UNPUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

VIENNA FAMILY MEDICAL ASSOCIATES,
INCORPORATED, a West Virginia
corporation,
Plaintiff-Appellee,
                                                                   No. 95-1225
v.

ALLSTATE INSURANCE COMPANY, an
Illinois corporation,
Defendant-Appellant.

Appeal from the United States District Court
for the Southern District of West Virginia, at Parkersburg.
Charles H. Haden II, Chief District Judge.
(CA-94-471)

Argued: December 4, 1995

Decided: March 5, 1996

Before WILKINSON, Chief Judge, RUSSELL, Circuit Judge,
and THORNBURG, United States District Court Judge for the
Western District of North Carolina, sitting by designation.

_________________________________________________________________

Reversed and remanded by unpublished per curiam opinion. Chief
Judge Wilkinson wrote a dissenting opinion.

_________________________________________________________________

COUNSEL

ARGUED: Gordon Harrison Copland, STEPTOE & JOHNSON,
Clarksburg, West Virginia, for Appellant. James Hubert McCauley,
McCAULEY, WEBSTER, EMRICK & GARRISON, Belpre, Ohio,
for Appellee. ON BRIEF: Amy M. Smith, Michael J. Florio, STEP-
TOE & JOHNSON, Clarksburg, West Virginia, for Appellant.

_________________________________________________________________

Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).

_________________________________________________________________

OPINION

PER CURIAM:

Vienna Family Medical Associates, Inc. (Vienna) brought suit
against Allstate Insurance Company (Allstate), its business liability
insurer, seeking a declaratory judgment requiring Allstate to provide
a defense and coverage for a claim based on harassment and hostile
work environment. The district court found summary judgment as a
matter of law and declared the insurer must defend and pay under the
terms of the comprehensive business liability policy.1 For the reasons
stated below, we reverse the declaratory judgment and remand the
case to the district court with instructions to enter judgment in favor
of Allstate in accordance with this opinion.

This court has jurisdiction pursuant to 28 U.S.C.§ 1291 to review
a judgment granting summary judgment as a matter of law.

The grant of summary judgment is reviewed de novo, employing
the same standards used at the trial court level. Westfarm Assoc., L.P.
v. Washington Suburban Sanitary Comn., 66 F.3d 669, 678 (4th Cir.
1995), petition for cert. filed, 64 U.S.L.W. 3439 (Dec. 22, 1995);
Jackson v. Kimel, 992 F.2d 1318, 1322 (4th Cir. 1993); Fed. R. Civ.
P. 56(c). Summary judgment is appropriate if there are no genuine
disputes as to any material facts and the moving party is entitled to
_________________________________________________________________
1 The district court converted Allstate's motion to dismiss pursuant to
Fed. R. Civ. P. 12(b)(6) to one for summary judgment because matters
were considered outside the pleadings. Fed. R. Civ. P. 12(b)(6), 56.

                    2
judgment as a matter of law. Westfarm, supra; Fed. R. Civ. P. 56.
"Where, as here, there are no material facts in dispute, summary judg-
ment review turns solely on the question of whether the trial court
properly construed the law." Fuisz v. Selective Ins. Co. of America,
61 F.3d 238, 241 (4th Cir. 1995).

The undisputed facts show that Vienna, a family medical associa-
tion, employed Joyce Ruble as an office manager until 1992. In a sep-
arate state court action, Ruble alleged that from 1988 until the end of
her employment, she encountered hostility from a physician
employed by Vienna. At one point, she found notes prepared by that
physician in which accusations were made against Drs. Richard
Yocum and David Avery, Vienna's president and secretary. Those
accusations reflected the physician associate's belief that Yocum and
Avery were not properly distributing income to Vienna's physician
employees. When Ruble disclosed this information to her employers,
they insisted she provide them with a tape recorded statement. Ruble
refused and, claiming the stress from these problems at work had
made her ill, she took a period of sick leave.

