           RECOMMENDED FOR FULL-TEXT PUBLICATION
                Pursuant to Sixth Circuit Rule 206                       2    Westfield Ins. Co. v. Tech Dry et al.      No. 01-6390
     ELECTRONIC CITATION: 2003 FED App. 0230P (6th Cir.)
                  File Name: 03a0230p.06                                                    _________________
                                                                                                 COUNSEL
UNITED STATES COURT OF APPEALS
                                                                         ARGUED: John H. Engle, KOLSTEIN, ENGLE &
                  FOR THE SIXTH CIRCUIT                                  PRINCE, Cincinnati, Ohio, for Appellant. Suzanne Cassidy,
                    _________________                                    O’HARA, RUBERG, TAYLOR, SLOAN & SERGENT,
                                                                         Covington, Kentucky, for Appellees. ON BRIEF: John H.
                                                                         Engle, KOLSTEIN, ENGLE & PRINCE, Cincinnati, Ohio,
 WESTFIELD INSURANCE CO .,   X                                           for Appellant. Suzanne Cassidy, O’HARA, RUBERG,
          Plaintiff-Appellant,-                                          TAYLOR, SLOAN & SERGENT, Covington, Kentucky, for
                              -                                          Appellees.
                              -              No. 01-6390
           v.                 -                                                             _________________
                               >
                              ,                                                                 OPINION
 TECH DRY , INC.; GAYLE       -                                                             _________________
 WILLIAMSON,                  -
       Defendants-Appellees. N                                             KAREN NELSON MOORE, Circuit Judge. Plaintiff-
                                                                         Appellant Westfield Insurance Company (“Westfield”)
       Appeal from the United States District Court                      appeals the district court’s grant of summary judgment to
    for the Eastern District of Kentucky at Covington.                   Defendants-Appellees Tech Dry, Inc. (“Tech Dry”) and Gayle
  No. 00-00186—William O. Bertelsman, District Judge.                    Williamson (“Williamson”). When Williamson’s mother was
                                                                         murdered by a Tech Dry employee who had previously done
                     Argued: June 10, 2003                               work at her mother’s home, Williamson filed an action
                                                                         against Tech Dry. She alleged that Tech Dry proximately
               Decided and Filed: July 15, 2003                          caused the death of her mother by negligently hiring and
                                                                         retaining the employee who murdered her mother. Westfield
        Before: MOORE and GIBBONS, Circuit Judges;                       has a duty to defend Tech Dry, its insured, in actions seeking
             SCHWARZER, Senior District Judge.*                          damages for bodily harm if they are caused by an
                                                                         “occurrence.” In the present action, Westfield seeks a
                                                                         declaratory judgment that it is not obligated to defend Tech
                                                                         Dry in Williamson’s action because Tech Dry’s negligent
                                                                         hiring and retention of an employee is not an “occurrence”
                                                                         under the terms of Tech Dry’s insurance liability contract.
                                                                         Upon cross-motions for summary judgment, the district court
                                                                         granted summary judgment to Tech Dry and Williamson,
    *
                                                                         concluding that because the meaning of the policy term
     The Honorable William W Schwarzer, Senior United States District    “occurrence” was ambiguous, Westfield was obligated to
Judge for the Northern District of California, sitting by designation.

                                  1
No. 01-6390        Westfield Ins. Co. v. Tech Dry et al.    3    4      Westfield Ins. Co. v. Tech Dry et al.      No. 01-6390

defend Tech Dry in the underlying action. Westfield appeals.         However, we will have no duty to defend the insured
Because the Kentucky courts would likely find that negligent         against any “suit” seeking damages for “bodily injury” or
hiring and retention of an employee constitutes an                   “property damage” to which this insurance does not
“occurrence” under the terms of the policy in question, we           apply. We may, at our discretion, investigate any
AFFIRM the district court.                                           “occurrence” and settle any claim or “suit” that may
                                                                     result. . . .
