Board of Public Education v. National Union Fire Insurance, 709 A.2d 910

Board of Public Education v. National Union Fire Insurance

709 A.2d 910

Pa. Super. Ct.

1998

Check Treatment

*1 — (1998) Shope Eagle, v. 710 A.2d 1108

Pa. -, A.2d The BOARD OF PUBLIC EDUCATION

OF the SCHOOL DISTRICT OF PITTSBURGH, Appellant, v. UNION FIRE

NATIONAL INSURANCE PITTSBURGH, PA, COMPANY OF Appellee. Superior Pennsylvama. Court Sept. Argued 1997. MRS. FROZEN SMITH’S FOODS March 1998. Filed COMPANY, Petitioner, EQUIPMENT SALES, INC., FREEZING Corporation, Ram

Toshiba International Company Rego

Motors and Control Respondents.

Company,

No. 0099 M.D. Allocatur Docket 1997.

Supreme Pennsylvania. Court of

June Cozen, Glazer,

Stephen A. Richard C. Ga- Barthold, McLaughlin Philadelphia,

ele

petitioner.

ORDER

PER CURIAM: NOW, June, 1998, day

AND this we 3rd petition appeal, for allowance of

Grant Superior

we the order of the REVERSE

Court, the matter to the and we REMAND Montgomery Pleas of

Court Common opinion

County consistent with this Court’s Pennsyl

in Schroeder v. Commonwealth of al.,

vania, Department Transportation, et — (Pa.1998). Pa. -, 710 A.2d 23 *2 Smith, appellant. Pittsburgh,

Robert B. for Kurland, appel- Seymour ‍‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‍Philadelphia, for lee. McEWEN, Judge,

Before President CAVANAUGH, SOLE, BECK, DEL KELLY, TAMILIA, HUDOCK, EAKIN and SCHILLER, JJ.

EAKIN, Judge: Dis- The Board of Education of the School (the District”) Pittsburgh ap- trict of “School peals from the order of of Common the Court Alleghеny County granting the mo- Pleas of judgment on filed pleadings tion for Company Fire National Union Insurance (“National Union”). Pittsburgh, PA For the reasons, following we reverse. April rights civil