While on leave, Vienna replaced her as office manager with a
younger individual but offered her another job when she returned.
Ruble sued Vienna, Yocum and Avery in state court for harassment,
discrimination, and constructive discharge. Her complaint alleged the
defendants had engaged in negligent, willful and intentional acts caus-
ing her emotional distress, lost disability payments and lost wages.
Joint Appendix, at 65-66. Vienna settled the claim for $30,000; but,
Allstate, which had issued Vienna's business liability policy, refused
to defend the suit or fund the settlement.

Vienna and Allstate were parties to a comprehensive business lia-
bility insurance policy which provided in pertinent part:

          We will pay on behalf of persons insured all sums which
          they become legally obligated to pay as damages arising out
          of an accidental event, personal injury or advertising injury
          that occurs while this policy is in effect.

...

                    3
          We will defend any suit brought against persons insured
          seeking damages to which this Part applies, even if the alle-
          gations in the suit are groundless, false or fraudulent.

...

          The following people and organizations are persons insured
          under this Part:

...

          4. If you are shown in the Declarations as any organization
          other than an individual, partnership or joint venture: Execu-
          tive officers, stockholders, members of the board of trustees,
          and directors or governors while they are acting within the
          course and scope of their duties.

...

          "Accidental event" means an accident, including continuous
          or repeated exposure to the same conditions, resulting in
          bodily injury or property damage. An accident cannot be
          intended or expected by any persons insured, except for the
          use of reasonable force to protect persons or property.

Joint Appendix, at 36-38, 53.

As noted by the district court, Vienna had three avenues of cover-
age under the policy: accidental event; personal injury or advertising
injury. The court correctly concluded the alleged acts fell only under
the definition of "accidental event" and reviewed the policy provi-
sions for coverage, noting any ambiguities in the contract would be
liberally construed in favor of the insured. See , Marson Coal Co., Inc.
v. Insurance Co. of State of Pa., 158 W. Va. 146, 150, 210 S.E.2d
747, 750 (1974).

Because Ruble's complaint alleged both negligence and intentional
conduct by Yocum and Avery, the district court determined an acci-
dental event implicating coverage could have occurred. While the

                    4
court did not find intentional acts subject to coverage, it did conclude
that Ruble's allegations of intentional acts in conjunction with negli-
gent ones did not preclude coverage. Thus, the district court found the
negligent acts of Yocum and Avery as insured persons would be cov-
ered under the clear and unambiguous terms of the policy.

On appeal, Allstate argues the district court relied on the language
of one exclusionary clause without proper consideration of another
such clause. Vienna argues, contrary to the decision which it seeks to
uphold, that the exclusionary clauses in question are in conflict, ren-
dering the policy provisions ambiguous and requiring a strict con-
struction against Allstate which would result in coverage.

In determining the issue of coverage under this contract, "we must
resolve this diversity action pursuant to [West Virginia] law because
the case was [removed to] federal court in the[District of West Vir-
ginia]." Fuisz, 61 F.3d at 241 (citing Nguyen v. CNA Corp., 44 F.3d
234, 237 (4th Cir. 1995)). This court therefore applies West Virginia
law to the undisputed facts. While the court below first considered the
impact of the policy's exclusionary provisions, the definition of "acci-
dental event" in the policy is dispositive of the case.

In the state court complaint, Ruble characterized Avery and
Yocum's acts as "negligent, intentional and willful" conduct designed
"to cause [her] severe emotional distress." Joint Appendix, at 60-63,
66. Often in the same paragraph in which conduct was characterized
as negligent, Ruble referred to the intentional nature thereof, stating
the conduct was "in retaliation for" (Joint Appendix, at 61, 63, 64, 65)
her sick leave, alleging the defendants "created a hostile working cli-
mate" (Joint Appendix, at 61), refused benefits"with the intent of
causing plaintiff severe emotional distress" (Joint Appendix, at 63),
and acted "recklessly" and with "extreme and outrageous" conduct
(Joint Appendix, at 65, 66). Ruble also claimed defendants had
breached a contract to provide long-term disability benefits.

