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All opinions are subject to modification and technical correction prior to official publication in the North Carolina Reports and North Carolina Court of Appeals Reports. In the event of discrepancies between the electronic version of an opinion and the print version appearing in the North Carolina Reports and North Carolina Court of Appeals Reports, the latest print version is to be considered authoritative.
HOBBS REALTY & CONSTRUCTION COMPANY, JAMES O. HOBBS, and JAMES S.
HOBBS, Plaintiffs, v. SCOTTSDALE INSURANCE CO., Defendant
Filed: 16 March 2004
Insurance_commercial liability policy--coverage_rented property--invasion of the right of
Summary judgment was improperly granted for defendant commercial general liability
insurer in an action to determine coverage of a lawsuit arising from a realtor's denial of the keys
to a rented beach house to the 20-year old daughter of the renter, with an accompanying racial
remark. The proper inquiry under the policy language is whether there is a legally enforceable
right to assume control of the property rather than an actual assumption of control. Here, the
allegations sufficiently stated a possessory right such that the alleged refusal to provide the key
raised the possibility of liability and thus imposed the duty to defend.
Appeal by plaintiffs from order entered 29 January 2003 by
Judge Narley L. Cashwell in Wake County Superior Court. Heard in
the Court of Appeals 28 January 2004.
Wyrick Robbins Yates & Ponton LLP, by K. Edward Greene, Joseph
H. Nanney, Jr., and Kathleen A. Naggs, for plaintiff-
Anderson, Daniel & Coxe, by Bradley A. Coxe, for defendant-
This appeal arises from the parties' dispute over coverage
provided by a commercial general liability insurance policy issued
by defendant to plaintiffs. Plaintiffs appeal from an order
granting summary judgment in favor of defendant insurer. We
The Underlying Lawsuit
Plaintiff Hobbs Realty & Construction Company (Hobbs Realty)
is a North Carolina general partnership comprised of two general
partners - plaintiff James O. Hobbs (James), and his son James S.Hobbs (Jimmy). Plaintiffs are in the business of renting beach
property in Holden Beach, North Carolina. On 30 October 2000
plaintiffs herein were named as defendants in a lawsuit filed
against them by Harvey Bynum (Bynum), his daughter Loren Bynum
(Loren), and his wife Frances Solari (Solari). The factual
allegations of that complaint included, in pertinent part, the
1. Plaintiffs [in the underlying lawsuit] . .
. are husband and wife[.]
2. Mr. Bynum is Black; Ms. Solari is White.
3. [Loren] was born May 14, 1978 and is bi-
racial. . . .
14. . . . [Bynum and Solari] planned to take
[Loren] and three of her friends to Holden
Beach . . . October 2, 1998[.]
15. . . . Ms. Solari telephoned Hobbs Realty
to rent a [house] . . . for the weekend of
October 2-3, 1998.
16. . . . [Solari] paid in full and in advance
by credit card.
. . . .
18. Ms. Solari related to the reservation
agent that this would be her daughter's last
beach trip for a long while . . . .
19. The reservation agent instructed Ms.
Solari that, after business hours, the key to
the unit would be in the night pick-up box
located near the front door of Hobbs Realty.
20. At no time did the reservation agent
suggest in any way that Plaintiffs' use and
possession of the unit was contingent upon
arriving . . . before a certain time or date,
that Ms. Solari alone was authorized to take
the key from the night pick-up box, that Ms.
Solari alone was authorized to assume
possession of the unit, or that [Loren] was
not authorized to take possession of the unit
unless she was accompanied by Ms. Solari.
21. . . . [Loren] invited three friends to
join Plaintiffs at Holden Beach . . .
[including] Specialist Travis Askridge, who is
Black. . . .
. . . .
24. Mr. Bynum and Ms. Solari were delayed in
Durham and planned to join Ms. Bynum and her
friends Saturday morning October 3, 1998.
. . . . 27. When [Loren] arrived at . . . Hobbs
Realty at approximately 11:30 p.m., the key to
the unit was not in the night pick-up box as
26, [Loren] followed the written instructions
posted on the front of Hobbs Realty and
telephoned Defendant James Hobbs to secure a
key to the unit.
29. Upon his arrival at Hobbs Realty,
Defendant James Hobbs . . . refused to give
[Loren] a key to the unit[.]
30. Defendant James Hobbs told [Loren] it was
the policy of Hobbs Realty not to rent to
31. As proof of their ages, [Loren] and her
companions offered their respective
identifications to Defendant James Hobbs.
32. Defendant James Hobbs . . . refused to
look at the identifications . . .
