Atmed Treatment Center, Inc. v. The Travelers Indemnity Company

December 9, 2022

                                                     Supreme Court

                                                     No. 2021-130-Appeal.
                                                     (PC 19-11553)




    Atmed Treatment Center, Inc.      :

                   v.                 :

 The Travelers Indemnity Company.     :




            NOTICE: This opinion is subject to formal revision
            before publication in the Rhode Island Reporter. Readers
            are requested to notify the Opinion Analyst, Supreme
            Court of Rhode Island, 250 Benefit Street, Providence,
            Rhode Island 02903, at Telephone (401) 222-3258 or
            Email:      opinionanalyst@courts.ri.gov,     of     any
            typographical or other formal errors in order that
            corrections may be made before the opinion is published.
                                                         Supreme Court

                                                         No. 2021-130-Appeal.
                                                         (PC 19-11553)




    Atmed Treatment Center, Inc.          :

                   v.                     :

 The Travelers Indemnity Company.         :



      Present: Suttell, C.J., Goldberg, Robinson, Lynch Prata, and Long, JJ.

                                     OPINION

      Justice Goldberg, for the Court. This insurance coverage dispute came

before the Supreme Court on October 4, 2022, on appeal by the plaintiff, Atmed

Treatment Center (Atmed), seeking review of a Superior Court final judgment and

order granting summary judgment in favor of the defendant, The Travelers

Indemnity Company (Travelers), and denying Atmed’s motion for summary

judgment. For the reasons set forth herein, we affirm the judgment of the Superior

Court in part and vacate in part.

                                    Facts and Travel

      The material facts in this case are not in dispute. This controversy arose from

an allegation of racial discrimination that purportedly occurred at the Atmed


                                              -1-
Treatment Center in Johnston, Rhode Island, on July 14, 2015. On November 23,

2015, Folosade Olofinlade, a woman of Nigerian national origin, filed a charge of

discrimination (charge) with the Rhode Island Commission for Human Rights

(commission). In the charge, Olofinlade alleged that, on July 14, 2015, she and her

two-and-one-half-year-old daughter had accompanied her brother-in-law to the

Atmed Treatment Center in order for him to be evaluated for symptoms of illness.

At the time, Olofinlade was thirty-eight weeks pregnant. According to Olofinlade,

she informed Atmed that her brother-in-law had a history of malaria and that that

was likely the cause of his illness. Ms. Olofinlade alleged that she and her daughter

were then quarantined in a small room with her brother-in-law for approximately

four hours without access to food, water, or a restroom. She also alleged overhearing

an employee declare on the telephone that Atmed might have its first case of Ebola,1

despite having no facts to support such a statement.


1
  “Ebola virus disease (EVD) is a deadly disease with occasional outbreaks that occur
mostly on the African continent.” Centers for Disease Control and Prevention, What
is Ebola Virus Disease?, https://www.cdc.gov/vhf/ebola/about.html (last visited
October 13, 2022). “The course of the illness typically progresses from ‘dry’
symptoms initially (such as fever, aches and pains, and fatigue), and then progresses
to ‘wet’ symptoms (such as diarrhea and vomiting) as the person becomes sicker.”
Centers for Disease Control and Prevention, Ebola (Ebola Virus Disease) Signs and
Symptoms, https://www.cdc.gov/vhf/ebola/symptoms/index.html (last visited
October 13, 2022). “The virus spreads through direct contact (such as through
broken skin or mucous membranes in the eyes, nose, or mouth) * * *.” Centers for
Disease Control and Prevention, Ebola (Ebola Virus Disease) Transmission,
https://www.cdc.gov/vhf/ebola/transmission/index.html (last visited October 13,
2022).
                                          -2-
      According to Olofinlade, after four hours of confinement, she and her family

members were transported to a local hospital in accordance with “Hazmat

protocol.”2 In her charge, Olofinlade alleged that Atmed’s conduct “caused a serious

delay in transport, undue stress, panic, anxiety, confusion, and fear for both [her]

and [her] child.”    Ms. Olofinlade averred that her brother-in-law was never

diagnosed with Ebola or any other infectious disease. According to Olofinlade, the

events that transpired at Atmed “indicate[d] that both [she and her daughter] were

treated in a disparate manner on the basis of [their] national origin, race and color.”

Ms. Olofinlade claimed that Atmed’s conduct constituted discrimination in violation

of Title VII of the Civil Rights Acts of 1964, the Rhode Island Civil Rights Act, and

other state and federal laws.