The insurance policy clearly excludes from the definition of "acci-
dental" any conduct which is "intended or expected by any persons
insured." Joint Appendix, at 53. At issue, then, is whether the com-
mingled allegations of negligent and intentional acts by Yocum and
Avery, insured persons, qualify as an accidental event.

                    5
In Horace Mann Ins. Co. v. Leeber, 180 W. Va. 375, 376 S.E.2d
581 (1988), the Supreme Court of Appeals of West Virginia ruled the
exclusionary provisions of an insurance policy proscribing coverage
for intentional acts applied to the sexual advances of a teacher to stu-
dents, thus, prohibiting not only coverage under his homeowner's
insurance policy but also precluding a duty to defend. In that case as
well, the language of the complaint was framed in terms of both
intentional and negligent acts. In rejecting the insured's attempt to
bootstrap coverage by alleging negligence, the court stated

          the allegations of "negligence" in the complaint are "a trans-
          parent attempt to trigger insurance coverage by characteriz-
          ing allegations of [intentional] tortious conduct under the
          guise of `negligent' activity. Our review of the complaint
          reveals that [the plaintiff in the underlying action] seeks
          recovery for the alleged intentional acts committed by [the
          insured]. Thus, there was no duty [on the insurer] to
          defend[.]"

Id., at 381 (quoting Linebaugh v. Berdish, 144 Mich. App. 750, 763,
376 N.W.2d 400, 406 (1985)).

Here, although Ruble cloaked her allegations in the language of
negligence, she clearly seeks recovery for intentional acts committed
by Avery and Yocum: creating a hostile work environment by allow-
ing an abusive physician employee to intimidate her and by demand-
ing her to provide a tape recorded statement; retaliating against her
sick leave by demoting her during her absence; breaching a contract
to provide long-term sick benefits; and intentionally inflicting emo-
tional distress. Thus, the presence of negligence allegations in the
complaint does not defeat the clearly intentional nature of the acts
involved. Id.; see also, Silk v. Flat Top Constr., Inc., 192 W. Va. 522,
453 S.E.2d 356 (1994) (the inclusion of negligence allegations in a
complaint for breach of contract and misrepresentation not sufficient
to trigger the coverage of a general liability policy where claims
grounded in contract). Because a review of the complaint reveals
Ruble sought recovery for intentional conduct, Allstate had no duty
to provide coverage. See also, Fidelity and Guar. Ins. Underwriters,
Inc. v. Everett I. Brown Co., L.P., 25 F.3d 484 (7th Cir. 1994) (insurer
entitled to rely on the allegations of the complaint claiming inten-

                    6
tional conduct and thus there was no duty to defend or cover acciden-
tal events); First Nat'l Bank & Trust Co. of Williston v. St. Paul Fire
& Marine Ins. Co., 770 F. Supp. 513 (D.N.D. 1991), aff'd, 971 F.2d
142 (8th Cir. 1992) (intentional conduct does not fall within definition
of accident); Kline v. Kemper, 826 F. Supp. 123 (M.D. Pa. 1993),
aff'd, 22 F.3d 301 (3rd Cir. 1994) (the discharge of an employee is
an intentional act, not accidental, thus insurer has no duty to defend
or pay); accord Providence Washington Ins. Group v. Albarello, 784
F. Supp. 950 (D. Conn. 1992); Russ v. Great American Ins. Cos.,
1995 WL 754446 (N.C. App. 1995); St. Paul Fire & Marine Ins. Co.
v. Campbell Co. School Dist. No. 1, 612 F. Supp. 285 (D. Wyo.
1985).

The ruling in Mann also disposes of the issue of duty to defend.

