On certification to the Superior Court, Appellate Division, whose opinion is reported at 344 N.J. Super. 558 (2001). Sharon Handrock Moore argued the cause for appellant (Gebhardt & Kiefer, attorneys; Ms. Moore and Arthur D. Fialk, on the briefs). Francis X. Garrity argued the cause for respondent (Garrity, Graham, Favetta & Flinn, attorneys; Rudolph G. Morabito, of counsel and on the brief).
(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized).
Argued March 25, 2002 - Decided June 13, 2002
COLEMAN, J., writing for a majority of the Court.
The issue in this appeal is whether it is the filing of criminal charges against an officer or employee of a board of education, or the acquittal or dismissal of the charges, that triggers coverage under an insurance policy issued to satisfy the board's statutory obligation to indemnify such employees when criminal charges are disposed of in their favor.
On June 19, 1996, David Ford, a teacher employed by the Borough of Florham Park Board of Education (Board), was arrested and charged with sexual assault and reckless endangerment of four female students. He was acquitted of all charges on March 26, 1999. Ford then demanded reimbursement from the Board in the amount of $487,831.08 for counsel fees and legal expenses. The Board sought indemnification from Selective Insurance Company (Selective) and Utica Mutual Insurance Company (Utica).
Selective provided coverage from July 1, 1993 to July 1, 1996, twelve days after Ford's arrest. The Utica policy was in force fromJuly 1, 1996 to July 1, 1999, and was thus in effect at the time of Ford's acquittal. Both policies define the event triggering coverage by reference to the Board's statutory obligation, N.J.S.A. 18A:12-20, 16-6 and 16-6.1. Utica denied coverage because its policy was not in effect at the time Ford was arrested and charged. Selective denied coverage because its policy had expired before Ford's acquittal. Consequently, the Board filed a declaratory judgment action against both carriers.
Concluding that the language in both policies was ambiguous as to the triggering event, and relying on Meeker Sharkey Associates, Inc. v. National Union Fire Insurance Co., 208 N.J. Super 354 (App. Div. 1986), the trial court held that the Utica policy bore the risk because it was the policy in force when Ford was acquitted. Meeker held that under N.J.S.A. 18A:16-6.1 the triggering even for insurance coverage is an acquittal or final disposition in favor of the employee.
The Appellate Division reversed, concluding that the event triggering coverage was when the Board's officer or employee was actually damaged; i.e., when Ford was arrested and charged. The Appellate Division further held that Meeker was inapplicable because that case incorrectly focused on when the insured, the Board, and not the complaining party, was actually damaged. Instead, the Appellate Division relied on Paterson Tallow Co. v. Royal Globe Insurance Cos., 89 N.J. 24 (1982), in which the Court held that coverage was triggered by the filing of the complaint and not by the favorable termination of the proceedings.
The Supreme Court granted Selective's petition for certification.
HELD: The event that triggers coverage under an insurance policy issued to satisfy a board of education's statutory obligation to indemnify its officers and employees is the acquittal or other disposition of the criminal charges in favor of the officer or employee.
1. It is undisputed that Ford is entitled to reimbursement by the Board for counsel fees and expenses incurred in defending the criminal charges. Read collectively, N.J.S.A. 18A:12-20, 16-6 and 16-6.1 require that a board of education defray such costs when the criminal charges: (1) arose out of and in the course of the performance of the duties of that person, and (2) resulted in a final disposition in favor of such person. An acquittal is clearly a final disposition that is favorable to any criminal defendant. (Pp. 6-8)
2. While a court should not write for the insured a better policy than the one purchased, any ambiguities in insurance policies must be resolved in favor of the insured. Indemnification obligations generally accrue only on an event fixing liability, rather than on preliminary events that eventually may lead to liability but have not yet occurred. In this case, because both policies incorporate by reference the statutory language in N.J.S.A 18A:16-6.1 and related provisions, and applying Bower v. Board of Education of East Orange, 149 N.J. 416 (1997), the language of the policies is not ambiguous. (Pp. 9-11)
3. The Appellate Division's reliance on Paterson Tallow is misplaced. In that case, the insured initiated the filing of the criminal charges in the context of a malicious prosecution claim, and it is reasonable to use that conduct as the triggering event. However, in a statutory indemnification case, the triggering event is not the filing of the criminal charges. The applicable analysis is that found in Meeker Sharkey: The triggering event under the indemnification for criminal defense expenses statutes is the favorable disposition of all criminal charges against the Board employee or officer. (Pp. 11-15)
Judgment of the Appellate Division is REVERSED.
JUSTICE LONG has filed a separate dissenting opinion, expressing the view that what is covered in an indemnity policy is an occurrence and that the covered occurrence in this matter, as in Paterson Tallow, was the institution of a criminal prosecution.
CHIEF JUSTICE PORITZ and JUSTICES STEIN, VERNIERO, LaVECCHIA and ZAZZALI join in JUSTICE COLEMAN'S opinion. JUSTICE LONG ...