33. [Loren] explained . . . that her parents
Mr. Bynum and Ms. Solari would arrive in
Holden Beach the next morning, and offered to
call Mr. Bynum on her cellular phone for
34. Defendant James Hobbs told [Loren]
There's no use to call anyone. I'm not
giving you the key.
35. As he turned away from [Loren] and her
companions, Defendant James Hobbs said he had
no intention of renting to ni---rs.
. . . .
40. . . . Mr. Bynum spoke with Defendant James
Hobbs by telephone.
41. Mr. Bynum explained . . . that he and Ms.
Solari would arrive in . . . a few hours 
and that [Loren] was twenty years of age.
. . . .
44. Defendant . . .again . . . refused to
allow [Loren] to take possession of the unit.
45. Neither the vacation brochure . . . nor
[the] standard rental contract makes any
reference to a practice or policy of Hobbs
Realty to deny occupancy to persons below a
Based on these and other allegations, plaintiffs in the underlying
lawsuit asserted claims for race discrimination, in violation of 42
U.S.C. § 1981 and § 1982; unfair or deceptive trade practices, in
violation of N.C.G.S. § 75-1.1; and civil conspiracy, in violation
of 42 U.S.C. § 1985(3) and N.C.G.S. § 99D-1. Those originalplaintiffs sought compensatory and punitive damages for economic
loss, personal injury, emotional distress, and great mental
Hobbs v. Scottsdale Lawsuit
The present appeal arises from a suit brought by plaintiffs
(defendants in the underlying action) against Scottsdale Insurance
Company, challenging the insurer's refusal to defend or indemnify
them in the underlying lawsuit.
The parties do not dispute that at the time of the events
alleged in the underlying suit plaintiffs had in force a general
commercial liability policy issued by defendant. The policy
provided, in relevant part, coverage for the following losses: (1)
damages for bodily injury and property damage if such damage were
caused by an occurrence, defined in the policy as an accident;
and (2) damages for personal injury, defined in the policy to
include injury, other than bodily injury, arising from wrongful
eviction from, wrongful entry into, or invasion of the right of
private occupancy of a room, dwelling or premises that a person
The complaint in the underlying lawsuit was filed on 30
October 2000. On 22 December 2000 defendant informed plaintiffs
that it would neither defend plaintiffs in the lawsuit, nor
indemnify them for liability arising from the suit, on the basis
that the policy did not provide coverage for the acts alleged in
the Bynum complaint. In its correspondence with plaintiff,
defendant took the position that the conduct alleged is of a
voluntary, deliberate nature, so it could not be construed as an'occurrence' and thus that coverage for bodily injury or property
damage is excluded by the terms of the policy. Defendant also
contended that the acts alleged in the underlying complaint did not
constitute invasion of the right of private occupancy of a rental
On 18 January 2002 plaintiffs filed suit against defendant,
seeking a declaratory judgment that defendant was required to
provide a defense under the terms of the policy, an order directing
defendant to defend and indemnify them in the underlying lawsuit,
and compensatory and punitive damages for breach of contract, bad
faith refusal to defend and indemnify, unfair competition, and
unfair and deceptive trade practices. Defendant filed a motion for
summary judgment on 1 October 2002, which was granted by the trial
court on 29 January 2003. From this order, plaintiffs appeal.
Standard of Review
Plaintiffs appeal from an order of summary judgment in favor
of defendant. Summary judgment is properly granted if the
pleadings, depositions, answers to interrogatories, and admissions
on file, together with the affidavits, if any, show that there is
no genuine issue as to any material fact and that any party is
entitled to a judgment as a matter of law. N.C.G.S. § 1A-1, Rule
56(c) (2003). On appeal, this Court's standard of review involves
a two-step determination of whether (1) the relevant evidence
establishes the absence of a genuine issue as to any material fact,
and (2) either party is entitled to judgment as a matter of law.
Guthrie v. Conroy, 152 N.C. App. 15, 567 S.E.2d 403, 408 (2002)
(citations omitted). In the instant case, neither party challenges the accuracy or
authenticity of the subject insurance policy, or the existence of
any relevant facts. Rather, the parties' arguments are based on
their respective interpretations of the terms of the insurance
policy. Consequently, the record does not present a genuine issue
as to any material fact. We next consider whether either party was
entitled to judgment as a matter of law.
The issue presented by this appeal is whether defendant
insurer has a duty to defend or indemnify the insured plaintiffs in
the underlying lawsuit. An insurer has a duty to defend when the
pleadings state facts demonstrating that the alleged injury is
covered by the policy[.] Penn. Nat'l Mut. Cas. Ins. Co. v.
