Winnacunnet & SAU #21 v. Na t '1 Union CV-93-627-B 08/29/95
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE
Winnacunnet Cooperative School District
v. No. 93-0627-B
National Union Fire Insurance Company
and
School Administrative Unit #21
v. No. 93-0671-B
O R D E R
Pending before me are cross motions for summary judgment in
two related declaratory judgment actions seeking insurance
coverage from National Union Fire Insurance Company ("National")
for claims against its policyholders, Winnacunnet Cooperative
School District ("Winnacunnet") and School Administrative Unit
#21 ("Unit #21"). Because the motions raise the same legal
issues and concern the same underlying facts, I consider the
cases together and resolve the pending motions as follows.
I. BACKGROUND
The suits underlying the declaratory judgment actions stem
from the notorious Pamela Smart murder case. See State v. Smart,
136 N.H. 639, cert, denied, 114 S. C t . 309 (1993). Former
1 students at Winnacunnet High School, Vance Lattime, Patrick
Randall, and William Flynn, and their parents allege that
Winnacunnet was negligent in hiring and supervising Pamela Smart
as media director at the school and in supervising the plaintiff
students. As a result, they claim that the students developed
inappropriate relationships with Smart that allowed her to
manipulate them emotionally and physically causing them to "incur
injuries including but not limited to emotional distress, mental
instability, physical incarceration, impairment of judgment."
Cecelia Pierce alleges that while she was a student at
Winnacunnet High School, Unit #21 was negligent in hiring,
training, and supervising Smart and that its negligence caused
"loss of education, loss of past, present and future earnings,
loss of reputation and standing in the community, and mental
anguish" to Pierce. Despite the generality of these allegations,
the parties agree that the claimants' alleged injuries resulted
from their knowledge of, or participation in. Smart's successful
plan to kill her husband, Greg Smart.
Winnacunnet and Unit #21 both brought declaratory judgment
actions to reguire National to defend and indemnify them under
their liability policies for the claims brought by Lattime,
Randall, Flynn, and Pierce. National now moves for summary
judgment and relies on exclusions in the policy precluding coverage for "claims arising out of" assault or battery, and
bodily injury or death.1 Winnacunnet and Unit #21 have filed
cross-motions for summary judgment arguing that the exclusions
are inapplicable.
II. STANDARD OF REVIEW
Summary judgment is appropriate if the record taken in the
light most favorable to the nonmoving party shows that no genuine
issue of material fact exists and the moving party is entitled to
judgment as a matter of law. Fed. R. Civ. P. 56(c); Commercial
Union Ins. Co. v. Walbrook Ins. Co., 7 F.3d 1047, 1049 (1st Cir.
1993). A "material fact" is one "that might affect the outcome
of the suit under the governing law," and a genuine factual issue
exists if "the evidence is such that a reasonable jury could
return a verdict for the nonmoving party." Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 248 (1986). I review the parties'
motions under the appropriate standard.
1National also relies on an exclusion precluding coverage for claims "involving allegations of" criminal acts. Since I find that the other two exclusions are applicable here, I need not consider National's argument based upon the criminal acts exclusion.
3 III. DISCUSSION
The declaratory judgment actions were brought pursuant to
N.H. Rev. Stat. Ann. § 491:22 (Supp. 1994) .2 When coverage
provided by particular insurance policies is disputed under this
statute, the insurer bears the burden of showing noncoverage.
N.H. Rev. Stat. Ann. § 491:22-a (1983); Niedzielski v. St. Paul
Fire & Marine Ins. Co., 134 N.H. 141, 147 (1991) (citing Laconia
Rod & Gun Club v. Hartford Accident & Indem. Co., 123 N.H. 179,
182 (1983)). If disputed terms are not defined in the policy or
by judicial precedent, they are construed according to their
plain and ordinary meaning in the context of the policy and "in
the light of what a more than casual reading of the policy would
reveal to an ordinarily intelligent insured." Concord Hosp. v.
New Hampshire Medical Malpractice Joint Underwriting Ass'n, 137
N.H. 680, 682 (1993) (internal citations and guotations omitted).
When disputed terms reasonably may be interpreted differently and
one interpretation favors coverage, the ambiguity will be
construed in favor of the insured. Green Mountain Ins. Co. v.