      Atmed notified Travelers of Olofinlade’s charge and demanded that Travelers

defend it against the claims in accordance with a commercial general liability

insurance policy (policy) that Atmed held with Travelers. The policy was effective

from June 2015 to June 2016 and provided Atmed coverage for commercial general

liability. Among the sections of the policy pertinent to this lawsuit are:




2
  According to Olofinlade, multiple emergency personnel from the Johnston Fire
Department and the Johnston Police Department responded to the treatment center
to handle the transfer. Ms. Olofinlade alleged that the “emergency personnel
blocked all exits to the treatment center while ‘Hazmat team members’ entered the
center in order to mask [her and her daughter] and ‘prepare’ [them] for transfer.”
                                          -3-
“SECTION I – COVERAGES
“COVERAGE A BODILY INJURY AND PROPERTY
DAMAGE LIABILITY
“1. Insuring Agreement
       “a. We will pay those sums that the insured becomes
       legally obligated to pay as damages because of
       ‘bodily injury’ or ‘property damage’ to which this
       insurance applies. We will have the right and duty
       to defend the insured against any ‘suit’ seeking
       those damages. However, we will have no duty to
       defend the insured against any ‘suit’ seeking
       damages for ‘bodily injury’ or ‘property damage’ to
       which this insurance does not apply.
“* * *
“SECTION V – DEFINITIONS
“* * *
“18. ‘Suit’ means a civil proceeding in which damages
because of ‘bodily injury’, ‘property damage’ or ‘personal
and advertising injury’ to which this insurance applies are
alleged. ‘Suit’ includes:
         “a. An arbitration proceeding in which such
         damages are claimed and to which the insured must
         submit or does submit with our consent; or
         “b. Any other alternative dispute resolution
         proceeding in which such damages are claimed and
         to which the insured submits with our consent.
“* * *
“XTEND ENDORSEMENT
“* * *
“EXCLUSION – DISCRIMINATION
“* * *
“1. COVERAGE A – BODILY INJURY AND
PROPERTY DAMAGE LIABILITY – is amended by
adding the following additional exclusion:
                              -4-
             “(This Insurance does not apply to:)
             “‘Bodily Injury’ resulting from or as a consequence of
             discrimination, whether intentional or unintentional, based
             upon a person’s sex, sexual preference, marital status,
             race, creed, religion, national origin, age, physical
             capabilities, characteristics or condition, or mental
             capabilities or condition.
             “2. COVERAGE B – PERSONAL AND ADVERTISING
             INJURY LIABILITY – is amended by adding the
             following additional exclusion:
             “(This insurance does not apply to:)
             “‘Personal injury’ resulting from or as a consequence of
             discrimination, whether intentional or unintentional, based
             upon a person’s sex, sexual preference, marital status,
             race, creed, religion, national origin, age, physical
             capabilities, characteristics or condition, or mental
             capabilities or condition.”
      In response to Atmed’s demand, Travelers informed Atmed by letter that

Olofinlade’s charge was not covered under the terms of the policy. Travelers

explained that, in its view, the allegations made in Olofinlade’s charge “d[id] not set

forth a claim for ‘bodily injury’ or ‘property damage’ caused by an ‘occurrence.’”3

Travelers also stated that the “Expected Or Intended Injury” exclusion4 and the




3
 The policy defines “occurrence” as “an accident, including continuous or repeated
exposure to substantially the same general harmful conditions.”
4
  The policy provides that the insurance does not apply to “Expected Or Intended
Injury,” defined as “‘[b]odily injury’ or ‘property damage’ expected or intended
from the standpoint of the insured.” The policy further provides that “[t]his
exclusion does not apply to ‘bodily injury’ resulting from the use of reasonable force
to protect persons or property.”
                                           -5-
“Discrimination” exclusion both precluded coverage. To support its decision to

disclaim coverage, Travelers quoted numerous provisions of the policy.

Significantly, however, Travelers omitted certain relevant portions of the policy that

are germane to our analysis. Atmed retained counsel to defend.

      Ms. Olofinlade obtained a right-to-sue authorization from the commission and

filed an action against Atmed in the Superior Court on behalf of herself and her

daughter on October 10, 2017.5 The operative complaint against Atmed consisted

of various claims sounding in discrimination and tort. Specifically, the amended

complaint set forth claims for: (1) discrimination in violation of the Rhode Island

Civil Rights Act of 1990 (RICRA), G.L. 1956 chapter 112 of title 42; (2)

negligence/premises liability; (3) intentional infliction of emotional distress; (4)

false imprisonment; (5) discrimination in violation of Title VI of the Civil Rights

Act of 1964; and (6) discriminatory practices prohibited in places of public

accommodation in violation of G.L. 1956 chapter 24 of title 11. Atmed continued

with retained counsel to defend it against Olofinlade’s suit. On January 17, 2019,

Atmed removed the case to the United States District Court for the District of Rhode

Island, where it remains pending.




5
 Ms. Olofinlade filed an amended complaint on January 9, 2019. The amended
complaint also lists the Town of Johnston and Joseph Chiodo, in his capacity as
Finance Director for the Town of Johnston, as defendants.
                                          -6-
      It was not until August 20, 2019, that Atmed notified Travelers of Olofinlade’s

suit and demanded that Travelers undertake its defense.6 In a letter to Atmed dated

September 10, 2019, Travelers agreed to participate in Atmed’s defense against

Olofinlade’s claims, subject to a reservation of rights. Travelers, however, has not

reimbursed Atmed for its legal costs incurred before August 20, 2019.