              I. FACTS AND PROCEDURE
                                                                                               ***
   Fred Furnish (“Furnish”) performed work at Ramona
Williamson’s (“Ramona”) home while employed as a carpet              b. This insurance applies to “bodily injury” and
cleaner for Tech Dry. In early June 1998, Tech Dry                   “property damage” only if:
terminated Furnish’s employment. Several weeks later,
Furnish broke into Ramona’s home, where he assaulted and               (1) The “bodily injury” or “property damage” is
murdered Ramona. Furnish was subsequently convicted of                 caused by an “occurrence” that takes place in the
capital murder in Kentucky state court.                                “coverage territory;” and

  After she was named the executor of her mother’s estate,             (2) The “bodily injury” or “property damage”
Williamson filed a wrongful death action against Tech Dry in           occurs during the policy period.
Kentucky state court. Williamson alleged that an employee
of Tech Dry caused her mother’s death and that Tech Dry was          c. Damages because of “bodily injury” include damages
negligent in hiring and retaining Furnish as an employee. Jeff       claimed by any person or organization for care, loss of
Cheser (“Cheser”), the Tech Dry franchise owner and                  services or death resulting at any time from the “bodily
manager who hired Furnish, admits that he did not perform a          injury.”
criminal background check on Furnish. Moreover, Cheser
retained Furnish as an employee even after receiving             Joint Appendix (“J.A.”) at 82 (Policy). The policy defines
complaints of theft from customers and learning that Furnish     “occurrence” as “an accident, including continuous or
had stolen money from Tech Dry.                                  repeated exposure to substantially the same general harmful
                                                                 conditions.” J.A. at 93 (Policy). The policy excludes from
  Tech Dry, Westfield’s insured, asked Westfield to provide      coverage “‘[b]odily injury’ or ‘property damage’ expected or
a defense and indemnity for the claims asserted against Tech     intended from the standpoint of the insured.” J.A. at 82
Dry in Williamson’s wrongful death action. The liability         (Policy).
policy in question obligates Westfield to provide the
following coverage:                                                In response to Tech Dry’s request for a defense and
                                                                 indemnity, Westfield filed the present action in United States
  a. We will pay those sums that the insured becomes             District Court. Westfield seeks a declaratory judgment that
  legally obligated to pay as damages because of “bodily         Tech Dry’s insurance policy does not require Westfield to
  injury” or “property damage” to which this insurance           defend Tech Dry or to pay or satisfy any judgment or award
  applies. We will have the right and duty to defend the         rendered to Williamson in the underlying wrongful death
  insured against any “suit” seeking those damages.              action.
No. 01-6390         Westfield Ins. Co. v. Tech Dry et al.      5    6       Westfield Ins. Co. v. Tech Dry et al.               No. 01-6390

  The parties submitted a stipulation of facts and filed cross-     the light most favorable to the nonmoving party. Taft Broad.
motions for summary judgment. The district court denied             Co. v. United States, 929 F.2d 240, 248 (6th Cir. 1991).
Westfield’s motion for summary judgment and granted Tech
Dry’s and Williamson’s motions for summary judgment.                   Because this court is sitting in diversity,1 see 28 U.S.C.
Westfield timely appealed.                                          § 1332, we apply the law, including the choice of law rules,
                                                                    of the forum state. Hayes v. Equitable Energy Res. Co., 266
                       II. ANALYSIS                                 F.3d 560, 566 (6th Cir. 2001) (citing Klaxon Co. v. Stentor
                                                                    Elec. Mfg. Co., 313 U.S. 487, 496 (1941)). The parties agree
A. Standard of Review                                               that we should apply Kentucky law. Because the question at
                                                                    issue has not yet been resolved by the Kentucky Supreme
   We review the district court’s grant of summary judgment         Court, we must engage in the challenging task of attempting
de novo, employing the same legal standard applied by the           to predict what the Kentucky Supreme Court would do if
district court. Equitable Life Assurance Soc’y of U.S. v. Poe,      confronted with the same issue. Stalbosky v. Belew, 205 F.3d
143 F.3d 1013, 1015 (6th Cir. 1998). “We also review de             890, 893-94 (6th Cir. 2000).
novo a district court’s order denying summary judgment, if
the denial is based on purely legal grounds.” Black v.              B. Westfield’s Duty to Defend and Indemnify
Roadway Express, Inc., 297 F.3d 445, 448 (6th Cir. 2002).
