Horace Mann Ins. Co. v. Independent School Dist. No. 656

• Decision Date: 19 October 1984
• Docket Number: C5-83-1207 and CX-83-1381,CX-83-1381,Nos. C2-83-936,s. C2-83-936
• Citation: 355 N.W.2d 413
• Parties: 20 Ed. Law Rep. 686 HORACE MANN INSURANCE COMPANY, Respondent, v. INDEPENDENT SCHOOL DISTRICT NO. 656 and Fireman's Fund Insurance Company, Appellants, (C2-83-936, C5-83-1207), Security Insurance Company, Respondent, Eugene J. Crosby, guardian ad litem for R.L.E., et al., Appellants, (), Michael Phillips, Respondent. Nos. C2-83-936, C5-83-1207 and .
• Court: Minnesota Supreme Court

Page 413

355 N.W.2d 413

20 Ed. Law Rep. 686

HORACE MANN INSURANCE COMPANY, Respondent, v. INDEPENDENT SCHOOL DISTRICT NO. 656 and Fireman's Fund Insurance Company, Appellants, (C2-83-936, C5-83-1207) Security Insurance Company, Respondent Eugene J. Crosby, guardian ad litem for R.L.E., et al Appellants, (CX-83-1381) Michael Phillips, Respondent.

Nos. C2-83-936, C5-83-1207 and CX-83-1381.

Supreme Court of Minnesota.

Oct. 19, 1984.

Rehearing Denied Oct. 19, 1984.

Syllabus by the Court

1. A general liability insurance policy containing an "intentional damages" exclusion precludes a duty to defend and indemnify an insured adult public school teacher who allegedly had sexual contact with one of his minor students.

2. When an adult school teacher and counselor engages in behavior of repeated sexual contacts with a minor student, an intent to cause bodily injury may be inferred as a matter of law to preclude coverage under a homeowner's insurance policy.

3. The general liability insurer of a school district has no obligation to defend an employee of the district nor to indemnify him for any judgment that might be entered based upon claims against the teacher-counselor because he engaged in sexual contact with a minor student.

4. When a teacher is sued for behavior allegedly causing damages which occurred in the course and scope of his employment, the school district has an absolute statutory duty to defend him.

5. A school district owes no duty to indemnify a teacher or other employee guilty of malfeasance or willful or wanton neglect of duty.

Donald M. Jardine, Mary A. Rice, St. Paul, for Independent School Dist. 656.

James T. Martin, So. Minneapolis, for Security Ins. Co.

Michale J. Healy, St. Paul, for Ellerbusch.

Joseph M. Goldberg, Minneapolis, for Horace Mann Ins. Co.

John H. McLoone, IV, Waseca, for Michael Phillips.

Considered and decided by the court en banc without oral argument.

KELLEY, Justice.

Horace Mann Insurance Company (Horace Mann), the insurer of the Minnesota Education Association (MEA), brought this declaratory judgment action against Independent School District No. 656 (school district); its insurer, Fireman's Fund Insurance Company (Fireman's Fund); Michael Phillips (Phillips); his homeowner's insurer, Security Insurance Company (Security); and a father and his daughter, R.L.E., ¹ plaintiffs in a lawsuit commenced against the school district and Phillips, one of its teachers, claiming damages sustained by them as the result of alleged sexual contact by Phillips with R.L.E. in the course of his employment as a teacher with the school district (the main action). The trial court granted summary judgment to Horace Mann and Security, holding that neither had the duty to defend or indemnify Phillips in the main action. The trial court denied the school district's and Fireman's Fund's initial partial summary judgment motion requesting orders that they had no duty to defend Phillips in the main action. Subsequent to these initial orders and judgment, the trial court entered orders denying amended finding motions brought by the guardian ad litem, Fireman's Fund and the school district. It also entered an order denying a second summary judgment motion alleging no duty to defend or indemnify brought by Fireman's Fund. The guardian ad litem, the school district and Fireman's Fund bring this appeal. ² We affirm the orders and judgment granting Horace Mann and Security summary judgment and reverse the order denying Fireman's Fund summary judgment on the defense and indemnification issues. We hold the school district has the duty to defend Phillips but not to indemnify him in the main action.

Michael Phillips was employed by the school district. His duties included serving as assistant coach of the girls basketball team and as a chemical dependency counselor for the school system. During the 1978-79 and 1979-80 school years, R.L.E. was a tenth and eleventh grade student in the school district and a member of the girls basketball team. At a school orientation session in fall 1978, the students in the high school had been informed that Phillips was available for information, counseling and discussions with respect to chemical use problems.