On student, filed on behalf of a minor District, (“R.C.S.”), against School City of of Public Education of the Board Pittsburgh, principal Margaret School, Rudolph B. Milliones Middle Walls, par- president of middle school’s organization. complaint al- ent-teacher leged that because various enumerated al, et. shortcomings R.C.S., in sexually was able molest rights. of the student’s civil violation insurer, the trial The School District contends District informed its (1) determining Union, court erred in its causes prior both action breach of contract and bad faith complaint, upon service of the (2) are barred terms provide a de- requested that National Union of the assault exclusion terms defendants, fense on behalf of all named relieve National Union of its to defend Walls, Er- except under the “School Leaders *3 indemnify against by and the claims asserted Policy.” National ror and Omissions Union (3) R.C.S., National Union had no acknowledge receipt of the com- failed to indemnify against the claims to defend or answer was to be plaint until after the due by policy. asserted non-insured under judgment after a default had been filed and 29, 1992, April By letter dated entered.1 judgment pleadings A motion for on the is Union disclaimed and re- National granted only pleadings show properly exists, to genuine fused the mov- no issue of fact matter, citing following language judgment ant is entitled to as a matter Co., 414 poliсy: Kelly v. Nationwide Insurance law. (1992). 6, 9-10, 470, 606 471 Pa.Super. A.2d apply: This does not plenary; appeal, scope our of review is On a) ... any involving allegations claim we must consider whether the trial court’s criminal acts ... on a clear error of law or order “was based (3) b) any arising out of whether there were facts disclosed properly go to the which should battery pleadings assault or .... Berkley, 354 jury.” (quoting Vogel Id. c) arising bodily injury any claim out of (1986)). 878, 291, 296, Pa.Super. 511 A.2d 880 any person_ to ... plead- limit our consideration to thе We must repeated requests by the The record reflects exhibits ings and relevant documents and Union District’s solicitor 10, Kelly, Pa.Super. 414 attached thereto. defend, emphasizing refusal to reconsider its accept true the 606 A.2d at 471. We must as underlying complaint alleged negligent non-moving party, well-pleaded facts of the express- supervisory conduct and not conduct considering against party only those policy. ly excluded under the The School facts it admits. Id. ultimately ease on Febru- District settled the reviewing the trial Although we are 23, 1994, action ary then filed the instant policy in interpretation court’s of the instant Union, alleging breach of against National underlying in the light of the claims raised faith.2 contract and bad to the trial complaint, we need not defer 9, 1995, National Union filed a On March finding the construction of a court’s since judgment pleadings as to motion for question of law. of insurance is a contract policy, under the which issues of Association v. Services Automobile United granted by the trial cоurt. The 362, 368, 982, motion was Elitzky, Pa.Super. 358 517 A.2d language denied, 600, utilized “[t]he trial court reasoned 515 Pa. 528 985 alloc. (1987). clear in the assault and exclusion is primary purpose in 957 Our A.2d alle- unambiguous. No matter how the interpreting contracts is to “ascertain such District are gations against parties the School as manifested the intent of the claim, all phrased agreement.” in the R.C.S. Ameri language of the written Maryland ‘arise out against all the Defendants therein Insurance Co. v. Casu can States Co., 170, 181, 628 A.2d alty Pa.Super. Defendant 427 of the assaults and batteries (1993) 880, Opinion (quoting Trial Standard Venetian against R.C.S.” Court 886 (Corrected), 8/9/95, Empire Insurance appeal This fol- v. American at 8-9. Blind Co. 563, Co., 300, 305, 469 A.2d 566 503 Pa. lowed. prac- April unfair trade 2. A third count based on the filed and served on 1. The twenty days, protection due within law was dis- 1992. The answer was act and consumer tices April on and default was entered of court. missed order ultimately upon Judgment was set aside motion of the School District. exclusionary lan- clear, (1983)). ly, the issue is whether policy language is suсh If the excused, If a matter of given guage effect the court. language is however, ambiguous, we will language law, obligation to de- manifest the otherwise agreement against the drafter. construe unambiguously, we If not do so fend. it does Hampton, Pennsylvania v. Insurance Co. trial court. reverse the must 976, 978, 382, 385, 657 A.2d alloc. National Union Under (1995). alleg coverage for claims agreed provide defined) (as Act herein “any Wrongful ing is dis duty to defend An insurer’s person for whose any other Insured or of from, than, broader tinct responsible legally the Insured is Casualty actions indemnify an insured. Aetna Roe, ...”, or suit action “[d]efend and to Surety v.Co. alleging An is not insurer Insured brought against *4 all claims asserted obligated Act, defend if such action or suit Wrongful even insured; duty its is determined against its By an en false or fraudulent.” groundless, underly allegations the nature the definition dorsement Maryland complaint. v. Casual ing Wilson to include volunteers. Insured was amended Co., 588, 594, 304, 307 ty 105 A.2d 377 Pa. “any Wrongful Act as policy The defined 368, (1954); Pa.Super. 517 Elitzky, 358 at duty, neglect, alleged actual or breach оf must defend its at 985. An insurer A.2d solely in ... omission committed error or alleges underlying complaint insured for the School Dis performance of duties which, true, actually poten or would facts trict.” tially policy cov bring the claims within Roe, 422, Board of Pa.Super. complaint alleged 650 erage. 437 at A.2d The R.C.S. 99; Humphreys Niagara they Fire Insur knew persons at v. failed to screen Education Co., 347, 354, Pa.Super. 404 590 A.2d ance young students and have access to would denied, 637, 1267, 1271, ‍‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‍Pa. 598 alloc. 528 policies, or implement procеdures, failed to A.2d 994 in contact with background checks of those any crimi- discovery facilitate students to An who refuses to defend insurer children. The history of sexual abuse of nal so at its its insured from the outset does alleged District complaint also the School Roe, 423, Pa.Super. A.2d at peril, 437 at 650 teachers, train, or inform its failed to instruct Club, 99; Sportsmen’s Stidham v. Millvale permit employees not to administrators 548, 564, 945, 953 Pa.Super. 421 618 A.2d contact students unsupervised between (1992), duty to defend remains because volunteers, averred this PTO unscreened claim has with the insurer until it is clear the depri- grossly negligent so failure “was beyond terms of been narrowed to one rights was constitutional of Plaintiffs Underwriters, vation v. policy. Britamco Inc. Com- substantially certain to result.” R.C.S. 649, Weiner, Pa.Super. 431 636 A.2d 59, I, at R.C.S. denied, Paragraph 652, 575, plaint, Count Pa. 655 A.2d 508 alloc. 540 Stidham, 564, (1994); of the School Pa.Super. 421 at 618 acts and omissions also “deprived An its at 953-54. insurer who disclaims District A.2d Board and on a exclusion duty liberty to defend based Due Process without Plaintiff applicability proving beаrs the burden Fourteenth Amend- in violation of the Law States, 427 American of the exclusion. 42 U.S.C. Constitution and ment of the U.S. 183, A.2d at 887. Pa.Super. at 628 I, Para- Complaint, § Count 1983.” R.C.S. 60, allegations of These graph at 9-10.3 not whether question before us is clearly “wrongful acts” under pay anything; obliged to Union was they fall is whether policy; question it had a question is whether rather the language. exclusionary precise- under District. More the School the com- thority Count III contained to him. same II contained the 3. Count conduct, allegation plaint’s of intentional sole principal, averred in the alternative but battery against Walls. policy-making au- delegated certain the Board 914 underlying complaint