      On December 5, 2019, Atmed commenced this action seeking a declaratory

judgment that Travelers had a duty to defend Atmed before the commission (count

one). The complaint also asserted a breach-of-contract claim based upon Travelers’

disclaimer of coverage and its explanation for its decision to disclaim coverage

(count two), and insurer bad faith (count three).7

      On March 19, 2020, Atmed filed a motion for partial summary judgment as it

relates to counts one and two. Travelers filed an objection along with a cross-motion

for summary judgment. A hearing on the parties’ cross-motions for summary

judgment was held in the Superior Court on July 22, 2020. At the conclusion of the

hearing, the trial justice reserved decision on the motions. On September 18, 2020,


6
 We note that Atmed waited approximately one year and eleven months to notify
Travelers of Olofinlade’s action.
7
 Travelers filed an answer on January 14, 2020, in which it denied the allegations
and asserted several affirmative defenses. On February 24, 2020, Travelers filed a
motion to sever and stay the bad-faith claim, and Atmed stipulated that count three
could be severed and stayed.


                                          -7-
the trial justice issued a bench decision granting Atmed’s motion as to liability only

(original decision).   The trial justice deferred ruling on Atmed’s recoverable

damages, explaining that she would give Travelers the opportunity to dispute the

reasonableness of the attorneys’ fees Atmed had incurred. The trial justice directed

the parties to refrain from preparing an order on the cross-motions for summary

judgment until the issue of damages was resolved.

      On November 3, 2020—before an order entered—Travelers filed a motion for

reconsideration, or, alternatively, for separate and final judgment. Atmed objected

and a hearing was held on December 17, 2020. The trial justice proceeded to issue

a second bench decision, in which she granted Travelers’ motion for reconsideration;

granted Travelers’ cross-motion for summary judgment; and denied Atmed’s motion

for partial summary judgment. Conflicting (and confusing) orders subsequently

entered on April 12, 2021, that culminated in an order granting summary judgment

for Travelers on all counts, including count three that had been severed and stayed.8

Notably, Travelers had not moved for summary judgment as to count three of the

complaint. On April 15, 2021, Atmed filed a timely notice of appeal. In deciding


8
  An order granting Atmed’s partial motion for summary judgment as to counts one
and two was entered, followed by an order that granted Travelers’ motion for
reconsideration, vacated the court’s previous order, and denied Atmed’s motion for
partial summary judgment, then granted Travelers’ cross-motion for summary
judgment as to counts one and two, and finally, granted summary judgment in favor
of Travelers on count three—which had been severed and stayed—and entered
judgment in favor of Travelers.
                                          -8-
this case, we touch upon several of the hallmarks of summary-judgment

jurisprudence.

                                Standard of Review

      “Although we stress that the Superior Court Rules of Civil Procedure say

nothing [about] a motion to reconsider, we do note that ‘a party’s motion to

reconsider has been treated by this Court as a motion to vacate a judgment under

Rule 60(b).’” McLaughlin v. Zoning Board of Review of Town of Tiverton, 

, 604 n.9 (R.I. 2018) (quoting Turacova v. DeThomas, 

 (R.I.

2012)). “It is well settled that [a] motion to vacate a judgment is left to the sound

discretion of the trial justice * * *.” Renewable Resources, Inc. v. Town of Westerly,

 (R.I. 2015) (quoting Berman v. Sitrin, 

(R.I. 2014)). Whether the trial justice had the authority to grant Travelers’ motion

for reconsideration and vacate her original decision presents a question of law

concerning which we undertake de novo review. See National Education Association

Rhode Island v. Town of Middletown by and through Dible, 

 (R.I.

2019) (“[T]his Court reviews questions of law de novo.”).

      “This Court reviews a grant of summary judgment de novo.” Morgan v.

Bicknell, 

, 1182 (R.I. 2022) (quoting Sullo v. Greenberg, 

 (R.I. 2013)). “Examining the case from the vantage point of the trial justice who

passed on the motion for summary judgment, we view the evidence in the light most


                                          -9-
favorable to the nonmoving party, and if we conclude that there are no genuine issues

of material fact and that the moving party is entitled to judgment as a matter of law,

we will affirm the judgment.” Ballard v. SVF Foundation, 

 (R.I.