Associated Scaffolders & Equip. Co.,
157 N.C. App. 555, 558, 579
S.E.2d 404, 407 (2003). Thus:
An insurance company has a duty to defend its
insured against a suit brought by a third
party claimant, . . . if in such suit the
third party claimant alleged facts which, if
true, imposed upon the insured a liability to
the claimant within the coverage of the
insured's policy. The court must then compare
the complaint with the policy to see whether
the allegations describe facts which appear to
fall within the insurance coverage.
Waste Management of Carolinas, Inc. v. Peerless Ins. Co
., 72 N.C.
App. 80, 84, 323 S.E.2d 726, 729-30 (1984), reversed on other
, 315 N.C. 688, 340 S.E.2d 374 (1986) (citation omitted).
Accordingly, an insurer is excused from its duty to defend the
insured only where the complaint against the insured clearly
demonstrates no basis upon which the insurer could be required toindemnify the insured under the policy. Fuisz v. Selective Ins.
Co. of America
, 61 F.3d 238, 242 (4th Cir. 1995). Moreover:
When pleadings allege multiple claims, some of
which may be covered by the insurer and some
of which may not, the mere possibility the
insured is liable, and that the potential
liability is covered, may suffice to impose a
duty to defend. Any doubt as to coverage is
to be resolved in favor of the insured.
Bruce-Terminix Co. v. Zurich Ins. Co.
, 130 N.C. App. 729, 735, 504
S.E.2d 574, 578 (1998) (citing Waste Management of Carolinas, Inc.
v. Peerless Ins. Co
., 315 N.C. 688, 691 n.2, 693, 340 S.E.2d 374,
377 n.2., 378 (1986) (citation omitted)). Finally, in construing
an insurance policy, the various terms of the policy are to be
harmoniously construed, and if possible, every word and every
provision is to be given effect. If, however, the meaning of words
or the effect of provisions is uncertain or capable of several
reasonable interpretations, the doubts will be resolved against the
insurance company and in favor of the policyholder. Woods v.
., 295 N.C. 500, 506, 246 S.E.2d 773, 777 (1978).
We next consider whether the Bynum/Solari complaint alleges
acts that give rise to defendant insurer's duty to defend. The
insurance policy at issue herein provides two types of coverage,
A and B. The issue raised by this appeal is whether Coverage
B applies to the allegations of the complaint.
(See footnote 1)
Coverage Bprovides coverage for personal injury which the policy defines,
in pertinent part, as follows:
Personal injury means injury, other than
bodily injury, arising out of one or more of
the following offenses:
. . . .
c. The wrongful eviction from, wrongful entry
into, or invasion of the right of private
occupancy of a room, dwelling or premises that
a person occupies by or on behalf of its
owner, landlord or lessor; . . . .
No North Carolina cases have previously addressed the scope of
insurance coverage for invasion of the right of private
occupancy. The parties to this appeal advance conflicting
interpretations of the coverage provided for personal injury by
this policy. Plaintiffs assert that the complaint alleges an
invasion of the Bynum's right
of private occupancy. Plaintiffs
also argue that the phrase invasion of the right of private
occupancy is inherently ambiguous, and therefore should be
interpreted in favor of coverage.
Defendant, on the other hand, focuses on the modifier phrase
that a person occupies and argues that the addition of this
phrase to invasion of the right of private occupancy serves to
deny insurance coverage where plaintiffs in the underlying lawsuit
have not physically occupied the premises when the alleged injury
occurred. On this basis, defendant contends that without physical
occupancy of the subject property, there can be no invasion of the
right of private occupancy of a . . . premises
that a person
occupies. We disagree.
Appellate analysis of the phrase invasion of the right of
private occupancy, whether or not it is modified by the additionalclause that a person occupies, has generally focused on whether
the plaintiff's status is such that the factual allegations of the
complaint might be an invasion of the right of private occupancy
of the subject property by the plaintiff. Defendant argues that
insurance coverage requires physical residence or occupancy by
the plaintiff. However, none of the cases cited by defendant draw
such a narrow distinction. Instead, they interpret the policy
language to exclude coverage if the plaintiff has no possessory
interest, or right
to occupy, the subject property. For example,
appellate cases have denied coverage where the underlying plaintiff
alleged deprivation of the right to enter into a housing contract.
