Canutillo Indep. School Dist. v. National Union

• Decision Date: 17 October 1995
• Docket Number: No. EP-92-CA-41-DB.,EP-92-CA-41-DB.
• Citation: 900 F. Supp. 844
• Parties: CANUTILLO INDEPENDENT SCHOOL DISTRICT, et al. v. NATIONAL UNION FIRE INSURANCE CO.
• Court: U.S. District Court — Western District of Texas

900 F. Supp. 844

CANUTILLO INDEPENDENT SCHOOL DISTRICT, et al. v. NATIONAL UNION FIRE INSURANCE CO.

No. EP-92-CA-41-DB.

United States District Court, W.D. Texas, El Paso Division.

October 17, 1995.

E. Link Beck, El Paso, TX, for plaintiffs.

Patrick A. Groves, El Paso, TX, for defendant.

MEMORANDUM OPINION AND ORDER

BRIONES, District Judge.

On this day, the Court revisits the above-captioned cause, hopefully for the last time. Pursuant to the Court's Memorandum Opinion of August 22, 1995, Canutillo filed its brief on the duty to indemnify on September 5, 1995. National Union filed its response on September 12, 1995. Canutillo's reply was received September 15, 1995. Having previously determined that National Union had a duty to defend prior to the filing of the Mendoza Plaintiffs' Second Amended Complaint, the Court will now tackle the coverage issue based on that Second Amended Complaint. After due consideration the Court is of the opinion that the cause should be disposed of as set forth below.

Statement of Facts

The facts of the case are set out in the August Memorandum Opinion and will not be reiterated here. For purposes of this opinion it is sufficient to note that the Second Amended Complaint of the Plaintiffs in the Mendoza litigation alleged only a violation of Title IX. Further, the parties in their "Agreement" stipulate that the Second Amended Complaint and the policy itself are the controlling documents before the Court.¹

Summary Judgment

Summary Judgment is warranted where the pleadings and evidence on file show that no genuine issue exists as to any material fact and the moving party is entitled to judgment as a matter of law. FED. R.CIV.P. 56(c). See Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Matsushita Elec. Industr. Co. v. Zenith Radio Corp., 475 U.S. 574, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).

In the case at bar, both parties and the Court agree that the determination of the duty to indemnify is proper for summary judgment. The Court reviews all the terms of the policy and all the terms of the "Agreement".

Duty to Indemnify

The Court now considers the narrow question of whether National Union has a duty to indemnify Canutillo. In this diversity case, the duty to indemnify is to be determined under Texas law. In contrast to the duty to defend, the duty to indemnify is not based upon the third party's allegations, but upon the actual facts that underlie and result in the liability. American Alliance Ins. Co. v. Frito-Lay, Inc., 788 S.W.2d 152, 153-54 (Tex.App. — Dallas 1990, writ dism'd); Cluett v. Medical Protective Co., 829 S.W.2d 822, 828 (Tex.App. — Dallas 1992, writ denied). The Mendoza litigation was settled out of court. The liability in this case was not litigated, thus, the actual facts were not ascertained. However the parties have, by agreement stipulated that the facts as alleged in the Second Amended Complaint are those on which the Court should base its determination on this issue.

National Union denies the existence of coverage based on the first three exclusions in the policy. The exclusions state as follows:

This policy does not apply:

a) to any claim involving allegations of fraud, dishonesty or criminal acts or omissions; however, the insured shall be reimbursed for all amounts which would have been collectible under this policy if such allegations are not subsequently proven;

b) to any claims arising out of (1) false arrest, detention or imprisonment; (2) libel, slander or defamation of character; (3) assault or battery; (4) wrongful entry or eviction or invasion of any right of privacy;

c) to any claim arising out of bodily injury to, or sickness, disease or death of any person, or damage to or destruction of any property, including the loss of use thereof;

The Mendoza Plaintiffs' Second Amended Complaint, which was the live pleading at the time of the settlement agreement alleged only a Title IX cause of action. As in the prior opinion, if the Court finds that the cause of action advanced by the Mendoza Plaintiffs was not excluded, or that there was some question as to whether coverage existed through ambiguity in the policy, then National Union had a duty to indemnify.

I.