2018) (brackets omitted) (quoting Sullo, 

). “Summary judgment

is appropriate only when 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 the moving party is entitled to judgment as a

matter of law.” Webster Bank, National Association v. Rosenbaum, 

,

558 (R.I. 2022) (quoting Sola v. Leighton, 

 (R.I. 2012)). “‘Where

the facts suggest only one reasonable inference[,]’ the trial justice may treat the issue

as a matter of law.” Shannahan v. Rhode Island Interlocal Risk Management Trust,

, 739 (R.I. 2022) (quoting Deutsche Bank National Trust Company, for

Registered Holders of Ameriquest Mortgage Securities, Inc. v. McDonough, 

 (R.I. 2017)).

      “Additionally, ‘whether an ambiguity exists in an insurance policy is a

question of law.’” Bacon Construction Co., Inc. v. Arbella Protection Insurance

Company, Inc., 

 (R.I. 2019) (brackets omitted) (quoting

Merrimack Mutual Fire Insurance Company v. Dufault, 

 (R.I.

2008)). “This Court reviews a trial justice’s conclusions on questions of law de

novo.” 

 at 599 (quoting Beacon Mutual Insurance Company v. Spino Brothers,


                                           - 10 -
Inc., 

 (R.I. 2011)). “Accordingly, we review a trial justice’s

interpretation of a contract de novo.” 

 (quoting Beacon Mutual Insurance

Company, 

). In doing so, “[t]his Court interprets the terms of an

insurance policy according to the same rules of construction governing contracts.”

Town of Cumberland v. Rhode Island Interlocal Risk Management Trust, Inc., 

 (R.I. 2004). “We look at the four corners of a policy, viewing it

‘in its entirety, affording its terms their plain, ordinary and usual meaning.’” 

(quoting Casco Indemnity Co. v. Gonsalves, 

 (R.I. 2004)). “The

test to be applied is not what the insurer intended * * *, but what the ordinary reader

and purchaser would have understood [the language] to mean.” Allstate Insurance

Company v. Ahlquist, 

 (R.I. 2013) (quoting Pressman v. Aetna

Casualty and Surety Co., 

 (R.I. 1990)). “[W]e shall not depart

from the literal language of the policy absent a finding that the policy is ambiguous.”

Mallane v. Holyoke Mutual Insurance Company in Salem, 

 (R.I.

1995). “We refrain from engaging in mental gymnastics or from stretching the

imagination to read ambiguity into a policy where none is present.” Beacon Mutual

Insurance Company, 

 (quoting Lynch v. Spirit Rent-A-Car, Inc., 

 (R.I. 2009)).




                                          - 11 -
                                     Analysis

      On appeal, Atmed asserts that the trial justice erred in granting Travelers’

motion for reconsideration and then granting summary judgment in favor of

Travelers. We address each claim of error in turn.

                                 Reconsideration

      First, we look to Atmed’s argument that the trial justice erred in granting

Travelers’ motion for reconsideration. Atmed contends that the trial justice erred in

determining that Travelers’ motion for reconsideration was not governed by Rule

60(b) of the Superior Court Rules of Civil Procedure.9 Specifically, Atmed argues



9
 Rule 60(b) of the Superior Court Rules of Civil Procedure, entitled “Relief from
Judgment or Order” provides:
            “On motion and upon such terms as are just, the court may
            relieve a party or a party’s legal representative from a final
            judgment, order, or proceeding for the following reasons:
                   “(1) Mistake, inadvertence, surprise, or excusable
                   neglect;
                   “(2) Newly discovered evidence which by due
                   diligence could not have been discovered in time to
                   move for a new trial under Rule 59(b);
                   “(3) Fraud, misrepresentation, or other misconduct
                   of an adverse party;
                   “(4) The judgment is void;
                   “(5) The judgment has been satisfied, released, or
                   discharged, or a prior judgment upon which the
                   judgment is based has been reversed or otherwise
                   vacated, or it is no longer equitable that the
                   judgment should have prospective application; or
                   “(6) Any other reason justifying relief from the
                   operation of the judgment.
                                         - 12 -
that the trial justice should have treated Travelers’ motion for reconsideration as a

motion to vacate the judgment pursuant to Rule 60(b) because the trial justice’s

original decision had a “substantial element of finality in that the court had decided

the issues of Travelers’ duty to defend and Travelers’ liability for breach of the

contract of insurance.” Atmed argues, in the alternative, that even if the trial justice

properly determined that Travelers’ motion for reconsideration did not align with

Rule 60(b), she nevertheless exceeded her authority by vacating her original

decision. Travelers, on the other hand, argues that the trial justice did not err in

granting its motion for reconsideration and vacating her original decision because,

in the posture of this case, she had the “power to hear Travelers’ motion for

reconsideration and modify her previous interlocutory order.” We agree with

Travelers.