When a district court denies summary judgment to one party             Tech Dry’s policy provides that Westfield will defend Tech
on the ground that it is granting summary judgment to another       Dry in suits seeking damages for bodily injury or property
party, the denial of summary judgment is based on a legal           damage caused by an “occurrence.” The policy further
conclusion rather than the district court’s finding of a genuine    defines occurrence as “an accident, including continuous or
issue of material fact. Id. Because the district court denied       repeated exposure to substantially the same general harmful
summary judgment for Westfield on the purely legal ground           conditions.” J.A. at 93 (Policy). The district court found that
that it was granting summary judgment to Tech Dry and               the term “accident” is “inherently ambiguous,” J.A. at 17 (Op.
Williamson, we therefore review de novo both the district           & Order), and construed the ambiguity in favor of finding
court’s grant of summary judgment to Tech Dry and                   coverage, Healthwise of Kentucky, Ltd. v. Anglin, 956 S.W.2d
Williamson and the district court’s denial of summary               213, 217 (Ky. 1997). Westfield contests the district court’s
judgment to Westfield.                                              finding of ambiguity, contending that negligent hire and
                                                                    retention is clearly not an “occurrence” under the terms of the
   Summary judgment is appropriate “if the pleadings,               policy. According to Westfield, the policy therefore does not
depositions, answers to interrogatories, and admissions on          provide coverage for a wrongful death suit arising under these
file, together with the affidavits, if any, show that there is no   circumstances.
genuine issue as to any material fact.” Fed. R. Civ. P. 56(c).
A dispute over a material fact is not considered “genuine”
unless a reasonable jury could return a verdict for the
nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S.
                                                                        1
242, 248 (1986) (quotation omitted). When reviewing cross-                For diversity pu rposes, W estfield — an O hio co rporation w ith its
motions for summary judgment, we must evaluate each                 principal place of business in Ohio — is consid ered an O hio citizen, while
motion on its own merits and view all facts and inferences in       Williamson and Tech D ry — a K entucky corporation with its principal
                                                                    place of business in K entuck y — are deemed citizens of Kentucky.
No. 01-6390        Westfield Ins. Co. v. Tech Dry et al.      7    8      Westfield Ins. Co. v. Tech Dry et al.        No. 01-6390

  The interpretation of an insurance contract is a matter of           The words “accident”, “accidental”, and “accidental
law. Stone v. Ky. Farm Bureau Mut. Ins. Co., 34 S.W.3d 809,            means”, as used in insurance policies, have never
810 (Ky. Ct. App. 2000). Under Kentucky law, a court                   acquired a technical meaning in law, and must be
should determine at the outset of litigation whether an                interpreted according to the usage of the average man
insurance company has a duty to defend its insured by                  and as they would be read and understood by him in the
comparing the allegations in the underlying complaint with             light of the prevailing rule that uncertainties and
the terms of the insurance policy. DiBeneditto v. Med.                 ambiguities must be resolved in favor of the insured. An
Protective Co., 3 Fed. Appx. 483, 485 (6th Cir. 2001). An              accident is generally understood as an unfortunate
insurance company has a duty to defend its insured if the              consequence which befalls an actor through his
language of an underlying complaint against the insured                inattention, carelessness or perhaps for no explicable
brings the action within the scope of the insurance contract.          reason at all. The result is not a product of desire and is
Id.                                                                    perforce accidental. Conversely, a consequence which is