National Union relies on Britamco Under- Britamco Un Grzeskiemcz, writers, derwriters, Weiner, 276, Inc. 433 Inc. v. 55, 1208, discontinued, appeal alloc. (1994), proposi- Pa. A.2d 895 for the declaratory judg A.2d another tion that of assault and action, resulting ment also involved claims separated underlying allega- cannot be from physical from an attack on a bar failing prevent tions (this patron, employee) time a bar and is battery. interpret assault or We do not helpful more than Grzeskiewicz. The rele broadly nor Grzeskiewicz so do we consider provided: vant exclusion facts, controlling, given present that case agreed it is understood and that this Complaint, of the R.C.S. arising excludes claims out of: language policy. Battery, Assault & whether caused (a Grzeskiemcz, patron of the insured of, at the instructions or at the di- pub) alleged injuries resulting from an attack insured, of, employees, rection his patron. pub sought coverage another patrons causes whatsoever and patron’s personal injury for the claims under Allegations negligent hiring, supervi- multi-peril policy, sought and the insurer sion, employees or control of retention declaratory judgment that it had no by or on behalf of the insured. indemnify pub. or defend the The exclusion- ary language provided: at issue (emphasis 636 A.2d at 651-52 *5 Battery, Assault & Endorsement added). Grzeskiewicz, inAs the ex- Weiner Company [T]he is under no [Britamсo] very clusion covered the conduct at issue in

duty indemnify to defend or to an in- case, negligence failing pre- the instant in to any in alleging sured action ... such Weiner, however, wrongful vent the act. damages: the Court made the determination that the defend, duty insurer owed a to which