The Court must adopt the construction of an exclusionary clause urged by the insured as long as that construction is not unreasonable, even if the construction urged by the insurer appears to be more reasonable or a more accurate reflection of the parties' intent. National Union Fire Ins. Co. v. Hudson Energy Co., 811 S.W.2d 552, 555 (Tex.1991). Any intent to exclude coverage must be expressed in clear and unambiguous language. The insurer has the duty to expressly and clearly state the exclusion. Id. Exceptions or limitations on liability are strictly construed against the insurer and in favor of the insured. Id. Thus, the inquiry is whether the construction advanced by Canutillo is a reasonable interpretation.

The policy does not specifically exclude Title IX claims against the school district. The Second Amended Complaint does not state a cause of action for fraud, dishonesty, criminal acts or omissions, false arrest, detention or imprisonment, libel, slander or defamation of character, assault or battery, wrongful entry or eviction or invasion of any right of privacy, bodily injury to, or sickness, disease or death of any person. National Union is correct in that these terms are unambiguous. The Complaint does state a cause of action based on gender discrimination. Thus, National Union's only hope is that the terms "involving" and "arising out of" in the exclusions are of sufficient breadth and particularity that the conduct of Tony Perales can be included within the exclusions. National Union zealously so argues.²

A.

The Supreme Court has held that when a teacher sexually harasses or abuses a student because of that student's sex, that teacher intentionally discriminates on the basis of sex. Franklin v. Gwinnett County Public Schools, 503 U.S. 60, 73, 112 S.Ct. 1028, 1037, 117 L.Ed.2d 208 (1992). When there is an allegation of sexual misconduct, Title IX, as applied to school districts by this Court, requires that there be two distinct actions or inactions, at least one of which is intentional in nature, on the part of an employee and on the part of the school district. See Rosa H. v. San Elizario Independent School Dist., 887 F.Supp. 140 (W.D.Tex.1995). But, it is the conduct of the school district which gives rise to the cause of action and is at the heart of any Title IX action.

Title IX forbids schools receiving federal funds from discriminating against a student on the basis of gender. A cause of action under Title IX is a suit alleging discrimination. Only the conduct of the school board itself can give rise to Title IX liability.³ A suit under Title IX alleges that the school district has failed to implement policies or procedures to prevent or discover incidents of sexual discrimination or, as in Rosa H., that once the discrimination has been discovered failed to act in an appropriate manner.⁴ In other words, the suit alleges that Canutillo made an error or omission by failing to comply with Title IX. Tony Perales did not violate Title IX. While his conduct was certainly discriminatory, without some action by Canutillo the cause of action under Title IX cannot be sustained.

Admittedly, as this Court and others have noted, there is a genuine dearth of instructive Title IX case law. However, in this Court, Title IX does require proof of negligent, reckless or intentional acts by the school district, independent of the intentional conduct of the employee. This Court believes that to hold otherwise is to place the school district in the untenable position of being liable for conduct which it was, or is unable to remedy or rectify. Simply put, case law does not allow the school district (the insured) to be held liable for the wrongful act of an employee under either Title IX or § 1983.⁵ There must be further wrongful conduct by a school district to prove a Title IX case. A Title IX cause of action is not the same as a § 1983 cause of action; such a reading renders Title IX redundant.

This Court interprets Title IX so as to require proof, by a preponderance of the evidence, that the school district was negligent or acted with recklessness or intentionally discriminated. This requirement is a separate and discrete element of a Title IX claim. While Perales' conduct is discriminatory, it is only the conduct of the school district which gives rise to legally cognizable discrimination. The Title IX claim does not "arise out of" the conduct of Tony Perales, it arises out of the inactions of Canutillo, thus the exclusion does not apply. On this basis the Court finds a duty to indemnify.

B.

Tony Perales is an employee of the school district: he is not an insured. Canutillo argues that the exclusion should apply to the insured, that is, the school leaders or in this case the school board.⁶ National Union does not contend that any school board member did anything which would run afoul of the exclusions. Had a principal or assistant principal (or any named insured) committed the sexual abuse then the exclusion would arguably apply.

Defendant argues that to interpret the assault and battery exclusion to apply only to claims against the insured who actually commits the assault and battery would "emasculate" the exclusion. The Court strongly disagrees with this statement. To so interpret the exclusions would be to give the words their plain meaning; if one of the listed insured engaged in conduct subject to the exclusion, the policy does not apply, otherwise it does. This interpretation is simple, clear and direct. It does not strip the words of their meaning; rather, it gives them precise meaning.

National Union cites an unpublished opinion which is of no...