          An insurer's duty to defend is normally tested by whether
          the allegations in the complaint against the insured are rea-
          sonably susceptible of an interpretation that the claim may
          be covered by the terms of the insurance policy. Conse-
          quently, there is no requirement that the facts alleged in the
          complaint against the insured specifically and unequivocally
          delineate a claim which, if proved, would be within the
          insurance coverage . . . [However], a liability insurer need
          not defend a case against the insured if the alleged conduct
          is entirely foreign to the risk insured against.

180 W. Va. at 378, 376 S.E.2d at 584. As seen from the allegations
in the complaint, the conduct here was intentional. Thus, Allstate had
no duty to defend.

Because the conduct was intentional, it is unnecessary to look past
the issue of whether an accidental event occurred. However, because
the parties addressed the policy's exclusionary provisions, a brief dis-
cussion follows.

Vienna argues the district court's ruling should be affirmed
because the language of paragraphs 8 and 14 of the policy is ambigu-
ous as a result of the following conflict: that paragraph 14 provides
coverage for Ruble's bodily injury sustained as the result of Yocum

                     7
and Avery's conduct while paragraph 8 precludes coverage for the
same conduct.2 With this argument we disagree.

Paragraph 8 precludes coverage for bodily injury sustained by an
employee of an insured person (Yocum and Avery) unless assumed
under a separate contract. There is no contention that such a separate
contract exists. Paragraph 14(a) precludes coverage for bodily injury
to an employee by another employee acting within the course and
scope of employment. Paragraph 14(b) precludes coverage for injury
to an insured person (Yocum and Avery) by employees acting within
the scope of their employment. Paragraph 14 is then followed by the
exception that sections (a) and (b) do not apply to Avery and Yocum
as officers of Vienna.

Vienna would apply the exception to paragraph 14(a) to mean that
bodily injury to an employee resulting from the activities of Yocum
_________________________________________________________________
2 The policy provides in pertinent part:

          "Bodily injury" means injury, sickness or disease and includes
          death that results from injury, sickness or disease.

...

          We do not cover:

...

          8. Any bodily injury to anyone employed by any persons
          insured unless such bodily injuries are assumed under a contract
          or agreement that is not excluded.

...

          14. Any liability for:

          a. Bodily injury to any of your employees that result from
          the activities of another employee(s) who is acting within the
          course and scope of their employment.

          b. Bodily injury to you, your partners or joint venturers
          that result from the activities of your employee(s) who are
          acting within the course and scope of their employment.

          (a) and (b) above do not apply to executive officers, directors or
          stockholders.

Joint Appendix, at 40-42, 53.

                    8
and Avery would be covered under the policy. The flaw in this argu-
ment is the presumption that the exception applies to bodily injury to
an employee caused by Yocum and Avery. Instead, the exception
means that bodily injury to Yocum and Avery, as officers, by Vienna
employees would be covered under the policy. Thus, the exclusion of
paragraph 14(a) which applies to Vienna's employees injured by
employees is not altered by the exception.

The language of the exclusions is clear and unambiguous and does
not warrant judicial interpretation. Rich v. Allstate Ins. Co., 191 W.
Va. 308, 309, 445 S.E.2d 249, 250 (1994); Ward v. Baker, 188 W.
Va. 569, 575, 425 S.E.2d 245, 251 (1992). Paragraph 8 is meant to
preclude coverage for injury to employees unless assumed under a
separate contract.

Appellee argues the West Virginia doctrine of reasonable expecta-
tions mandates coverage. That doctrine is stated as follows:

          [w]ith respect to insurance contracts, the doctrine of reason-
          able expectations is that "the objectively reasonable expecta-
          tions of applicants and intended beneficiaries regarding the
          terms of insurance contracts will be honored even though
          painstaking study of the policy provisions would have
          negated those expectations."