                                                                       a result of plan, design or intent is commonly understood
  1. Ambiguity                                                         as not accidental.
   As an initial matter, we must determine whether the policy      Fryman, 704 S.W.2d at 206 (citation omitted); see Stone, 34
terms “occurrence” and “accident” are ambiguous. The               S.W.3d at 811 (“In the context of an insurance policy, the
district court reasoned that “the word ‘accident’ . . . . is       word ‘accident’ should be interpreted in accordance with its
inherently ambiguous.” J.A. at 17 (Op. & Order) (noting that       common usage.”).          The Kentucky Supreme Court
Black’s Law Dictionary gives more than twenty meanings for         subsequently described Fryman as “hold[ing] that terms of
the word). However, the district court also noted that “[i]f       insurance contracts have no technical meaning in law and are
used in an insurance contract, the ordinary meaning of the         to be interpreted according to the usage of the average man
term is ‘an event which . . . is unusual and not expected by the   and as they would be read and understood by him in the light
person to whom it happens.’” J.A. at 18 (Op. & Order)              of the prevailing rule that uncertainties and ambiguities must
(quoting Black’s Law Dictionary (5th ed. 1979)) (emphasis          be resolved in favor of the insured.” Brown Found., 814
omitted).                                                          S.W.2d at 279.
   Where policy terms are not ambiguous, “the ordinary                The Kentucky Court of Appeals has relied on Fryman’s
meaning of the words chosen by the insurer is to be                articulation of the average man’s understanding of “accident”
followed.” James Graham Brown Found. v. St. Paul Fire &            to analyze the definition of “occurrence” that is at issue in this
Marine Ins. Co., 814 S.W.2d 273, 279 (Ky. 1991). In other          case. Interpreting the “occurrence” term of a different policy,
words, “the terms should be interpreted in light of the usage      the Kentucky Court of Appeals concluded that although the
and understanding of the average person.” Stone, 34 S.W.3d         policy did not define “accident,” it should be read “according
at 811 (citing Fryman v. Pilot Life Ins. Co., 704 S.W.2d 205       to the usage of the average person,” as explained in Fryman.
(Ky. 1986)).                                                       Thompson v. W. Am. Ins. Co., 839 S.W.2d 579, 580 (Ky. Ct.
                                                                   App. 1992). The Kentucky Court of Appeals also cited
   The Kentucky Supreme Court has addressed the                    Fryman when interpreting a similar policy provision in Stone,
significance of the word “accident” in insurance policies,         explaining that, “according to its plain meaning, an ‘accident’
although in a slightly different context:
No. 01-6390            Westfield Ins. Co. v. Tech Dry et al.             9    10       Westfield Ins. Co. v. Tech Dry et al.             No. 01-6390

denotes something that does not result from a plan, design, or                general liability policy is a matter of first impression in
an intent on the part of the insured.” Stone, 34 S.W.3d at 812.               Kentucky. Therefore, we must predict how the Kentucky
                                                                              Supreme Court would resolve this issue. Stalbosky, 205 F.2d
  In light of the Kentucky Supreme Court’s analysis of                        at 893-94. Other courts have reached differing conclusions
“accident” in Fryman and the Kentucky Court of Appeals’s                      about whether negligent hiring constitutes an accident and,
subsequent reliance on Fryman when interpreting the                           more specifically, about whether negligent hiring claims are
“occurrence” terms of insurance policies, we conclude that                    covered “where the person hired or supervised has committed
these terms were not ambiguous in the policy in question.                     an intentional tort.”3 7 Couch on Insurance 3d § 103:31, at
                                                                              103-74 (1997).
  2. The Conduct at Issue
                                                                                Several courts have held that because the decision to hire or
  Because the term “occurrence” is not ambiguous, we must                     retain an employee is an intentional business decision, even
determine whether the “occurrence” causing Ramona’s                           when the decision is negligently made, it is not accidental.
injuries and death was covered by the policy. To do so, we                    See, e.g., Erie Ins. Co. v. Am. Painting Co., 678 N.E.2d 844,
must identify the “occurrence” at issue. See Farmers Alliance                 846 (Ind. Ct. App. 1997). As one court explained, “a
Mut. Ins. Co. v. Salazar, 77 F.3d 1291, 1295 (10th Cir. 1996)                 volitional act — which is always intended — does not
(“Before we apply the policy’s definition of ‘occurrence,’ we                 constitute an accident, even where the results may be
must first decide what event or events in the causal chain                    unexpected or unforeseen.” Allstate Ins. Co. v. Norris, 795 F.