      At the December 17, 2020 hearing, the trial justice concluded that Travelers’

motion for reconsideration need not meet the requirements of Rule 60(b) because


             “The motion shall be made within a reasonable time, and
             for reasons (1), (2), and (3) not more than one (1) year after
             the judgment, order, or proceeding was entered or taken.
             A motion under this subdivision (b) does not affect the
             finality of a judgment or suspend its operation. This rule
             does not limit the power of a court to entertain an
             independent action to relieve a party from a judgment,
             order, or proceeding, or to set aside a judgment for fraud
             upon the court. The procedure for obtaining any relief
             from a judgment shall be by motion as prescribed in these
             rules or by an independent action.”
                                          - 13 -
the original decision was an interlocutory order rather than a final judgment. The

trial justice explained that, because this Court has made clear that a trial justice is

vested with the authority to modify interlocutory orders, she had the discretion to

modify the original decision.

      “With respect to a motion to reconsider [a prior] ruling, ‘[t]he Superior Court

Rules of Civil Procedure, similar to the Federal Rules of Civil Procedure, do not

provide for a motion to reconsider.’” Yi Gu v. Rhode Island Public Transit Authority,

 (R.I. 2012) (quoting School Committee of Cranston v. Bergin-

Andrews, 

 (R.I. 2009)). “This Court, however, applies a liberal

interpretation of the rules [in order] to ‘look to substance, not labels.’” Bergin-

Andrews, 

 (quoting Sarni v. Meloccaro, 

, 

 (1974)). Thus, “we have allowed ‘motions to reconsider’ to be treated as

motions to vacate under Rule 60(b) * * *.” Yi Gu, 

 (quoting Bergin-

Andrews, 

). “However, Rule 60(b) generally is available ‘in

instances where relief is sought from a final judgment, order, or proceeding.’”

Turacova, 

 (quoting Murphy v. Bocchio, 

, 

 (1975)). “The finality contemplated by Rule 60(b) envisions an order that

definitely terminates the litigation and leaves nothing more for the court to decide.”

Murphy, 

, 

. “If it appears from the order that

something remains to be done before the rights of the litigants are fixed, the requisite


                                          - 14 -
finality to which the rule refers has not been reached.” 

 “A decree, we [have]

stated, cannot be described as being final when a person in whose favor the decree

runs must return to court for further assistance.” 

, 

.

      It necessarily follows that, if Rule 60(b) applies to final judgments or orders,

it does not apply to interlocutory orders. See Renewable Resources, Inc., 

-71 (quoting Murphy, 

, 

) (“Rule [60(b)] ‘is

applicable only in instances where relief is sought from a final judgment, order, or

proceeding.’ * * * Because a preliminary injunction is merely an interlocutory order,

as opposed to a final judgment, Rule [60(b)] was erroneously invoked.”). In contrast

to final judgments, “[i]nterlocutory orders are those that are provisional or

temporary, or that decide some intermediate point or matter but are not a final

decision of the whole matter.” Coit v. Tillinghast, 

 (R.I. 2014)

(quoting Simpson v. Vose, 

 (R.I. 1997)).

      In the present case, we conclude that the trial justice was correct in

determining that Travelers’ motion for reconsideration was not governed by Rule

60(b) because the original decision simply was not final. Although the trial justice

granted Atmed’s motion for summary judgment as to liability, she did not rule on

damages and specifically asked the parties to refrain from preparing any orders until

the issue of damages had been resolved. See Turacova, 

 (holding

that order was not final judgment where court anticipated parties would draft


                                          - 15 -
proposed order and come before it once more for entry of mutually agreed upon

order and where order failed to set forth monetary award); see also Webster v.

Perrotta, 

 (R.I. 2001) (holding that judgments by default that

conclusively established liability of defendants were not final judgments because

litigation was not terminated and case was ordered to hearing on oral proof of claim).

      We are unpersuaded by Atmed’s contention that, even if Travelers’ motion

for reconsideration was not governed by Rule 60(b), the trial justice nevertheless

erred by vacating the original decision. Atmed argues that, although a trial justice

holds the inherent power to modify his or her interlocutory orders, he or she does not

have the inherent power to vacate those orders.

      A trial justice retains the authority “to modify any interlocutory judgment or

order prior to final judgment.” Renewable Resources, Inc., 

(quoting Murphy, 

, 

). Because a trial justice has

plenary authority to afford relief from interlocutory judgments, we conclude that the

trial justice was free to vacate her original decision upon concluding that she may

have erred. See 

 (quoting Greene v. Union Mutual Life Insurance Company of

America, 

 (1st Cir. 1985)) (acknowledging “the inherent power of

[the trial court] to afford such relief from interlocutory judgments * * * as justice

requires”); see also Fernandez-Vargas v. Pfizer, 

, 61 n.2 (1st Cir. 2008)

(“While the Federal Rules do not provide for a ‘motion to reconsider,’ a district court


                                          - 16 -
has the inherent power to reconsider its interlocutory orders, and we encourage it to

do so where error is apparent.”). Although this policy is particularly suitable to cases

in which the trial justice, upon reflection, has concluded that the first decision was

erroneous, a motion for reconsideration should not be undertaken lightly. Because

the prevailing party has a stake in the original decision, when confronted with a

motion to reconsider, a trial justice must balance the interests of the parties against

a thoughtful determination that a change of course is proper under the circumstances,

a serious event to all concerned.