Silk, 192 W. Va. at 526 n.4, 453 S.E.2d at 360 (quoting Keeton,
Insurance Law Rights at Variance with Policy Provisions, 83
Harv.L.Rev. 961 (1970)). However, "[i]n West Virginia, the doctrine
of reasonable expectations is limited to those instances . . . in which
the policy language is ambiguous." Id."Because the [quoted] provi-
sions [in this case] are clear and unambiguous, we do not apply the
doctrine. . . ." Id.

This court understands that "an exclusion in a general business lia-
bility policy should not be so construed as to `strip the insured of pro-
tection against risks incurred in the normal operation of his
business.'" Nat'l Mutual Ins. Co. v. McMahon & Sons, Inc., 177
W.Va. 734, 742, 356 S.E.2d 488, 496 (1987) (citations omitted).
However, harassment, retaliation, and a hostile work environment are
not "risks incurred in the normal operation" of Vienna's business.

                     9
Such conduct is not the type of "technical encumbrance[ ]" or "hidden
pitfall[ ]" which the doctrine of reasonable expectation covers. Id.
Although exclusionary language in a contract of insurance is con-
strued against the insurer, such construction does not mandate cover-
age or defense where "the alleged conduct is entirely foreign to the
risk insured against." Mann, 180 W. Va. at 378, 376 S.E.2d at 584.
Such is the case here.

In view of our ruling that the policy does not cover the events in
question, we do not address appellee's contention that West Virginia
courts would interpret the injuries at issue to come within the policy's
definition of bodily injury. However, we do note the significant
weight of authority from other states holding that the phrase "bodily
injury" does not encompass "nonphysical injuries," such as emotional
distress. American States Ins. Co. v. Hanson Indus., 873 F. Supp. 17,
27 (S.D. Tex. 1995) (citing Travelers Indem. Co. v. Holloway, 17 F.
3d 113, 115 (5th Cir. 1994) (citing Nat'l Casualty Co.v. Great South-
west Fire Ins. Co., 833 P.2d 741, 746 (Colo. 1992))); (also citing
United Pac. Ins. Co. v. First Interstate Bancsystems , 690 F. Supp.
917, 918 (D. Mont. 1988); West Am. Ins. Co. v. Bank of Isle of Wight,
673 F. Supp. 760, 765 (E.D. Va. 1987); Continental Casualty Co. v.
Synalloy Corp., 667 F. Supp. 1550, 1559 (S.D. Ga. 1985), aff'd, 826
F.2d 1024 (11th Cir. 1987); American & Foreign Ins. Co. v. Church
Sch. in the Diocese, 645 F. Supp. 628, 632 (E.D. Va. 1986); Rolette
County v. Western Casualty & Sur. Co., 452 F. Supp. 125, 130
(D.N.D. 1978); Allstate Ins. v. Diamant, 401 Mass. 654, 518 N.E.2d
1154, 1156 (1988); Presidential Hotel v. Canal Ins. Co., 188 Ga.
App. 609, 373 S.E.2d 671, 672 (1988); E-Z Loader Boat Trailers, Inc.
v. Travelers Indem. Co., 106 Wash.2d 901, 907, 726 P.2d 439, 443
(1986)); see also, Kline, supra ; Providence Washington Ins. Group,
supra; St. Paul Fire & Marine Ins. Co., supra.

Finally, Vienna argues without citation that the district court erred
in determining that Ruble's lost wages do not qualify as property
damage under the terms of the policy.3 However, property damage is
_________________________________________________________________
3 The policy provides in pertinent part:

          "Property damage" means physical damage to, or the destruction
          of, any tangible property, including any losses that result because
          the damaged or destroyed property can no longer be used.

Joint Appendix, at 55.