leading to [the injury] should be the focus of our inquiry.”).                Supp. 272, 275 (S.D. Ind. 1992). Thus, because the employer
Williamson’s complaint in the underlying wrongful death                       “intended to commit the act that resulted in injury” — here,
action alleges that Tech Dry’s negligence was the proximate                   the hiring and retention of Furnish — these courts would
cause of Ramona’s wrongful death and Westfield does not                       conclude that the injury to Ramona was not caused by an
dispute it. Our inquiry will therefore focus on whether Tech                  accident. Allstate Ins. Co. v. Davis, 6 F. Supp. 2d 992, 996
Dry’s allegedly negligent decision to hire and retain an                      (S.D. Ind. 1998).
employee is a qualifying “occurrence” under the policy.2
  The issue of whether negligent hiring and retention of an
employee can constitute an “occurrence” in the context of a
                                                                                   3
                                                                                    Although some of the cases discussed herein analyze different types
    2
                                                                              of policies and/or slightly different definitions of “occurrence” and
      W estfield argues that this court has previously concluded that where   “accid ent,” it is nevertheless helpful to consider their analyses of these
an employer negligently hires an emplo yee and the em ployee harm s a         terms to resolve the issue at hand. As is the case here, most policies
customer, the em ployee’s actions “co nstitute the o ccurrence resulting in   require an “occurrence” to trigger coverage and define that term as an
injury” under a similarly word ed policy. Monticello Ins. Co. v. Ky. River    “accid ent.” Furthermore, most policies exclude coverage for injuries
Cmty. Care, Inc., No. 98-5372, 1999 W L 2361 90, at *4 (6th Cir. 1999).       “expected or intended from the standpoint of the insured,” J.A. at 82
But Monticello Insurance did not ad dress whether the negligent hiring and    (Policy), either by incorporating self-excluding language in the definition
retention of an employee could constitute an “occurrence” under the terms     of “occurrence” or in a separate exclusion clause. See N. Sec. Ins. Co. v.
of the general liability policy in question. Rather, it distinguished         Perron, 777 A.2d 151, 157-58 (Vt. 2001) (explaining that the effect of
between the employer’s negligent hiring and the emp loyee’s assault only      “expected or intended” language is the same regardless of whether it is
for the purpo se of determining whether the “occurrence” in question took     included in the definition of “occurrence” or in a separate exclusion
place during the life of a p articular policy.                                clause).
No. 01-6390            Westfield Ins. Co. v. Tech Dry et al.             11     12     Westfield Ins. Co. v. Tech Dry et al.                  No. 01-6390

   Other courts have reached the opposite conclusion,                           coverage in negligent hiring cases, they arguably transform an
assuming that negligence is inherently not intentional. See                     employer’s negligent acts into intentional acts, dissolving the
United Fire & Cas. Co. v. Shelly Funeral Home, 642 N.W.2d                       distinction between negligent and intentional conduct. See
648, 654 (Iowa 2002) (listing cases in which “other courts                      Doe v. Shaffer, 738 N.E.2d 1243, 1247 (Ohio 2000). To
faced with similar facts and the identical ‘occurrence’ and                     avoid this problem, we will “look to the actions of the insured
intentional act provisions before us have found coverage for                    and not the perpetrator of the intentional act in determining
negligent hiring and supervision”); Silverball Amusement,                       whether there is coverage” of Tech Dry for its alleged
Inc. v. Utah Home Fire Ins. Co., 842 F. Supp. 1151, 1165                        negligent hiring and retention of Furnish. 14 Couch on
(W.D. Ark. 1994) (“[A]n insurer must provide coverage and                       Insurance 3d § 201:18, at 201-41 (1999).