2 State remedies such as declaratory judgment are available in diversity actions in federal court. Titan Holdings Syndicate v. Keene, 898 F.2d 265, 273 (1st Cir. 1990) (citing Erie R.R. Co. v. Tompkins, 304 U.S. 64 (1938)).
4 George, 138 N.H. 10, 14 (1993).
National relies on two policy exclusions to preclude
coverage. The two exclusions at issue provide:
This policy does not apply:
b) to any claims arising out of (1) false arrest, detention or imprisonment; (2) libel, slander or defamation of character; (3) assault or battery; (4) wrongful entry or eviction, or invasion of any right of privacy;
c) to any claim arising out of bodily injury to, or sickness, disease or death of any person, or damage to or destruction of any property, including the loss of use thereof.
Nationalargues that both exclusions apply because the underlying
actions seek to recover for damages that resulted from Greg
Smart's murder. Winnacunnet and Unit #21 challenge the
applicability of the exclusions on two grounds.3 First, they
3The policyholders' arguments apply to both their claims for a defense and their claims for indemnification. The duty to defend is broader than the duty to indemnify, as the insurer may be obligated to defend a groundless suit. United States Fidelity & Guar. Co. v. Johnson Shoes, 123 N.H. 148, 151-52 (1983). Further, unlike the duty to indemnify, the duty to defend is ordinarily determined by examining the allegations in the underlying complaints. M. Mooney Corp. v. United States Fidelity & Guar. C o ., 136 N.H. 463, 469 (1992). Since the underlying complaints do not refer to Greg Smart's death, I would have to find the exclusions inapplicable in determining National's duty to defend if I followed the general rule. However, in cases such
5 argue that because the underlying actions allege negligence as
the cause of action and do not refer to any excluded acts,4 the
underlying actions are not excluded. Second, they point to the
broad and nonspecific language of the exclusions and contend that
the exclusions are ambiguous. I begin with the guestion of
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Winnacunnet & SAU #21 v. Na t '1 Union CV-93-627-B 08/29/95
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE
Winnacunnet Cooperative School District
v. No. 93-0627-B
National Union Fire Insurance Company
and
School Administrative Unit #21
v. No. 93-0671-B
O R D E R
Pending before me are cross motions for summary judgment in
two related declaratory judgment actions seeking insurance
coverage from National Union Fire Insurance Company ("National")
for claims against its policyholders, Winnacunnet Cooperative
School District ("Winnacunnet") and School Administrative Unit
#21 ("Unit #21"). Because the motions raise the same legal
issues and concern the same underlying facts, I consider the
cases together and resolve the pending motions as follows.
I. BACKGROUND
The suits underlying the declaratory judgment actions stem
from the notorious Pamela Smart murder case. See State v. Smart,
136 N.H. 639, cert, denied, 114 S. C t . 309 (1993). Former
1 students at Winnacunnet High School, Vance Lattime, Patrick
Randall, and William Flynn, and their parents allege that
Winnacunnet was negligent in hiring and supervising Pamela Smart
as media director at the school and in supervising the plaintiff
students. As a result, they claim that the students developed
inappropriate relationships with Smart that allowed her to
manipulate them emotionally and physically causing them to "incur
injuries including but not limited to emotional distress, mental
instability, physical incarceration, impairment of judgment."
Cecelia Pierce alleges that while she was a student at
Winnacunnet High School, Unit #21 was negligent in hiring,
training, and supervising Smart and that its negligence caused
"loss of education, loss of past, present and future earnings,
loss of reputation and standing in the community, and mental
anguish" to Pierce. Despite the generality of these allegations,
the parties agree that the claimants' alleged injuries resulted
from their knowledge of, or participation in. Smart's successful
plan to kill her husband, Greg Smart.
Winnacunnet and Unit #21 both brought declaratory judgment
actions to reguire National to defend and indemnify them under
their liability policies for the claims brought by Lattime,
Randall, Flynn, and Pierce. National now moves for summary
judgment and relies on exclusions in the policy precluding coverage for "claims arising out of" assault or battery, and
bodily injury or death.1 Winnacunnet and Unit #21 have filed
cross-motions for summary judgment arguing that the exclusions
are inapplicable.