                    10
covered only if an accidental event has occurred. Because the inten-
tional acts of Yocum and Avery were not accidental events, the issue
of whether Ruble sustained bodily injury and property damage need
not be considered. See, Vaughner v. Pulito, 804 F.2d 873 (5th Cir.
1986); West American Ins. Co., supra (even if bodily injury included
emotional distress, allegations of intentional torts are not covered by
insurance policy); E-Z Loader Boat Trailers, Inc., supra, (the act of
discharging an employee is intentional and thus not covered; retalia-
tory action against an employee also intentional and thus not cov-
ered).

The declaratory judgment below is reversed and the case is
remanded with instructions to the district court to enter summary
judgment as a matter of law in favor of appellant and a declaratory
judgment in accordance with this opinion.

REVERSED AND REMANDED

WILKINSON, Circuit Judge, dissenting:

I respectfully dissent. Vienna Family Medical Associates pur-
chased a comprehensive business liability policy from Allstate Insur-
ance. In construing the scope of that policy, we must interpret any
ambiguities in favor of the insured and any exclusions narrowly
against the insurer. See Marson Coal Co. v. Insurance Co., 210
S.E.2d 747, 750 (W. Va. 1974). As the district court found, applica-
tion of these familiar canons to the policy at issue here requires that
we rule in favor a duty to defend.

The policy provides protection for "accidental events" that result in
"bodily injury or property damage." "An accident," according to the
policy, "cannot be intended or expected by any persons insured."
Throughout her complaint in the underlying action, the plaintiff
repeatedly alleged that Vienna's employees "negligently" caused her
injuries, using the term "negligent" on at least six occasions. Injuries
that are negligently inflicted are not "intended or expected," and fall
within the definition of an "accident" under the policy.

In deciding otherwise, the majority picks apart the plaintiff's
claims and determines that they ultimately allege intentional conduct.

                     11
Such conclusions cannot be drawn from the face of this complaint.
"As a general rule, an insurer's duty to defend is tested by whether
the allegations in the plaintiff's complaint are reasonably susceptible
of an interpretation that the claim may be covered by the terms of the
insurance policy. `There is no requirement that the facts alleged in the
complaint specifically and unequivocally make out a claim within the
coverage.'" Aetna Cas. & Sur. Co. v. Pitrolo , 342 S.E.2d 156, 160
(W. Va. 1986) (emphasis added) (citations omitted). Moreover, a
complaint by its very nature will characterize the defendants' conduct
in the least favorable light; here the plaintiff had every incentive to
cast the defendants' actions as intentional. After reviewing the evi-
dence, however, a jury could well find that the injuries were not inten-
tionally inflicted. For example, the allegations that Drs. Avery and
Yocum created a hostile environment by allowing third-party miscon-
duct are a far cry from the direct sexual advances alleged in Horace
Mann Ins. Co. v. Leeber, 376 S.E.2d 581 (W. Va. 1988), the chief
case on which the majority depends.

The requirement that the accidental event result in"bodily injury"
is also satisfied here. The policy defines bodily injury to include "in-
jury, sickness, or disease," a definition broad enough to encompass
the stress-induced conditions suffered by the plaintiff. Moreover,
none of the policy's exclusions should be construed to bar coverage
here. Exclusion 14 prohibits coverage for bodily injury suffered at the
hands of a coemployee. That provision is inapplicable, since it
expressly does not pertain to executive officers and directors such as
the defendants in the underlying action. Exclusion 8, meanwhile, bars
coverage for any "bodily injury to anyone employed by any persons
insured unless such bodily injuries are assumed under a contract or
agreement that is not excluded." Not only is this provision confound-
ingly ambiguous; it also appears to conflict with other terms and to
undermine coverage that the policy otherwise seems to provide. To
the extent that this exclusion can even be understood, it should be
construed against the insurer.

Allstate agreed to provide comprehensive business coverage on
behalf of Vienna, for which Vienna presumably paid an appropriate
premium. The insurer should be held to its duties absent some demon-
stration of noncoverage. I agree with the district court that Allstate

                    12
should not be permitted to escape its contractual obligations. It fol-
lows that I would affirm the judgment.

                     13
