Stratford School v. Employers Rein.

• Court: Court of Appeals for the First Circuit
• Decided: January 30, 1997
• Docket: 96-1620
• Status: Published

Opinion

USCA1 Opinion

UNITED STATES COURT OF APPEALS
                            UNITED STATES COURT OF APPEALS



                                FOR THE FIRST CIRCUIT
                                FOR THE FIRST CIRCUIT

                                 ____________________



        No. 96-1620



                              STRATFORD SCHOOL DISTRICT,



                                 Plaintiff, Appellee,



                                          v.



                          EMPLOYERS REINSURANCE CORPORATION,



                                Defendant, Appellant.



                                 ____________________


APPEAL FROM THE UNITED STATES DISTRICT COURT



                          FOR THE DISTRICT OF NEW HAMPSHIRE



                    [Hon. Paul J. Barbadoro, U.S. District Judge]
                                             ___________________



                                 ____________________



                                        Before



                                 Selya, Circuit Judge,
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                            Aldrich, Senior Circuit Judge,
                                     ____________________



                              and Boudin, Circuit Judge.
                                          _____________



                                 ____________________


Charles  W. Grau with  whom David P. Slawsky  and Upton, Sanders &
            ________________            ________________      ________________

        Smith were on brief for appellant.
        _____

            Bruce W.  Felmly with  whom Jeanmarie  Papelian and McLane,  Graf,
            ________________            ___________________     ______________

        Raulerson & Middleton were on brief for appellee.
        _____________________



                                 ____________________



                                   January 30, 1997

                                 ____________________



ALDRICH,  Senior  Circuit   Judge.     This  is   a
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            declaratory  action  brought  to  determine  the   rights  of



            Stratford  [New  Hampshire]  School  District  ("Stratford"),



            insured under  a "claims-made"  errors  and omissions  policy



            issued  by  Employers Reinsurance  Corporation ("Employers").



            Both parties moved for summary judgment, and the  court ruled



            for  Stratford.    On  this  appeal  Employers  asserts  that



            Stratford's claim for coverage for  a suit brought on  behalf



            of  Crystal  Buffington,  post,  matured  within  the  policy
                                      ____



            exclusion  definition prior  to  the policy's  issuance,  and



            that,  in any event, the policy was voidable because of false



            answers in the application.  We affirm.



                      Starting  at the  beginning, we  accept the  facts,



            recited in Employers' brief  as undisputed, most favorable to



            it.  Morrissey v. Boston Five Cents Savings Bank, 54 F.3d 27,
                 ___________________________________________



            31 (1st Cir. 1995).  One  Harry Hikel became a music  teacher



            at  Stratford  in  1979.    In  1983 Stratford  conducted  an



            investigation and  held a hearing to  review allegations that



            Hikel had  inappropriately hugged and kissed female students.



            After  the  hearing  the  Stratford  School  Board  voted  to



            reprimand him severely.  A  reprimand letter was delivered to



            him  in January 1984.   Stratford did not  notify State Child


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Protective Services  in accordance with N.H.  Rev. Stat. Ann.



              169-C:29.1  Hikel left Stratford in 1986.



                      His next employer was the Lakeway Elementary School



            in  Littleton,  New  Hampshire.    According  to  one  of his



            students   there,  Crystal  Buffington,   he  began  sexually



            molesting her during the fall of 1990  and continued to do so



            until the fall of 1992.  In 1993 the Manchester Union  Leader



            reported this, although not identifying Crystal, and asserted



            that  the Department of  Education was  investigating charges



            that Hikel had  sexually abused  students when  he taught  in



            Littleton.   For present purposes we assume that this came to



            Stratford's  attention.   Thereafter, on  October 3,  1993, a



            Grafton  County Grand  Jury issued  a subpoena  in connection



            with an investigation of  criminal sexual misconduct of Harry



            Hikel in the  Littleton School District, seeking  Stratford's



            records on Hikel.  Stratford received the subpoena on October



            4.  On October 8 it applied for the present policy.



                      While  obviously the subpoena was a strong reminder



            that other such conduct might occur,  the question is whether



            it suggested to Stratford (of which there is no evidence), or



            should   have   suggested,    something   more    immediately



                                
            ____________________



            1.  This statute contains no language giving causes of action

            to children who could  prove personal injury that might  have

            been avoided  had it been observed.   In Marquay v.  Eno, 662
                                                     _______     ___

            A.2d  272, 278 (N.H. 1995),  the court held  that the statute

            created no personal rights.   We are not moved  by Employers'

            contention   that  this   ruling   should  not   be   applied

            retroactively.