II. STANDARD OF REVIEW
Summary judgment is appropriate if the record taken in the
light most favorable to the nonmoving party shows that no genuine
issue of material fact exists and the moving party is entitled to
judgment as a matter of law. Fed. R. Civ. P. 56(c); Commercial
Union Ins. Co. v. Walbrook Ins. Co., 7 F.3d 1047, 1049 (1st Cir.
1993). A "material fact" is one "that might affect the outcome
of the suit under the governing law," and a genuine factual issue
exists if "the evidence is such that a reasonable jury could
return a verdict for the nonmoving party." Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 248 (1986). I review the parties'
motions under the appropriate standard.
1National also relies on an exclusion precluding coverage for claims "involving allegations of" criminal acts. Since I find that the other two exclusions are applicable here, I need not consider National's argument based upon the criminal acts exclusion.
3 III. DISCUSSION
The declaratory judgment actions were brought pursuant to
N.H. Rev. Stat. Ann. § 491:22 (Supp. 1994) .2 When coverage
provided by particular insurance policies is disputed under this
statute, the insurer bears the burden of showing noncoverage.
N.H. Rev. Stat. Ann. § 491:22-a (1983); Niedzielski v. St. Paul
Fire & Marine Ins. Co., 134 N.H. 141, 147 (1991) (citing Laconia
Rod & Gun Club v. Hartford Accident & Indem. Co., 123 N.H. 179,
182 (1983)). If disputed terms are not defined in the policy or
by judicial precedent, they are construed according to their
plain and ordinary meaning in the context of the policy and "in
the light of what a more than casual reading of the policy would
reveal to an ordinarily intelligent insured." Concord Hosp. v.
New Hampshire Medical Malpractice Joint Underwriting Ass'n, 137
N.H. 680, 682 (1993) (internal citations and guotations omitted).
When disputed terms reasonably may be interpreted differently and
one interpretation favors coverage, the ambiguity will be
construed in favor of the insured. Green Mountain Ins. Co. v.
2 State remedies such as declaratory judgment are available in diversity actions in federal court. Titan Holdings Syndicate v. Keene, 898 F.2d 265, 273 (1st Cir. 1990) (citing Erie R.R. Co. v. Tompkins, 304 U.S. 64 (1938)).
4 George, 138 N.H. 10, 14 (1993).
National relies on two policy exclusions to preclude
coverage. The two exclusions at issue provide:
This policy does not apply:
b) to any claims arising out of (1) false arrest, detention or imprisonment; (2) libel, slander or defamation of character; (3) assault or battery; (4) wrongful entry or eviction, or invasion of any right of privacy;
c) to any claim arising out of bodily injury to, or sickness, disease or death of any person, or damage to or destruction of any property, including the loss of use thereof.
Nationalargues that both exclusions apply because the underlying
actions seek to recover for damages that resulted from Greg
Smart's murder. Winnacunnet and Unit #21 challenge the
applicability of the exclusions on two grounds.3 First, they
3The policyholders' arguments apply to both their claims for a defense and their claims for indemnification. The duty to defend is broader than the duty to indemnify, as the insurer may be obligated to defend a groundless suit. United States Fidelity & Guar. Co. v. Johnson Shoes, 123 N.H. 148, 151-52 (1983). Further, unlike the duty to indemnify, the duty to defend is ordinarily determined by examining the allegations in the underlying complaints. M. Mooney Corp. v. United States Fidelity & Guar. C o ., 136 N.H. 463, 469 (1992). Since the underlying complaints do not refer to Greg Smart's death, I would have to find the exclusions inapplicable in determining National's duty to defend if I followed the general rule. However, in cases such
5 argue that because the underlying actions allege negligence as
the cause of action and do not refer to any excluded acts,4 the
underlying actions are not excluded. Second, they point to the
broad and nonspecific language of the exclusions and contend that
the exclusions are ambiguous. I begin with the guestion of
whether the exclusions apply to the underlying cause of action.
Exclusions of the type at issue here have been the subject
of litigation in other jurisdictions. Although the courts that
have addressed the issue are split, most recognize that
exclusions barring coverage for claims "arising out of" or "based
on" an assault also plainly exclude coverage for claims that an
insured negligently allowed the assault to occur. See, e.g..
