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Montville Township Board of Education v. Zurich American Insurance Co.

United States District Court, D. New Jersey

January 19, 2018

MONTVILLE TOWNSHIP BOARD OF EDUCATION, Plaintiff,
v.
ZURICH AMERICAN INSURANCE CO., Defendant.

          OPINION

          KEVIN MCNULTY, United States District Judge.

         Before the court is the motion of Montville Township Board of Education ("Montville") for reconsideration of my prior Opinion ("Op.", ECF no. 22) and Order (ECF no. 23). In that Opinion, I held that Montville's insurer, Zurich American Insurance Co. ("Zurich"), did not have a duty under the GCL Coverage Part of the policy to defend Montville against state-court claims brought against it by Child M. Child M alleges that Montville, while it employed Jason Fennes as a teacher for twelve years, knew about abusive acts by Fennes, failed to notify the authorities, and agreed not to tell potential future employers about that conduct in order to induce Fennes to resign. In 2010, Fennes did resign, and went on to a position at Cedar Hill Prep, where he sexually abused a number of students. He was later criminally charged for acts of sexual abuse. Montville's silence, Child M claims, enabled and facilitated Fennes's abuse of her at Cedar Hill.

         Montville sought a declaratory judgment by order to show cause, and has contended throughout that Zurich is obligated to defend it against Child M's allegations under the GCL Coverage Part of its general commercial liability ("GCL") policy. Zurich has declined to do so, based on, inter alia, the GCL Coverage Part's exclusion of claims "arising from" or "relating in any way" to "abusive acts."

         Taking the claims as presented by Montville, I considered whether Zurich's duty to defend under the GCL Coverage Part was vitiated by the abusive acts exclusion. The scope of the duty to defend, I held, is determined by the nature of the allegations against the insured-i.e., the kind of claim being made. To simplify a bit, if the plaintiff does not allege a covered risk, the insurer has no duty to defend against the allegation. Montville's insistence that it was not actually guilty of any wrongdoing with respect to the abuse of students, I wrote, did not alter the nature of the claims being asserted, or the issue of whether the risk fell within the coverage of the GCL Coverage Part.

         To some degree, Montville seems to request that I reconsider my disposition of the issues under the GCL Coverage Part. I discuss that contention in Section II.B.1, infra, but reject it.

         Primarily, however, Montville has switched its approach. Now it argues that it is entitled to defense costs (and presumably coverage) under a different part of the policy: the Abusive Acts ("AA") Coverage Part. Without really acknowledging the switch, Montville objects in substance that the bulk of the discussion in the prior Opinion is inapplicable to the AA Coverage Part. And no wonder-that was not the issue that Montville's papers, fairly read, presented to the Court.

         The issue now before the Court is whether Montville's new position is cognizable on reconsideration. Citing a brief reference in its Reply and Opposition brief, and a head-scratching footnote in my Opinion where I attempted to make sense of that reference, Montville insists that-or rather, blusteringly acts as if-the AA Coverage Part issue has been in the case all along. Indeed, Montville's counsel appears to be trying to convince the author of the Opinion that his Opinion (which devoted a few sentences of a footnote to a version of the issue) "focused on the 'prior known acts' exclusion of the 'AA Coverage Part."' ((Reconsideration Br. 7, ECF no. 31; emphasis added)

         Still, I would not lightly deny an insured, and particularly a school district, the benefit of its insurance policy because its counsel's tactics were ill-considered, or even because I thought counsel had wasted the time and resources of its adversary and the Court. I will analyze the motion to reconsider, as it bears on the AA Coverage Part, in Section II.B.2, infra.