       We emphasize, however, that after a trial justice has granted a motion to

reconsider, he or she must rely not on the parties’ after-the-fact arguments as set

forth in their papers in support of or opposition to the motion to reconsider, but rather

on the arguments originally made. See Jackson v. Medical Coaches, 

 (R.I. 1999) (“Rule 60(b) does not constitute a vehicle for the motion justice to

reconsider the previous judgments in light of later-discovered legal authority that

could have and should have been presented to the court before the original judgments

entered.”); see also Cochran v. Quest Software, Inc., 

 (1st Cir. 2003)

(“It is generally accepted that a party may not, on a motion for reconsideration,

advance a new argument that could (and should) have been presented prior to the

district court’s original ruling.”).




                                           - 17 -
                               Summary Judgment

      We next turn to Atmed’s argument that the trial justice erred in granting

Travelers’ motion for summary judgment. Atmed specifically contends that the trial

justice erred (1) in determining that a charge of discrimination filed with the

commission did not constitute a “suit” to which the insurance policy applies; (2) in

concluding that the discrimination exclusion within the insurance policy nullified

Travelers’ duty to defend; (3) in determining that Travelers could not have breached

the insurance contract by misrepresenting pertinent provisions of the insurance

policy; and (4) in granting summary judgment as to count three of the complaint

because it had been severed and stayed.

                                          A

                          The Discrimination Exclusion

      We first address whether the discrimination exclusion applies to Olofinlade’s

allegations before the commission. Atmed argues that the trial justice mistakenly

ruled that Travelers had no duty to defend Atmed based on her finding that the

allegations contained within Olofinlade’s charge to the commission did not fall

within the risk covered by the policy because Olofinlade alleged that her injuries

resulted from, or were a consequence of, discrimination on the basis of race and

national origin. We disagree. Because we conclude that the exclusion applies to




                                          - 18 -
Olofinlade’s charge of discrimination before the commission, we need not address

whether the charge was a “suit” that the insurance policy covers.10

      “It is well settled in Rhode Island that the ‘pleadings test’ is applied in order

to ascertain whether an insurer has a duty to defend an insured.” Bacon Construction

Co., 

 (quoting Medical Malpractice Joint Underwriting Association

of Rhode Island v. Charlesgate Nursing Center, L.P., 

 (R.I.

2015)). “That test requires the trial court to look at the allegations contained in the

complaint, and if the pleadings recite facts bringing the injury complained of within

the coverage of the insurance policy, the insurer must defend irrespective of the

insured’s ultimate liability to the plaintiff.” 

 (quoting Progressive Casualty

Insurance Company v. Narragansett Auto Sales, 

 (R.I. 2001)).

“Moreover, ‘when a complaint contains a statement of facts which bring the case

within or potentially within the risk coverage of the policy, the insurer has an



10
   “Generally speaking, the insured seeking to establish coverage bears the burden
of proving a prima facie case, including but not limited to the existence and validity
of a policy, the loss as within the policy coverage, and the insurer’s refusal to make
payments as required by the terms of the policy.” General Accident Insurance
Company of America v. American National Fireproofing, Inc., 

(R.I. 1998). “The insurer then bears the burden of proving the applicability of policy
exclusions and limitations in order to avoid an adverse judgment but only after the
insured has sustained its burden and established its prima facie case.” 

 Thus,
although Atmed had the initial burden of proving that the charge of discrimination
was a “suit” to which the insurance policy applies, we need not resolve this issue
because we conclude that Travelers has met its burden of proving that the
discrimination exclusion is applicable.
                                          - 19 -
unequivocal duty to defend.’” 

 (quoting Medical Malpractice Joint Underwriting

Association of Rhode Island, 

).

      Relying on the “pleadings” test, Atmed asserts that Travelers has a duty to

defend because the allegations raised are potentially within the risk covered by the

policy. In particular, Atmed argues that, because Olofinlade alleged that she was

confined wrongfully, there is potential liability for the tort of false imprisonment, a

risk covered by the policy. Atmed contends that its “potential liability for injury

arising out of false imprisonment is not linked to unlawful discrimination, as a matter

of law.” According to Atmed, if “Olofinlade were able to establish that Atmed,

without justification, confined her in the manner she described, but could not show

Atmed did that because of her national origin, race, or color, Atmed nevertheless

could be held liable for the tort of false imprisonment.” In other words, Atmed

contends that its potential liability for false imprisonment is severable from its

potential liability for discrimination.

      The trial justice applied the pleadings test and determined that the allegations

before the commission are precluded from coverage under the discrimination

exclusion. The trial justice explained that the discrimination exclusion clearly states

that the insurance policy “does not apply to bodily injury resulting from or as a

consequence of discrimination * * *.” Thus, the trial justice concluded that the




                                          - 20 -
discrimination exclusion clearly places Olofinlade’s claims of discrimination

outside the scope of coverage of the policy. We agree with this reasoning.