R.L.E. had a history of drug use beginning with the use of marijuana in the eighth grade. By the tenth grade, when she was on the girls basketball team, she also used "speed," hashish and alcohol. Phillips became aware of these chemical use problems and began advising and counseling R.L.E. R.L.E. alleged Phillips inflicted several sexual contacts upon her during her counseling with him and while she was on the basketball team. After the last alleged contact, the girl began to exhibit emotional problems more severe than those previously experienced with her drug problems. Phillips initially recommended inpatient treatment to her parents, who consulted him, as her counselor, regarding her increased problems. Since 1979, she has experienced severe psychological illness and has required hospitalization on numerous occasions for suicidal tendencies, depression and anorexia. Her medical expenses, as of 1983, totaled approximately $90,000. The damage to R.L.E., allegedly arising out of the sexual contact incidents, prompted the filing of the main action in which R.L.E. and her guardian ad litem alleged strict liability and assault and battery against Phillips, a claim against the school district as his employer, and a claim against the school district for its own negligence in hiring and retaining Phillips in the position he held. Upon being sued, Phillips requested defense and indemnity from Horace Mann, Security, Fireman's Fund and the school district. Horace Mann then commenced the instant declaratory judgment action to determine its obligation, if any, to defend and indemnify Phillips. The other insurers and the school district likewise asserted claims of non-liability in this action. All parties moved for either summary judgment or partial summary judgment.

1. We first consider whether the court erred in granting Horace Mann summary judgment. As a member of the MEA, Phillips was an insured under the policy issued by Horace Mann to that association. The trial court granted summary judgment to Horace Mann under an "intentional damages" exclusion in the policy, holding "that the nature of Phillips' conduct was such that an intention to inflict injury can be inferred as a matter of law." See Fireman's Fund Insurance Co. v. Hill, 314 N.W.2d 834 (Minn.1982).

The Horace Mann liability policy issued to the MEA contains the following relevant provisions:

II. DEFINITIONS

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* * * G. OCCURRENCE. The term "Occurrence" means an event which results in damages to someone other than the member. An occurrence can involve a single sudden event or the continuous or repeated exposure to conditions. If the latter the exposure shall constitute a single occurrence and shall be deemed to have occurred as of the most recent exposure to said conditions.

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III. COVERAGES

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A. EDUCATORS LIABILITY. The Company agrees to pay all damages which the insured shall become legally obligated to pay as a result of any claim arising out of an occurrence in the course of the insured's educational employment activities, and caused by any acts or omissions of the insured or any other person for whose acts the insured is legally liable, not to exceed the limit of liability stated in the Declarations for this coverage.

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VII. EXCLUSIONS

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H. INTENTIONAL DAMAGES. Section III(A) of this policy does not apply to occurrences involving damages which are the intended consequence of action taken by or at the direction of the insured.

Appellants ³ argue that the definition of "occurrence" in the Horace Mann policy is so broadly defined as "an event which results in damages" that intentional injuries are covered under the policy; that the trial court erred by applying Fireman's Fund Insurance Co. v. Hill, 314 N.W.2d 834 (Minn.1982), to the instant case because Hill was an interpretation of an "intentional injury" exclusion, whereas the Horace Mann policy excludes "intentional damages"; and that the "intentional damages" exclusion is ambiguous as to what it excludes so it should be construed in favor of coverage.

The first and third arguments are without merit if the exclusion for "intentional damages" is unambiguous. In Hill the exclusionary clause was for "intentional injury." We do not discern any material difference between that and "intentional damages." The words "damages" and "injuries" used in this context are synonymous. Black's Law Dictionary 706 (rev. 5th ed. 1979); Burton's Legal Thesaurus 132, 284 (1980); Webster's Third New International Dictionary 1164 (4th ed. 1976). See also Ziolkowski v. Continental Casualty Co., 284 Ill.App. 505, 510-11, 1 N.E.2d 410, 412 (1936), aff'd, 365 Ill. 594, 7 N.E.2d 451 (1937).

Furthermore, the trial court's reliance on Hill was not misplaced. An intentional injury or damage exclusion excludes coverage in a liability policy either if "a reason for the act is to inflict bodily injury or when the character of the act is such that an intention to inflict an injury can be inferred." Caspersen v. Webber, 298 Minn. 93, 99, 213 N.W.2d 327, 330 (1973). Phillips, in a deposition, claimed his actions were not intended to damage the girl. Thus, he did not subjectively intend to harm, although he intended to commit those sexual contacts to which he admits. Nevertheless, those subjective statements do not preclude this court from inferring an intent to injure or to damage from the nature of the acts involved--unconsented sexual contact with a minor. Hill, 314 N.W.2d at 835; see also Woida v. North Star Mutual Insurance Co., 306 N.W.2d 570 (Minn.1981); Continental Western Insurance Co. v. Toal, 309 Minn. 169, 244 N.W.2d 121 (1976). Accordingly, we conclude the trial court correctly held that the Horace Mann...