         I. Standard on Motion for Reconsideration

         The standards governing a motion for reconsideration are well settled. See generally D.N.J. Loc. Civ. R. 7.1(i). Reconsideration is an "extraordinary remedy, " to be granted "sparingly." NL Indus. Inc. v. Commercial Union Ins. Co., 935 F.Supp. 513, 516 (D.N.J. 1996). Generally, reconsideration is granted in three scenarios: (1) when there has been an intervening change in the law; (2) when new evidence has become available; or (3) when necessary to correct a clear error of law or to prevent manifest injustice. See North River Ins. Co. v. CIGNA Reinsurance Co., 52 F.3d 1194, 1218 (3d Cir. 1995); Carmichael v. Everson, 2004 WL 1587894, at *1 (D.N.J. May 21, 2004). Local Rule 7.1(i) requires such a motion to specifically identify "the matter or controlling decisions which the party believes the Judge or Magistrate Judge has overlooked." Id.; see also Egloff v. New Jersey Air Nat'l Guard, 684 F.Supp. 1275, 1279 (D.N.J. 1988). Evidence or arguments that were available at the time of the original decision will not support a motion for reconsideration. Damiano v. Sony Music Entm't, Inc., 975 F.Supp. 623, 636 (D.N.J. 1997); see also North River Ins. Co., 52 F.3d at 1218; Bapu Corp. v. Choice Hotels Int'l, Inc., 2010 WL 5418972, at *4 (D.N.J. Dec. 23, 2010) (citing P. Schoenfeld Asset Mgmt. LLC v. Cendant Corp., 161 F.Supp.2d 349, 352 (D.N.J. 2001)).

         II. Discussion

         For ease of reference, I repeat here my summary of the pertinent allegations of Child M's state-court complaint:

• Prior to working at Cedar Hill, Montville employed Fennes as a teacher and track coach at William Mason Elementary School. During the 12 years he worked at Montville, Fennes sexually abused minor students. (Compl. p. 11)
• Montville knew about, or was on notice of, such sexual abuse. Montville nevertheless failed to report Fennes to the appropriate authorities as required by law. (Id.)
• Montville entered into an agreement, dated May 4, 2010, with Fennes, in which Montville agreed to "limit the scope of information" it would communicate to potential employers "in exchange for" his resignation. (Id. at 12)
• Fennes "performed various acts of sexual molestation against" Child M (Id. at 5)
• But for Montville's failure to report and "provide pertinent and highly relevant information" about Fennes to potential employers, such as Cedar Hills, Child M would not have been sexually abused by Fennes. (Id. at 12-15)

(Op. 2-3)

         In that action, Montville prevailed on a motion for summary judgment. That judgment, however, was for the most part reversed by the Appellate Division. Child M. v. Fennes, Docket No. A-0873-15T2, 2016 WL 4473253, 2016 N.J.Super. Unpub. LEXIS 1955, *2-*8 (App. Div. Aug. 25, 2016). My Opinion quoted at length from the Appellate Division's opinion. (Op. 6-10) (Montville's objection to my having done so is discussed at Section II.B.l, infra.)

         A. Correction of Date, New Evidence

         Before proceeding to the substance, I briefly consider two discrete subsidiary issues raised by the reconsideration motion.

         1. Date correction

         In the introductory paragraph of the Opinion, I wrote that that "In 2012, one of Fennes's alleged victims, Child M, a Cedar Hills student, sued (among others) Montville." (Op. 1; emphasis added} That sentence inaccurately telescopes the events. The original 2012 state-court complaint named only Fennes and Cedar Hill; Montville was added by amendment later, in 2015.

         Montville makes much of what was clearly a slip of the pen; I did not misapprehend the facts. Two pages later, in the formal statement of facts, I described the procedural history accurately:

In August 2012, Child M and her parents sued Fennes and Cedar Hill. On January 23, 2015, Child M filed a third amended complaint that named Fennes, Cedar Hill, Montville, and others as defendants.

(Op. 3)

         The misstatement on page 1 had no effect on the Court's decision. Nevertheless, accuracy is important. Reconsideration is granted to die extent that I will order that the sentence on page 1 of the Opinion be amended to delet "In 2012, " and to read in its amended form as follows: "One of Fennes's alleged victims, Child M, a Cedar Hills student, sued (among others) Montville."

         2. New evidence

         Montville proffers a document, dating from 2010 but "new" in the sense that it was obtained by Montville after I had filed my Opinion. (ECF no. 25, sealed) Because Montville represents that it did not possess the document, there is at least an argument that it could not have been expected to bring it to the Court's attention ...


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