1.) Assault; complaint’s allegation stemmed from the that 2.) Battery; the was caused intentional conduct 3.) Harmful or offensive contact be- negligent or conduct. Because there was a persons tween two or more legitimate prospect negligence, that rather Regardless degree culpability of of or than intentional assault or caused the regard intent and without to: injury, the exclusion ‍‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‍did not excuse the insur- er’s to defend. alleged C. The failure of the insured or his present The exclusions in the case are less officers, employers, employees, agents expansive, explicit, and less than the exclu- attempt prevent, or servants to to bar or Notably, sions in Grzeskiewicz and Weiner. any halt such conduct. policy express the contains no exclusions for Id. at 639 A.2d at 1211. The control, supervision, negligent hiring, or conduct, alleged solely intentional the Moreover, rights for civil violations. the ex- specific language of the the exclusion covered apply to clusions do not their terms the Thus, very policy conduct at issue. was supply conduct of a non-insured. will not We coverage found to exclude for the conduct exclusionary bargained neither for nor terms alleged.4 agreed parties. Grzеskiewicz, Here, unlike the R.C.S. com- plaint allegations grounded negli- exclusionary in turn to three includes We (a) gence policy expressly paragraphs and the does not ex- herein. Exclusion deals with coverage negligence. “involving clude for claims of claims ... criminal acts”. This Therefore, value, language, at face would eliminate cov Grzeskiewicz decision does erage any “involving” not control our factual scenario result. proof agreement parties "negligencе hiring, 4. Further in retention and control of provided by 62-63, application employees.” was for the 639 A.2d at 1211-12. expressly which excluded the defense of claims criminal, by any person arguably arguably crimi- of one insured is acts which are nal; peripherally some- refuse innocent or the case “involved” can the insurer to defend jaywalking, the claim its no com- merely negligent one insurer could insureds who had Many duty to crimes criminal Put another plicity eliminated. acts? merely negligent that is negligence against invоlve conduct an way, can reckless; insured, to be clearly be covered simply solely by because some facts could policy’s undefended swept outside the ambit comprise criminality? to our arguably More another in- against nature of the point, such to defend would excuse fortiori, if the think not. A sured? We outset, before issue is determin- insured,5 from the is not an we will criminal actor even think this is contem- beyond able? We exclusionary preclude not absent realistic, plation parties; less a more expressly a result. language dictating such interpretation in- sweeping must have been Allowing deny insurer a defense tended, for otherwise would be few there entirely negli- sounding where serious claims would be scenarios law-abiding peo- to an entire gence roster covered. criminality groups alleged ple and because of single “volunteer” be what the by a cannot against the “in- The claim District School parties bargained for. acts, alleged criminal that it is volves” allowed criminal acts to its Walls’ paid an additional appellee The District occur, thereby. R.C.S. suffered expand coverage to premium policy’s However, criminality party is one volunteers; this meant to cannot have been insured; from the it is not removed existing Dis- diminish School insured criminality the claim involved is, if the District had trict That School District itself. covered, range expanded the of those expect though coverage even insurer, members would Thus the itself of this avail alleged; their exclusion, criminality of volunteers was interpret would to mean appear simply because expectations no.less you against your “We will defend *6 persons are to the roll of those negligence, your negligence more added own and claims paid insured to cover. injury negligently, others to cause to whom the allowed negligence of that but reason identical Claypoole, Exchange Erie Insurance person criminally, you’re acts on other (1996) (en 142, 673 A.2d 348 is, your appellee’s That inter- own.” under facts, banc), substantially involved similar pretation, the exact the same of criminal coverage of the and addressed coverage, district’s could result in (a driver), wrongdoer school bus and cover- not, dependent solely degree of on the (the employing school age of the insured alleged on culpability part parties the of oth- officials) they separately, though were even er than the insured itself. This district did not employers. Claypoole The court his best, would be an anomalous result at allow- coverage as employers’ the issue of reach ing right one’s to a covered defense Id. at moot. it determined issue was solely or fall claims to rise 151-54, it in- find 353-54. We of the acts of nature