United N a t '1 Ins. Co. v. Entertainment Group, Inc., 945 F.2d 210,
213-14 (7th Cir. 1991); Audubon Indem. Co. v. Patel, 811 F. Supp.
as this, where the alleged facts do not clearly preclude coverage. New Hampshire law permits the reviewing court to delve into the underlying facts "to avoid permitting the pleading strategies, whims, and vagaries of third party claimants to control the rights of parties to an insurance contract." Id. Relying on M. Mooney Corp., I have looked beyond the face of the complaint in determining whether National owes its policyholders a duty to defend.
4 Winnacunnet and Unit #21 agree that the injuries alleged in the underlying actions resulted from the conspiracy and murder of Greg Smart.
6 264, 265 (S.D. Tex. 1993); Stiglich v. Tracks, D.C., Inc., 721 F.
Supp. 1386, 1387 (D.D.C. 1989); St. Paul Surplus Lines Ins. Co.
v. 1401 Dixon's Inc., 582 F. Supp. 865, 867 (E.D. Pa. 1984);
Dynamic Cleaning Serv. v. First Fin. Ins. Co., 430 S.E.2d 33, 34
(Ga. A p p .), cert, denied, 1993 G a . LEXIS 664 (Ga. June 21, 1993)
and cert, denied, Brosv v. First Fin. Ins. Co., 1993 G a . LEXIS
943 (Ga. Oct. 5, 1993); Wallace v. Huber, 597 So.2d 1247 (La. C t .
App. 1992); Ross v. Minneapolis, 408 N.W. 2d 910 (Minn. C t . App.
1987) . But see Durham City Bd. of Educ. v. National Union Fire
Ins. C o ., 426 S.E. 2d 451, 456 (N.C. C t . App.), review denied,
431 S.E.2d 22 (N.C. 1993) .
Although the New Hampshire Supreme Court has not yet
addressed this issue, the court has interpreted the phrase
"arising out of" in a different context to mean "originat[ing]
from a specified source." Niedzielski, 134 N.H. at 146. Nothing
about the exclusions at issue in this case suggests that the
phrase should be given a different meaning here. Thus, I
conclude that the New Hampshire Supreme Court would follow the
majority rule in concluding that a cause of action is deemed to
arise out of an assault, within the meaning of the assault
exclusion, whenever assault is the source of the injury on which
the cause of action is based. Similarly, I conclude that a cause
7 of action is deemed to arise out of the death of another person
if the injuries complained of result from the death of any
person. Because the parties agree that the assault and death of
Greg Smart was the underlying cause of the injuries alleged in
the underlying action, the exclusions apply in this case. I turn
to the plaintiffs' argument that the exclusions are ambiguous.
Winnacunnet and Unit #21 argue that the exclusions are
ambiguous because they are silent as to who must commit the
excluded acts and, therefore, could reasonably be interpreted to
apply only to acts of the insureds. The exclusions bar coverage
for "any claims arising out of . . . assault" and "any claim
arising out of . . . death of any person." (Emphasis added.)
Ungualified terms such as "any" ordinarily should not be
construed to include unexpressed gualifications such as "but only
if the act is committed by an insured." Moreover, the
policyholders have not identified any other language in the
policy that supports their argument for a more limited
construction of the exclusions. In cases such as this, "where
policy language is clear, [the] court will not create an
ambiguity simply to construe the policy against the insurer."
International Surplus Lines Ins. Co. v. Manufacturers & Merchants
Mutual Ins. Co.. No. 94-133, 1995 WL 427940, at *3 (N.H. July 19, 1995). Accordingly, I reject the policyholders' argument and
conclude that the exclusions unambiguously bar their defense and
indemnification claims.
CONCLUSION
For the foregoing reasons. National's motions for summary
judgment (documents 14 and 26) are granted, and Winnacunnet's and
Unit #21's motions for summary judgment (documents 15 and 27) are
denied.
SO ORDERED.
Paul Barbadoro United States District Judge
August 29, 1995
cc: Gordon Rehnborg, Jr., Esg. Peter Saari, Esg. Linda Oliveira, Esg. Richard Sheehan, Esg. Mark Rumley, Esg.