Human Resource Selection 9th Edition by Marianne Jennings

Exercise 13

In June 1985, Carolyn Boose sought the dental services of Dr. George Blakeslee, who proposed to fill two cavities in her teeth. As part of the procedure, he administered nitrous oxide to Ms. Boose. She was rendered semiconscious by the drug and while she was in this state, Dr. Blakeslee lifted her shirt and fondled one of her breasts. He was subsequently charged with, and pled guilty to, the crime of indecent liberties.
Prior to the incident in question, Dr. Blakeslee had incorporated his dental practice as a professional services corporation. He was the corporation's sole shareholder, officer, and director. The corporation thereafter executed an employment agreement with Dr. Blakeslee, who signed the agreement both as an employee of the corporation and as its president.
At the time of the incident in question, Dr. Blakeslee and the corporation were covered by an insurance policy with Standard Fire Insurance Company that provided general and professional liability coverage. The general liability portion of the policy provided coverage for bodily injury or property damage caused by an "occurrence" arising out of the use of the insured premises. The insurance contract defined "occurrence" as "an accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended by the insured."
The professional liability portion of the policy limited coverage to damages for "injury… arising out of the rendering of or failure to render, during the policy period, professional services by the individual insured, or by any person for whom acts or omissions such insured is legally responsible.…"
In November 1985, Ms. Boose commenced an action against Dr. Blakeslee and the professional services corporation for the damages she allegedly sustained as a result of his conduct. Standard subsequently commenced a declaratory judgment action against Ms. Boose and Dr. Blakeslee in order to obtain a declaration of its rights and duties in connection with the lawsuit by Ms. Boose against Dr. Blakeslee and the corporation. All parties moved for summary judgment. The trial court granted judgment to Standard, concluding that it had no duty to defend or indemnify the insured (that is, Dr. Blakeslee and the corporation)against Ms. Boose's claim. Should the corporate veil be pierced to hold Dr. Blakeslee liable? [ Standard Fire Insurance Co. v Blakeslee, 771 P.2d 1172 (Wash. 1989)]