others. structive, however, assaultive that excludable (a) employ- insured specify does whether criminal behavior Exclusion and not, itself, in- deprive in and of act committed a non-insured is ee criminal did Similarly, coverage. separate employer coverage. of its If three sured meant to excuse insured, criminality by one is an “insured” whose can even Walls entities poli- exclusionary portion If of deprive coverage? other two is within the of Walls' sta- consistently and exhibits and conclude School District has maintained documents 5. The and policy is from the record an tus as an insured unclear Walls was not insured under parties. disputed determination trial A did not seek a defense on his behalf. The is be facts be- cannot made without insured under Walls’ status court determined was an for yond is a motion pursuant providing a those in front us. This to an endorsement pleadings; determination of insured. on "volunteer” falls within the definition premature. pleadings was therefore and attached Walls’ status We have reviewed cy, coverage is alloc. not denied The School District is this fact alone. coverage not to be denied because of this (b) Exclusion excuses for phrase. “arising battery.” out assault exclusions, Thus none of the three in our arise, injuries according plead- estimation, eliminate Natiоnal Union’s restricted, ings to which we are from the to defend. negligent School District’s acts and omis- jurisdictions eases in Recent other have (the sions; omissions and policies involved National Union with exclu- “claim”) did not arise from the molestation. herein, sionary language opposite with is, failings That Walls’ acts out of’ the “arose results. National Union offers the recent District, way of the School not the other Cooperative case of Winnacunnet complaint challenged around. R.C.S. District v. Nаtional Union Fire Insurance improper tending garden from Pittsburgh, Pennsylvania, 84 Co. F.3d grew, which the weeds of misconduct Walls’ (1st Cir.1996), provisions of which involved clearly it is but the latter which arose from policy materially an errors and omissions give proof the former. The weeds of the bad same as the in this ease. In Winna- claim, gardening, ability but the to hold cunnet, high pled three school students gardener responsible, arises from the guilty Hampshire in New to the murder of gardener, acts and omissions of the not the director, the husband of the school’s media Likewise, presence mere of weeds. Walls’ Smart, help Pamela who had their enlisted give acts alone do not create or rise to a planning executing the murder. The against appellants; claim that claim cannot suit, parents alleging students their filed stand on of assault alone. It negligent hiring the school district was arises, all, facts, grounded if at from other Smart, supervising resulting in such in- negligence. distress, juries physical incar- as emotional ceration, education, eаrning loss of loss of (c) Exclusion excludes capacity, etc. The court held National Union “arising injury.” bodily out of ... had no to defend the school district (b) For the same reasons exclusion does not precluding recovery based on the exclusions (c) control, equally uncontrolling. exclusion arising battery, out assault or for claims to R.C.S. is to have risen bodily injury any person, or death of appellant’s negligence—the negli from the despite underlying the fact that com- gence injury. did not arise from the plaints allege at 38. did not such acts. Further, the R.C.S. did not al- *7 conclusion, reaching the Winnacun- lege injury body, injury to the but rather to interpreted broadly “arising net court out of’ rights plaintiff the civil of the as manifested comprehensive a more than the as term even trauma, psychological “severe severe de- concept proximate cause. court de- self-esteem, pression, paranoia, loss of men- record, termined that the evidence of under anguish, tal embarrassment and humiliation.” injuries alleged originated from or arose the Complaint damage alleged at 10. R.C.S. murder; plaintiffs underlying out of the the “bodily injury”; certainly injury, is not it is prove negligence their could not claims that, significant injury it at but is showing they how were affected without body? physical He no wounds Id. at 35-36. the murder. injury; damage alleged or is to R.C.S.’s emotions, blush, reasoning of rights, civil to his and to his At first Winnacun- however, appears persuasive; note psyche. seriously he was affected net we While question, injuries “bodily beyond his not the court looked well the terms of the without are injury” interpretation pleadings, depositions, within to to determine the reasonable exclusions, precluded coverage. previous- As of the terms of the and we exclusions stated, law, Pennsylvania interpret any ambiguity against ly under an insur- must Homes, solely by Ryan insurer. Inc. v. Home Indem- er’s to defend is determined Co., underlying complaint. nity allegations of the 436 647 A.2d the