      The “pleadings test” requires this Court to focus on the allegations within the

complaint—regardless of the insured’s ultimate liability—to determine if the insurer

has a duty to defend. See Bacon Construction Co., 

. Applying the

pleadings test, it is clear that the allegations contained within the charge to the

commission bring Olofinlade’s injuries within the constraints of the discrimination

exclusion. Ms. Olofinlade alleged that she and her daughter were confined because

of their national origin, race, and color, and as a result, suffered injury.11 Under the

statement of facts set forth in the charge of discrimination, the charge is not within,

or even potentially within, the risk coverage of the policy because the allegations are

a clear and definite assertion that Olofinlade and her daughter suffered injuries

“resulting from or as a consequence of discrimination.”           Whether Atmed is

ultimately liable to Olofinlade for the intentional tort of false imprisonment in a

different forum is irrelevant in determining whether Travelers had a duty to defend

against Olofinlade’s charge before the commission, see Bacon Construction Co.,

, a body statutorily charged with enforcing the state’s anti-

discrimination laws, with limits of jurisdiction. See 515 RICR 10-00-2.2. It is


11
   Travelers does not contend that the injuries alleged by Olofinlade—delay in
transport, undue stress, panic, anxiety, confusion, and fear—are not within the
definition of “bodily injury” or “personal or advertising injury.”
                                          - 21 -
therefore our opinion that Travelers had no duty to defend Atmed against

Olofinlade’s charge before the commission.

                                          B

                      The Severed and Stayed Count Three

      Lastly, we address whether the trial justice erred in granting summary

judgment in favor of Travelers as to count three of the complaint. Travelers contends

that the trial justice did not err in granting summary judgment as to count three

because, it contends, this Court’s precedent in Zarella v. Minnesota Mutual Life

Insurance Co., 

 (R.I. 2003), establishes that a plaintiff must first show

that he or she is entitled to recover on the contract before proceeding against the

insurer for the tort of insurer bad faith. Thus, Travelers asserts, because the trial

justice found that Travelers had not breached the insurance contract, the trial justice

properly granted summary judgment in Travelers’ favor.

      Atmed, on the other hand, argues that the procedural posture of Zarella is

inapposite to the present case. Atmed distinguishes Zarella from the case at bar by

pointing out that, in Zarella, a jury found no evidence of intentional misconduct by

the insurer, and, therefore, judgment for the insurer was entered under Rule 50 of

the Superior Court Rules of Civil Procedure. Thus, Atmed asserts, in Zarella, the

jury had decided the merits of the plaintiff’s bad-faith claim, unlike in the case on

appeal. Atmed also argues that the trial justice erred in rejecting its argument that


                                          - 22 -
Travelers breached the insurance contract by making misrepresentations of pertinent

provisions of the policy. Specifically, Atmed contends that, by misrepresenting

pertinent provisions of the policy within the denial letter, Travelers breached its

contractual duty of good faith and fair dealing. Atmed asserts that such a breach

constitutes a breach of the insurance contract. We agree with Atmed that the trial

justice erred in granting summary judgment as to count three.

      In count three of the complaint, Atmed set forth a claim for “[b]reach of

[c]ontract ([i]nsurer [b]ad [f]aith).” Atmed alleged that in its denial letter, Travelers

“purposely misrepresented the provisions of the policies that applied to and

controlled Travelers’ duty to defend Atmed” against the charge Olofinlade filed with

the commission. Atmed further alleged in its complaint that Travelers had deceived

Atmed by failing to inform Atmed that the definition of “personal injury” within the

policy also includes claims based upon “false arrest, detention or imprisonment.”12

      In    arguing    against    reconsideration,    Atmed     contended     that   the

misrepresentations of the policy provisions within the denial letter constituted a

breach of contract. When asked by the trial justice under which count of the

complaint Atmed had alleged that Travelers had breached the contract by making

misrepresentations of the policy in the denial letter, Atmed stated that its claim fell


12
  Atmed also alleged in count three that Travelers had violated G.L. 1956 § 9-1-33
when it “wrongfully and in bad faith refused to timely perform its obligations under
the contract of insurance * * *.”
                                           - 23 -
under count three. The trial justice ultimately concluded that, if Travelers was not

found liable for breach of contract, Atmed could not maintain a bad faith claim,

regardless of whether that claim is framed as one sounding in statutory bad faith or

as a breach of the implied duty of good faith and fair dealing.

