418 F.3d 511 (5th Cir. 2005), 04-30445, Coleman v. School Bd. of Richland Parish

Docket Nº:04-30445.
Citation:418 F.3d 511
Party Name:Katie COLEMAN, Plaintiff, v. SCHOOL BOARD OF RICHLAND PARISH, Defendant-Third Party Plaintiff-Appellant, v. Mid-Continent Casualty Insurance Co., Third Party Defendant-Appellee.
Case Date:July 25, 2005
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit
 
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418 F.3d 511 (5th Cir. 2005)

Katie COLEMAN, Plaintiff,

v.

SCHOOL BOARD OF RICHLAND PARISH, Defendant-Third Party Plaintiff-Appellant,

v.

Mid-Continent Casualty Insurance Co., Third Party Defendant-Appellee.

No. 04-30445.

United States Court of Appeals, Fifth Circuit.

July 25, 2005

Page 512

[Copyrighted Material Omitted]

Page 513

Jon Keith Guice (argued), Hammonds & Sills, Monroe, LA, for School Bd. of Richland Parish.

Richard S. Vale (argued), Pamela Ferrage Noya, Blue Williams, Metairie, LA, for Mid-Continent Cas. Ins. Co.

Appeal from the United States District Court For the Western District of Louisiana.

Before HIGGINBOTHAM, SMITH, and BENAVIDES, Circuit Judges.

PATRICK E. HIGGINBOTHAM, Circuit Judge:

Mid-Continent Casualty Insurance Company agreed to insure the Richland Parish School Board against various risks, including loss resulting from claims based on actual or alleged racial discrimination, racial harassment, and breach of contract. Following execution of this agreement, a lawsuit was filed against the School Board alleging federal claims for intentional racial discrimination, and state claims for breach of contract and abuse of rights. Mid-Continent refused to defend the suit on grounds that the policy excluded from coverage acts committed with knowledge of their wrongful nature or with intent to cause damage. We find that the policy did not provide coverage for claims alleging acts of intentional racial discrimination committed by members of the School Board. However, we also conclude that Mid-Continent breached its duty to defend

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the School Board because the plaintiff's complaint alleged non-excluded claims for breach of contract and abuse of rights.

I

Katie Coleman, an African-American woman, applied for the newly-created position of associate principal at Rayville Elementary School in Rayville, Louisiana. Coleman, who had previously worked as a teacher in another Parish, was awarded the position and received a two-year contract of employment. She began serving as associate principal on September 6, 2000. In October 2000, she was asked to resign by the superintendent of the School Board. She refused to comply. The School Board then held a hearing to consider nine separate charges of insubordination levied against Coleman and, after finding her guilty of four, voted to terminate her employment. 1

Coleman filed suit against the School Board alleging that she had been discriminated against and terminated on account of her race. She brought claims under Title VII of the Civil Rights Act, 2 42 U.S.C. §§ 1981 and 1983, and pleaded state law causes of action for breach of contract and abuse of rights. Coleman alleged that the position of associate principal at Rayville Elementary had been created as a concession by white members of the School Board only after African-American members agreed to campaign within the African-American community on behalf of a school bond proposal to be voted on in October of 2000. She claimed that she accepted the position without knowledge of these "political under-currents."

Coleman alleged that the next business day after the bond proposal passed, she was asked to resign. According to Coleman, the superintendent "explained the political reality of her appointment and told her that she risked ruining her career if she did not resign." She alleged that he then threatened her with continuous "write-ups" and eventual termination if she did not relent to his demands, and offered to buy out one year of her two-year contract. She claimed that after this meeting, she was subjected to disparate enforcement of the Board's rules and regulations, and was continuously written-up for infractions that she did not commit. These events ultimately culminated in her termination by the Board without the consent and approval of several African-American members.