917 307; Wilson, 594, a act and an assault at A.2d at there was criminal 105 While here, at act of the Elitzky, battery that was not the 358 Thus, determining purposes a deny for To District. proceed- stage allege to at this against defend that do not a defense preclude on will not based ings, we would be the District excluded potential proof problems further down intolerable. (with complaint exception road. R.C.S.’s EDP, American Home In Search Inc. v. Walls) against alleges, of the Count essential- Co., N.J.Super. 267 Assurance ly, supervision rights vio- negligent and civil (1993), employment firm placement an negligence These claims of are lations. properly negligent failure to was sued for policy; as expressly excluded under employ- investigate party referred for pleaded, they neg- arise out of omissions violently later assaulted a party ment—the ligence of School District. pointed Jersey The New court coworker. noted, Further, disagree previously we out: with the court’s determination Winnacunnet omissions purpose of the errors and negligence subse- that arises from the protect an insured who com- policy is negli- quent it that crime. Wherе professional If negligence. an act of mits occur, gence allowed a crime does the professional causes negligence an act of against the from the negligent claim arise another, damage but actionable criminality? or from the We be- right protection depends not insured’s it is the former. lieve nature of the act rather on on the but Winnacunnet, resulting damage, believe

In contrast to the court in nature of we City policy objective stated would be Durham Board Education v. Nation- that the Pittsburgh, substantially al Union Fire Insurance nullified. Co. of Pa., (1993), N.C.App. S.E.2d Therefore, concept, agree. this we With rev. 333 N.C. 431 S.E.2d case, the facts of this we find under appropriate. found no exclusion to be underlying alleged acts which policy language That case involved identical policy. potentially within here, in our case. As law, in The trial court erred as a matter Union refused to board defend a school holding policy unambiguously ex- allegations following rights vio- R.C.S.’s of civil cludes ‍‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‍raрe of a student coach. basketball negligent supervision, and lations and court, recognizing The North Carolina justified refusing to National Union board, employee coach was an and an outset. against these claims from the insured, properly from excluded the coach of the trial Accordingly, we reverse the order however, held, coverage. That court also pleadings. granting court language excluding involving that the pro- Case remanded Order reversed. criminal acts does not exclude opinion. Juris- ceedings consistent with this board, against employees of the school as the relinquished. diction ‘arise out of an student’s “neither bodily nor out of assault ‘arise *8 SOLE, J., Concurring Opinion DEL files a against the Board KELLY, by JJ. joined BECK and which money present in the are for employees case SOLE, Judge, concurring. DEL negli- damages suffered as a result of their gent exclusionary language supervision. Majority’s join the conclusion I therefore, not, deny coverage to the does entering Judgment in trial cоurt erred Id. 426 S.E.2d at 457. Board.” Pleadings Appellee, on behalf of National considering the claims persuasive In whether reasoning find this more Union.

We “arise out assaults and batter- to this this matter of’ appropriate and case than Winna- court, ies, by the or out against the found trial cunnet decision. conduct, as supervisory alleged negligent and viola- District were Majority, rights. is reminded student’s found one tions of the constitutional (1956). first, join I question of what comes the chicken or For these reasons decision egg. to vacate the in this matter and the trial remand case to court. Majority Both the trial court and the cor- rectly party a com- note that where third

plaint clearly on its face establishes the terms of the

which is excluded under

policy, duty indemnify there is no and no However,

corresponding duty to defend.

obligation to defend will arise whenever the injured party may filed

potentially come within the Monaco,

policy. Seaboard Industries Inc. v. CO., Appellee, K-B BUILDING (1978). 392 A.2d 738 particular statements set forth in the third v. party complaint in this case lead me to con- INC., ASSOCIATES, HERMARA duty t/d/b/a clude that National Union had a Associates, Lysinger, Ronald Rob HRC ‍‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‍defend, ultimately and the were Darrah, Sukenik, ert M. Leanne R. proven, indemnify. рarticular In Barber, Appellants. James complaint alleges the District and the Board “were aware that Walls had a

history CO., of arrests convictions for com- Appellee, K-B and/or BUILDING mitting against young sexual crimes chil- dren,” “knew or should have known that serving probation committing ASSOCIATES, INC., HERMARA t/d/b/a crimes”, sexual “failed to conduct investi- Associates, Lysinger, Ronald Rob HRC Walls, gation background check” on Darrah, Sukenik, ert Leanne R. M. despite these facts had a which contin- Barber, Appellees. James regular ued “to allow Walls to have Thus,

unsupervised contact with students.” BARBER, Individually Appeal of James my view failure to act to the Board’s Associates, Inc., and Hermara t/d/b/a students, established, protect its was the Associates, Appellant. HRC claimed which was the cause of the breach harm, not assault committed student’s Superior Pennsylvania. Court of Thus, inapplica- the exclusions Walls. were ble and National Union had Argued Dee. 1997. charges. these April Filed potentially a elaim is within the Where scope of an insurance and the insurer outset,

refuses to defend at the it acts at its Casualty Surety peril.

own Aetna Co. v.

Roe, 650 A.2d 94 this matter National Union refused

provide a defense and its insured entered a injured party.

settlement with the therefore, refusal,

Union means of its peril

acted at its own and is now liable

only expenses for the incurred the insured defending for the amount the suit but also

of the settlement made the insured See, Annotation,

injured party. Conse-

quences Liability Insurer’s to As- Refusal Action, sume 49 A.L.R.2d 694 Defense of