      After concluding that Travelers had not breached the insurance contract, the

trial justice declared that she was not going to do any analysis as to count three of

the complaint. The trial justice explained that count three could not be reached

unless and until there was success on counts one and two. Consequently, the trial

justice granted Travelers’ motion for summary judgment. In accordance with its

bench decision, the court issued a written order, dated April 12, 2021, granting

summary judgment to Travelers as to count three of Atmed’s complaint which had

previously been severed and stayed. Notably, however, Travelers had not moved

for summary judgment as to that count.13

      After a careful review of the record, we conclude that count three of Atmed’s

complaint was not properly before the trial justice. See Robinson v. Malinoff, 

 (R.I. 2001) (holding that trial justice erred in granting summary

judgment on claim not properly before the court). “Our caselaw consistently has

mandated that when a trial justice considers and rules on an issue sua sponte, the


13
  In fact, Travelers even argued in its memoranda in support of its cross-motion for
summary judgment and in objection to Atmed’s motion for summary judgment that
count three of the complaint was not properly before the court.
                                         - 24 -
parties must be afforded notice of the issue and allowed an opportunity to present

evidence and argue against it.” Catucci v. Pacheco, 

 (R.I. 2005).

“Moreover, ‘[u]nder the general principles of the adversary system, a party should

not be granted relief that it did not request.’” 

 (quoting Providence Journal Co. v.

Convention Center Authority, 

 (R.I. 2003)).

      In the present case, count three of the complaint was severed and stayed. The

parties were not presented with the opportunity to fully debate the claims set forth

in count three. See 

 Furthermore, Travelers did not request summary judgment as

to count three of Atmed’s complaint. See 

 Thus, we hold that the trial justice

exceeded her authority in granting summary judgment in Travelers’ favor as to that

count of the complaint.

      To the extent that Atmed contends that the court erred in rejecting its argument

that Travelers breached the insurance contract by making misrepresentations of

pertinent provisions of the policy, we note that “no action in bad faith can lie unless

and until an insured has proven a breach of the insurance contract.” Skaling v. Aetna

Insurance Company, 

 (R.I. 2002). We acknowledge, however,

that, based upon the record before us—including Atmed’s appellate contention that

Travelers’ alleged misrepresentations purportedly resulted in a significant delay in

seeking a defense in the Superior Court case—these alleged misrepresentations

could have caused Atmed to incur damages in the form of attorneys’ fees from the


                                          - 25 -
time the action was filed to the date on which Travelers agreed to defend Atmed.

This Court has explained that insurers have a duty to fully and completely investigate

claims by an insured. 

 (“Insurers doing business in Rhode Island have an

implied obligation to promptly and fully respond to their insured, to investigate a

claim and to subject that claim to appropriate review.”).

      Recently, in Houle v. Liberty Insurance Corporation, 

 (R.I.

2022), this Court vacated an order granting judgment on the pleadings where an

insured had alleged that its insurer breached an insurance contract by failing to

perform a full and complete investigation. Houle, 271 A.3d at 594-95. In Houle, this

Court acknowledged that, inherent in every insurance contract is an implied

covenant of good faith and fair dealing that places on insurers, “an implied obligation

to promptly and fully respond to their insured, to investigate a claim and to subject

that claim to appropriate review.” Id. at 595 (quoting Skaling, 

).

This Court reasoned that “[i]t [could not] be said that the allegations as pled, and

under any set of facts that may be proven at trial, would not support a claim for

breach of contract or breach of the implied covenant of good faith and fair dealing.”

 In the present case, as in Houle, we conclude that the trial justice erred in granting

summary judgment on count three because facts may be proven at trial which support

a claim for breach of contract or breach of the implied covenant of good faith and

fair dealing based upon Travelers’ alleged misrepresentations.


                                           - 26 -
                                   Conclusion

      For the reasons set forth herein, we affirm the judgment of the Superior Court

with respects to counts one and two of the plaintiff’s complaint. We vacate that

portion of the judgment granting summary judgment on count three of the plaintiff’s

complaint. The papers may be returned to the Superior Court.




                                        - 27 -
                                              STATE OF RHODE ISLAND
                                         SUPREME COURT – CLERK’S OFFICE
                                               Licht Judicial Complex
                                                 250 Benefit Street
                                               Providence, RI 02903


                                     OPINION COVER SHEET

                                         Atmed Treatment Center, Inc. v. The Travelers
Title of Case
                                         Indemnity Company.
                                         No. 2021-130-Appeal.
Case Number
                                         (PC 19-11553)

Date Opinion Filed                       December 9, 2022

                                         Suttell, C.J., Goldberg, Robinson, Lynch Prata, and
Justices
                                         Long, JJ.

Written By                               Associate Justice Maureen McKenna Goldberg


Source of Appeal                         Providence County Superior Court


Judicial Officer from Lower Court        Associate Justice Melissa E. Darigan

                                         For Plaintiff:

                                         Neil P. Philbin, Esq.
Attorney(s) on Appeal
                                         For Defendant:

                                         Brian W. Haynes, Esq.




SU-CMS-02A (revised November 2022)