a legal defense to an insured where a complaint alleges that an
employer was negligent in hiring and supervision of an                             In analyzing whether Tech Dry’s conduct was an
employee who subsequently committed an intentional tort.                        “occurrence,” we note the Kentucky Supreme Court’s
An insurance policy would require an exceedingly precise                        recognition that “[c]ourts and commentators alike are in
exclusionary clause to avoid that fundamental principle, and                    agreement that the term ‘occurrence’ is to be broadly and
there is no such clause in the instant case. . . . The policy                   liberally construed in favor of extending coverage to the
covers negligent acts.”), aff’d, 33 F.3d 1476 (8th Cir. 1994).                  insured.” Brown Found., 814 S.W.2d at 278; see Thompson,
                                                                                839 S.W.2d at 580 (“Our Supreme Court has pronounced that
  These courts caution against confusing the evaluation of an                   ‘occurrence’ is to be given broad and liberal construction in
employee’s intentional conduct and the employer’s negligent                     favor of extending coverage.”). However, “[w]e must give
conduct. For example, one court reasoned,                                       the policy its plain meaning and are constrained from
                                                                                enlarging the risks contrary to the natural and obvious
  In refusing to separate the employer’s alleged negligence                     meaning of the insurance contract.” Walker v. Econ.
  from the employee’s intentional conduct, . . . courts                         Preferred Ins. Co., 909 S.W.2d 343, 346-47 (Ky. Ct. App.
  impermissibly ignored the employer’s independent acts                         1995).
  which gave rise to the alleged tort. Consequently, in
  holding that the employee’s intentional conduct places                          Under Kentucky law, even if Tech Dry’s conduct in hiring
  the insured’s negligence outside the definition of                            and retaining Furnish was intentional and the injury to
  “occurrence,” . . . courts read the exclusion too broadly.                    Ramona was foreseeable, the policy in question nevertheless
U.S. Fid. & Guar. Co. v. Open Sesame Child Care Ctr., 819
F. Supp. 756, 760 (N.D. Ill. 1993).4 When courts deny
                                                                                purp ose o f determ ining co verage. See U.S. Fid. & Gua r. v. Towa rd, 734
                                                                                F. Supp. 465, 470 (S.D. Fla. 1990) (recognizing the tort of negligent
    4
                                                                                hiring and su pervision and exp laining that “[t]he focus of these torts is the
      The district court for the Northern District of Illinois emphasized       first wrong, the de fendant’s negligence, not the second wrong, the third-
that “[t]he tort of negligen t hiring is a well-recognized claim . . . and is   party’s wrongful conduct which leads to the plaintiff’s injury”). Like
brough t against an employer for its negligent hiring of an employee who        Illinois and Florida, Kentucky also clearly “recognizes that an employer
intentionally injures a third party,” Un ited States F idelity and G uaranty    can be held liable when its failure to exercise ordinary care in hiring or
Co. v. Ope n Sesa me C hild Ca re Center, 819 F. Supp. 756, 760 (N.D . Ill.     retaining an employee creates a foreseeab le risk of harm to a third
1993), suggesting that the nature of the tort itself should guide courts in     perso n.” Oakley v. Flor-Shin, Inc., 964 S.W.2d 438, 442 (Ky. Ct. App.
distinguishing between the employer’s and employee’s conduct for the            1998).
No. 01-6390        Westfield Ins. Co. v. Tech Dry et al.    13

provides coverage to Tech Dry as long as “the injury was not
actually and subjectively intended.” Thompson, 839 S.W.2d
at 580. An insurer cannot deny coverage on grounds that
conduct was intentional rather than accidental if the insured
did not possess the requisite intent to do injury. Brown
Found., 814 S.W.2d at 277. Kentucky courts will infer intent
to injure from “inherently injurious” acts, such as sexual
molestation, Thompson, 839 S.W.2d at 581, or punching
someone in the face, Walker, 909 S.W.2d at 345. But conduct
is not considered inherently injurious unless it is
“substantially certain to result in some injury.” Thompson,
839 S.W.2d at 581. By nature, negligently hiring and
retaining an employee is not substantially certain to result in
some injury and therefore is not inherently injurious.
  We therefore conclude that the Kentucky Supreme Court
would hold that Tech Dry is entitled to coverage because
Tech Dry’s negligent hiring and retention of Furnish
constitutes an “accident,” and therefore an “occurrence,”
under the terms of the governing policy.
                    III. CONCLUSION
  For the reasons explained above, we AFFIRM the district
court’s grant of summary judgment for Tech Dry and
Williamson. Although the district court erred by concluding
that the insurance policy was ambiguous, Tech Dry’s
negligent hiring and retention of Furnish nevertheless
constitutes an “occurrence” under the policy.
