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General Direct Marketing, Inc. v. Lexington Insurance Co.

January 19, 2006

GENERAL DIRECT MARKETING, INC., SHAWNEE RESORTS OF SOUTH CAROLINA, INC., SHAWNEE DEVELOPMENT, INC., PLAINTIFFS
v.
LEXINGTON INSURANCE CO., DEFENDANT



The opinion of the court was delivered by: Judge James M. Munley United States District Court

MEMORANDUM

Presently before the Court for disposition is Defendant Lexington Insurance Company's Motion to Dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). The parties have fully briefed this matter, and it is ripe for disposition. For the following reasons, we will deny the motion.

I. Background*fn1

The plaintiffs, General Direct Marketing, Inc., Shawnee Resorts of South Carolina, Inc., and Shawnee Development, Inc., (collectively "Plaintiffs") purchased a Commercial General Liability Contract (the "policy") on April 1, 1999, from Lexington. Each individual plaintiff is an insured under the policy. The policy contains three relevant coverage periods:

1) Coverage A for bodily injury; 2) Coverage B for personal and advertising injury; and 3) a Hotel Professional Liability Endorsement (the "endorsement"). The endorsement provides:

The Company will pay on behalf of the Insured all sums which the Insured shall become legally obligated to pay because of:

Injury arising out of the rendering of or failure to render, during the policy period, professional services by the Insured, or by any person for whose acts or omissions such Insured is legally responsible. Exclusion

1. This insurance shall not apply to any acts and omissions, malpractice, or mistake of a professional nature committed or alleged to have been committed by or on behalf of the Insured other than in the conduct of the business activities as hotel proprietor.

2. This insurance does not apply to liability to the Insured as a proprietor, superintendent or executive officer of any hospital, sanitarium, clinic with bed and board facilities, laboratory or business enterprise.

(Compl. Ex. F).

Finally, the policy contains a "Discrimination and Wrongful Termination Exclusion."

It is understood and agreed that this policy shall not apply to any alleged or actual discrimination against a past, present, or prospective employee nor to discrimination committed intentionally against any other person. It is further agreed that this policy shall not apply to any liability arising out of any alleged or actual wrongful termination. (Def. Ex. B3 in Supp. Mot. to Dismiss).*fn2

On May 20, 2003, Plaintiffs were sued by the National Association for the Advancement of Colored People ("NAACP") in the United States District Court for the District of South Carolina in NAACP et al., v. Shawnee Development, Inc., General Direct Marketing, Inc. d/b/a The Yachtsman Resort Hotel, David Walker, Shawnee Resorts of South Carolina, Inc. and John Does 1-10, 03cv1733 (May 20, 2003) (the "NAACP complaint").

Therein, the NAACP and twelve of its members alleged that the Yachtsman Resort Hotel instituted discriminatory policies and procedures during the Memorial Day weekend event known as "Black Bike Week." The NAACP averred that General Direct owned and operated the Yachtsman, Shawnee Development was the sole owner of General Direct, and thus Shawnee exercised control over the rates, policies, rules, terms, and conditions of the Yachtsman.

Black Bike Week occurs every Memorial Day weekend and is sponsored by the town of Atlantic Beach, South Carolina, a largely African-American town bordered on three sides by North Myrtle Beach, a predominately Caucasian town. Approximately 100,000 motorcycle enthusiasts attend Black Bike Week every year, and many of the participants stay at hotels on or near Ocean Boulevard in nearby Myrtle Beach and patronize the establishments there.

A similar, predominately Caucasian, motorcycle gathering occurs on a different weekend every year, and is known as the Harley Rally or Harley Week. Harley Week draws approximately 200,000 persons, and it has caused significant public disturbances, ...


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