Prior to terminating Coleman, the School Board purchased an Educators Legal Liability Policy from Mid-Continent. The policy obligated Mid-Continent to defend and indemnify the Board, its directors, trustees, officers, and employees against loss resulting from any "claim" made during the policy period, which ran from October 11, 2000, through October 11, 2001. The policy defined "claim" as any written notice received by an insured, or any judicial or administrative proceeding initiated against an insured, seeking to hold the insured responsible or liable for a "wrongful act." The policy defined "wrongful act" as "any actual or alleged act, error, omission, misstatement, misleading statement, neglect or breach of duty" committed by an insured party in the discharge of his duties, including:

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(1) actual or alleged discrimination, whether based upon race, sex, age, national origin, religion, disability or sexual orientation;

(2) actual or alleged sexual or racial harassment;

(3) actual or alleged libel, slander or other defamation;

(4) actual or alleged invasion of privacy; or

(5) actual or alleged interference with or breach of any employment contract, whether oral, written, express or implied.

The policy also contained a provision excluding coverage for loss resulting from any claim "brought about or contributed to in fact by any dishonest, fraudulent or criminal Wrongful Act or by any Wrongful Act committed with actual knowledge of its wrongful nature or with intent to cause damage."

The School Board tendered the defense of Coleman's lawsuit to Mid-Continent pursuant to the terms of the policy. Mid-Continent denied coverage and declined to defend the suit, prompting the School Board to file a third-party claim against Mid-Continent. Mid-Continent filed a motion for summary judgment arguing that it had no duty to defend or indemnify the Board on grounds that coverage for Coleman's claims was precluded by the exclusion for acts committed with actual knowledge of their wrongful nature or intent to cause damage. The School Board filed a cross-motion for summary judgment arguing that it was entitled to a defense and indemnity on grounds that the policy explicitly provided coverage for actual or alleged racial discrimination and racial harassment.

While these motions were pending, the School Board defended against Coleman's suit at its own cost and ultimately reached a settlement. Following this settlement, the district court entered summary judgment in favor of Mid-Continent on the School Board's third-party claim, and denied the Board's motion for summary judgment. The court found that coverage for all of Coleman's claims was precluded by the policy's intentional acts exclusion. The Board timely appealed.

II

We review the grant of a motion for summary judgment de novo, applying the same standards employed by the district court. 3 "We review the legal question of the district court's interpretation of an insurance contract de novo, as well as its determination of state law." 4 Summary judgment is appropriate if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." 5 The party moving for summary judgment "bears the burden of identifying those portions of the record it believes demonstrate the absence of a genuine issue of material fact." 6 The burden then shifts to the non-moving party to "show the existence of a genuine fact issue for trial." 7 We view all evidence and reasonable inferences from the evidence in

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the light most favorable to the non-moving party. 8

III

On appeal, the School Board contends that the district court erred in holding that Mid-Continent was not obligated to defend and indemnify the Board against claims alleging intentional racial discrimination. In addition, the School Board argues that even if coverage for intentional discrimination were excluded, Mid-Continent would still be obligated to defend against Coleman's suit because her complaint alleged non-excluded claims for breach of contract and abuse of rights. We take up these arguments in turn.

A

The School Board's primary argument on appeal centers on its contention that Mid-Continent was obligated to defend and indemnify it against the totality of Coleman's lawsuit because the policy explicitly provided coverage for actual or alleged racial discrimination and racial harassment. The Board acknowledges, as it must, the presence of the exclusion for intentional acts, but urges that the exclusion cannot be squared with the policy's explicit coverage of racial discrimination and racial harassment as both are inherently intentional in nature. The Board argues that any attempt to reconcile the policy's exclusion with its coverage for discrimination and harassment leads to the absurd result that coverage is available only for "unintentional" "intentional" acts. Moreover, the Board posits that even if this result were permissible under established rules of contract interpretation, it would run afoul of Louisiana's reasonable expectations doctrine.

Mid-Continent rejects these contentions, arguing that coverage is available only for wrongful acts committed without knowledge of their wrongful nature or with intent to cause damage. It claims that this limitation does not render coverage for discrimination or harassment illusory because it cuts back, but does not wholly eliminate, such coverage. In addition, it asserts that limiting coverage of discrimination and harassment claims in this manner is consistent with Louisiana public policy. Accordingly, Mid-Continent contends that it had no duty to defend or indemnify the School Board against any of Coleman's claims.

1

The parties agree that Louisiana law...

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