Powell v. Alemaz
., 335 N.J. Super. 33, 760 A.2d
1141 (2000), wherein the Court held that an insurance policy with
the same language as that in the instant case did not cover
prospective tenants' allegations of racial discrimination by rental
Unquestionably [plaintiff] had no 'right' of
'private occupancy' -- no 'right' to occupy
the apartment she applied for. Though she was
entitled not to be discriminated against in
her application, that is not at all the same
as a 'right' to occupy: an enforceable claim
to occupancy[.] . . . By . . . adding the
phrase, that a person occupies, to the
definition, it can no longer be seriously
argued that the phrase, or invasion of the
right of private occupancy, includes actions
for personal injuries arising from racial
discrimination to prospective tenants.
at 42-43, 760 A.2d at 1146-47 (quoting Martin v. Brunzelle
F. Supp. 167, 170 (N.D. Ill. 1988)).
The parties cite no cases, and we have found none, in which
the underlying plaintiffs allege tortious behavior occurring after
obtaining a possessory right to the subject property, but before
plaintiffs have physically moved in. However, the appellate
jurisprudence interpreting the phrase invasion of the right of
private occupancy of a room, dwelling or premises that a person
occupies have generally distinguished between plaintiffs who own
or rent a property, and those who are merely prospective
but have not entered into a contract, signed a lease, or otherwise
obtained possessory rights to the subject property. We agree with
this distinction and conclude that the proper inquiry is not
whether a party has physically assumed control of the property, but
whether he has obtained a legally enforceable right
to do so. See,
e.g., United States v. Security Mgmt. Co
., 96 F.3d 260, 265 (7th
Simply put, coverage is extended to that
category of cases which involve the invasion
of a person's right of private occupancy. . .
. We agree . . . [that] the that a person
occupies portion of the definition does not
add much clarity to the clause. We . . . read
it as merely attempting to refine the nature
of the prerequisite right of private
occupancy. . . . We believe that a reasonable
insured would read the language as excluding
cases where the aggrieved individual was not
possessed of an existing right of private
Ambiguity in the terms of an insurance policy is resolved in
favor of the insured:
The words used in the policy having been
selected by the insurance company, any
ambiguity or uncertainty as to their meaning
must be resolved in favor of the policyholder,
or the beneficiary, and against the company.
However, ambiguity in the terms of an
insurance policy is not established . . .
unless, in the opinion of the court, the
language of the policy is fairly andreasonably susceptible to either of the
constructions for which the parties contend.
Trust Co. v. Insurance Co
., 276 N.C. 348, 354, 172 S.E.2d 518, 522
(1970) (citation omitted).
We conclude that [a] reasonable reading of the insurance
policy could produce either the reading offered by plaintiff or the
reading offered by defendants; therefore, the policy is ambiguous.
Scottsdale Ins. Co. v. Travelers Indem. Co
., 152 N.C. App. 231,
234, 566 S.E.2d 748, 750 (2002). Because the phrase invasion of
the right of private occupancy of a room, dwelling or premises that
a person occupies is ambiguous, the ambiguity in the policy
language must be resolved against the insurance company and in
favor of the insured. Brown v. Lumbermens Mut. Casualty Co
N.C. 387, 392, 390 S.E.2d 150, 153 (1990).
Mindful of the principle that ambiguities are to be resolved
in favor of providing coverage, we hold that the phrase invasion
of the right of private occupancy of a room, dwelling or premises
that a person occupies includes situations wherein a party suffers
injury after he has entered into a contract for possession of
realty and thus has gained a right of
private occupancy, even if
he has not yet assumed physical possession of the property. The
gravamen of the Bynum/Solari complaint is that (1) the plaintiffs
rented a house from defendants; (2) they were told that a key would
be left at the house; (3) no restrictions were imposed regarding
Solari's allowing a family member or any other person to obtain the
key if that person arrived at the beach house before Solari; and
(4) when their biracial adult daughter and three friends, includingan African American man, arrived in Holden Beach defendants refused
to give her a key to the premises, and employed a racial epithet.
We conclude that the allegations of the complaint sufficiently
allege a possessory right to the rental house by members of the
Bynum/Solari family such that the alleged refusal to proved a key
to Solari's adult daughter raises a possibility the insured is
liable and . . . suffice[s] to impose a duty to defend. Penn.
, 157 N.C. App. at 558, 579 S.E.2d at 407.
We conclude the trial court erred by granting summary judgment
in favor of defendant. Accordingly, the trial court's order of
summary judgment is
Judges HUNTER and McCULLOUGH concur.
The parties do not dispute that coverage A, insuring
property damage and bodily injury arising out of an occurrence,
or accident, does not apply to the facts of this case, inasmuch
as the complaint alleges only intentional, willful acts by the
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