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troublesome.  So contending,  Employers complains -- in terms



            of  warranty -- of Stratford's negative answers in the policy



            application to questions 25 and 26:



                      25.   Has the applicant, Board and/or its

                      employees  been involved  in or  have any

                      knowledge of any  pending federal,  state

                      or  local  legal actions  or proceedings,

                      including EEOC, against  the entity,  its

                      board  members,  or employees  within the

                      last ten  years?  If yes,  attach details

                      stating nature  of claim, date  of claim,

                      loss date, loss payments and disposition,

                      carrier handling claims, etc.



                      26.  Are    there    any    circumstances

                      indicating  the probability of a claim or

                      action known by any  person to be covered

                      by  this  insurance?    If   yes,  attach

                      details.



            In view of the lack of analysis in Employers' brief we regard



            25   as  being  included  in  26  and  ask  what  claims,  or



            "circumstances," to quote  question 26, affecting  Stratford,



            the subpoena  might  be thought  to  suggest.   Certainly  no



            criminal  proceedings.     Nor  could  it   be  thought  that



            Stratford's former  students were attempting to  reactivate a



            cause of  action arising  from behavior  that had  occurred a



            decade  ago outside  of  Littleton.   Very  likely Hikel  was



            charged  with   new  conduct  and  the   grand  jury,  before



            indicting, wished to look at the whole picture.  Nothing more



            had  yet  happened.     But  might  some  imaginative  lawyer



            representing  some  student  in   connection  with  this  new


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conduct, think  of claiming against Stratford  for not having



            published2 Hikel's prior behavior?  Anything is possible, but



            how likely, let alone probable?



                      Employers  cites  no  authority  contradicting  our



            belief  that a personal claim would be wholly frivolous.  The



            New Hampshire  court's refusal to recognize  such rights even



            in  the statute  cited  supra, n.1,  confirms  this.   If  an
                                    _____



            insurance  applicant  is  told  he has  to  conceive  of, and



            report,  every possibility  that someone  "might" (Employers'



            brief)  bring a  frivolous  law suit,  Employers'  solicitors



            would starve.   It  is because there  are possibilities  that



            people  take out  insurance.   The application  announced the



            standard for reporting -- not possibility, but probability.



                      The   application,  however,   was  not   the  only



            standard-setter.   The policy itself, by  its terms, provides



            that it does  not cover if "the Insured ha[d] become aware of



            a proceeding, event or development  which has resulted in  or



            could  in the  future result  in the  institution of  a claim
            _____                 ______



            against  the Insured. . . ."  (Emphasis supplied.)  "Possibly
                                                                 ________



            could result?"  "Reasonably  could result?"3  "Probably could
                             __________                    ________



            result?"  Even  apart from the principle  that ambiguities in



            insurance contracts  are to be resolved  against the insurer,



                                
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            2.  At  the  risk, incidentally,  of  incurring  a claim  for

            defamation, depending on how the duty is conceived.



            3.  The New Hampshire case from which the court drew the more

            limited word "reasonable" involved different policy language.



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Trombly v. Blue  Cross/Blue Shield of New  Hampshire-Vermont,
            _______   __________________________________________________



            423 A.2d 980, 985  (N.H. 1980), it makes business  sense here



            to   construe  the   exclusion   clause  together   with  the



            application  questionnaire.   Cf. Commercial  Union Assurance
                                          ___ ___________________________



            Co.  v. Gilford Marina, Inc.,  408 A.2d 405,  407 (N.H. 1979)
            ____________________________



            (contradictory  clauses  in  an insurance  contract  must  be



            interpreted  to reflect  the reasonable  expectations of  the



            insured).  Hence we take probable.  For the insurer to go the



            other way, and  say we do not cover matters  of which you had



            notice, even though  that notice  was too remote  for you  to



            have to  tell us about it,  makes no sense; indeed,  it would



            seem affirmatively  misleading.  We  can not think  the facts



            charged  Stratford  of  a  probability  that  some  Littleton



            student would sue it.



                      Finally, Employers' makes a  claim of malice.  This



            requires no comment.



                      Affirmed.
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