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

United States District Court, D. New Jersey

August 21, 2018

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

          OPINION

          KEVIN McNULTY UNITED STATES DISTRICT JUDGE

         Now before the court are cross-motions for summary judgment by Montville Township Board of Education ("Montville") and its insurer, Zurich American Insurance Co. ("Zurich"). Montville has been sued in state court by Child M. Child M alleges that Montville employed Jason Fennes for twelve years, knew about sexual misconduct by Fennes, failed to notify authorities, and agreed not to tell potential future employers about that conduct to induce Fennes to resign. After he resigned from Montville in 2010, Fennes began working for Cedar Hill Prep, where he allegedly sexually molested several students, including Child M. Child M claims that Montville's silence enabled and facilitated Fennes's abuse of her at Cedar Hill Prep.

         Montville initially argued that Zurich was obligated to defend it against Child M's allegations under its General Commercial Liability ("GCL") policy. Zurich declined because the GCL policy excludes coverage of claims "arising from" or "relating in any way" to "abusive acts." In a prior opinion, I found that Zurich did not have a duty to defend Montville under the GCL policy. (ECF No. 22). Montville moved for reconsideration, which I denied. (ECF No. 37).

         Montville's motion for reconsideration also asserted, for the first time, the argument that Zurich had a duty to defend under the Abusive Acts ("AA") provision of their policy. Montville insists that this provision has been in issue throughout the litigation, despite its previous statements to the contrary. I was reluctant to permit a school district to sacrifice rightful coverage based on a possible strategic misstep, but equally reluctant to decide an issue as to which Zurich had not been given a fair opportunity to respond. I therefore authorized Montville to file a new motion asserting that Zurich has a duty to defend it under the AA policy. (ECF No. 37). Zurich's duty to defend under the AA policy is thus addressed in these cross-motions for the first time.

         I. LEGAL STANDARDS

         Federal Rule of Civil Procedure 56(a) provides that summary judgment should be granted "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); Kreschollek v. S. Stevedoring Co., 223 F.3d 202, 204 (3d Cir. 2000). In deciding a motion for summary judgment, a court must construe all facts and inferences in the light most favorable to the nonmoving party. See Boyle v. County of Allegheny Pennsylvania, 139 F.3d 386, 393 (3d Cir. 1998). The moving party bears the burden of establishing that no genuine issue of material fact remains. See Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). "[W]ith respect to an issue on which the nonmoving party bears the burden of proof ... the burden on the moving party may be discharged by 'showing'-that is, pointing out to the district court-that there is an absence of evidence to support the nonmoving party's case." Id. at 325.

         Once the moving party has met that threshold burden, the non-moving party "must do more than simply show that there is some metaphysical doubt as to material facts." Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574 (1986). The opposing party must present actual evidence that creates a genuine issue as to a material fact for trial. Anderson, 477 U.S. at 248; see also Fed. R. Civ. P. 56(c) (setting forth types of evidence on which nonmoving party must rely to support its assertion that genuine issues of material fact exist). "[Unsupported allegations ... and pleadings are insufficient to repel summary judgment." Schoch u. First Fid, Bancorporation, 912 F.2d 654, 657 (3d Cir. 1990). If the nonmoving party has failed "to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial, ... there can be 'no genuine issue of material fact,' since a complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial." Katz v. Aetna Cas. & Sur. Co., 972 F.2d 53, 55 (3d Cir. 1992) (quoting Celotex, 477 U.S. at 322-23).

         When the parties file cross-motions for summary judgment, the governing standard "does not change." Clevenger v. First Option Health Plan of N.J., 208 F.Supp.2d 463, 468-69 (D.N.J. 2002) (citing Weissman v. U.S.P.S., 19 F.Supp.2d 254, 259 (D.N.J. 1998)). The court must consider the motions independently, in accordance with the principles outlined above. Goldwell of N.J., Inc. v. KPSS, Inc., 622 F.Supp.2d 168, 184 (D.N.J. 2009). That one of the cross-motions is denied does not imply that the other must be granted. For each motion, "the court construes facts and draws inferences in favor of the party against whom the motion under consideration is made" but does not "weigh the evidence or make credibility determinations" because "these tasks are left to the fact-finder." Pichler v. UNITE, 542 F.3d 380, 386 (3d Cir. 2008) (internal quotations and citations omitted). Nonetheless, when material underlying facts are not in dispute, summary judgment is appropriate to dispose of insurance-coverage questions. McMillan v. State Mut. Life Assur. Co., 922 F.2d 1073, 1074 (3d Cir. 1990).

         II. DISCUSSION

         Zurich does not have a duty to defend Montville from Child M's claims under the AA policy. The Prior Known Acts exclusion to the AA policy denies coverage for claims arising from "abusive acts" when the insured knew about the "abusive acts" prior to the policy's effective date.[1]Child M's complaint sufficiently alleges that Montville knew that Fennes had engaged in "abusive acts" during his tenure at Montville. Montville's liability is alleged to arise from, or to be attributable to, in whole or in part, its knowledge of those earlier abusive acts. Allegations, of course, are not proof, but in general the duty to defend is triggered by the nature of the allegations. Because prior known acts are alleged, the Prior Known Acts exclusion negates Zurich's duty to defend under the AA policy.

         Where ambiguities exist in a complaint, policy, or exclusionary clause, those ambiguities are resolved in favor of insurance coverage. However, if a straightforward reading of the complaint and policy, including exclusions, denies coverage, the court will apply the clear meaning of the text. The court will not engage in a strained construction or indulge a far-fetched interpretation of a policy to find coverage.

         For Zurich to have a duty to defend, the court must find that (1) Child M's allegations activate the AA policy coverage for suits arising from "abusive acts" and that (2) the Prior Known Acts exclusion does not negate that coverage under the circumstances of this case. Subsection II.A outlines the well-established principles that guide the duty-to-defend analysis. Subsection II.B discusses the applicability of the AA policy to Child M's allegations. Subsection II.C addresses the Prior Known Acts exclusion to the AA policy.

         A. ...


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