USCA1 Opinion
United States Court of Appeals
United States Court of Appeals
For the First Circuit
For the First Circuit
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No. 95-2068
WINNACUNNET COOPERATIVE SCHOOL DISTRICT,
Plaintiff, Appellant,
v.
NATIONAL UNION FIRE INS. CO. OF PITTSBURGH, PA,
Defendant, Appellee.
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No. 95-2069
SCHOOL ADMINISTRATIVE UNIT #21,
Plaintiff, Appellant,
v.
NATIONAL UNION FIRE INS. CO. OF PITTSBURGH, PA,
Defendant, Appellee.
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APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW HAMPSHIRE
[Hon. Paul J. Barbadoro, U.S. District Judge]
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Before
Selya, Stahl, and Lynch,
Circuit Judges.
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Robert A. Casassa with whom Casassa and Ryan was on brief for
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appellants.
Gordon A. Rehnborg with whom Doreen F. Connor and Wiggin & Nourie
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PA were on brief for appellee.
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May 23, 1996
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STAHL, Circuit Judge. Plaintiff-appellants
STAHL, Circuit Judge.
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Winnacunnet Cooperative School District ("Winnacunnet") and
School Administrative Unit #21 ("SAU #21") appeal the denial
of their summary judgment motions and the grant of summary
judgment in favor of defendant-appellee, National Union Fire
Insurance Company ("National Union"). In its ruling, the
district court held that insurance policies issued by
National Union did not cover certain legal claims asserted
against them, and that there was no genuine issue of material
fact as to the applicability of two policy exclusions. We
affirm.
I.
I.
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Factual Background and Prior Proceedings
Factual Background and Prior Proceedings
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To explicate the insurance coverage dispute, we
first recount the events underlying the claims against the
insured parties, Winnacunnet and SAU #21.
In 1991, former Winnacunnet High School students
Vance Lattime, Jr., Patrick Randall, and William Flynn
pleaded guilty to the murder of Gregory Smart, the husband of
the school media director, Pamela Smart ("Smart"). See State
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v. Smart, 622 A.2d 1197, 1202 (N.H.), cert. denied, 114 S.
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Ct. 309 (1993). The students eventually testified for the
state at the trial of Smart, who was convicted of first
degree murder, conspiracy to murder and tampering with a
witness. Id. at 1200, 1202. For their roles in the murder,
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Randall and Flynn are currently serving prison terms of
forty-years-to-life, and Lattime is serving thirty-years-to-
life (each with twelve years deferred). Cecelia Pierce, a
former student intern of Smart's who had known about the
murder plan before it was carried out, eventually assisted
the authorities in securing information leading to Smart's
arrest. Id. at 1201-02. Pierce was not charged with, or
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convicted of, any crime related to the murder.1
In 1993, Lattime, Randall, Flynn and their parents,
Naomi and Vance Lattime, Sr., Patricia and Frank Randall, and
Elaine Flynn, filed a lawsuit in New Hampshire state court
alleging that Winnacunnet was negligent in hiring and
supervising Smart. They claimed that Winnacunnet's
negligence resulted in "inappropriate relationships and
dangerous effects" and caused Smart to commit various acts
that, in turn, led to:
injuries including but not limited to
emotional distress, mental instability,
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1. The facts at trial, see Smart, 622 A.2d at 1200-02,
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established that Smart became involved sexually with Flynn.
During the affair, Smart told Flynn that they would have to
kill her husband if their relationship was to continue. They
planned the murder in detail, and Smart frequently spoke to
Pierce of the plans. Flynn enlisted the help of Randall and
Lattime after his first attempt at murdering Gregory Smart
failed. On the day of the murder, Flynn, Randall and Lattime
(with another boy) drove to Smart's empty residence, and,
while Lattime waited in the car, Flynn and Randall ransacked
the home to create the appearance of a burglary. When
Gregory Smart returned home, Flynn and Randall forced him to
his knees, and while Randall held his head down at knife
point, Flynn shot him once in the head.
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physical incarceration, impairment of
judgment, thereby causing them to suffer
criminal responsibilities, incarceration,
irreparable harm through loss of liberty,
lost earnings, earning capacity, loss of
education by and through [Winnacunnet],
financial loss, separation of Students
from their parents and family, loss of
consortium by the parents, loss of
consortium by the Students, etc.; all to
the damage of the plaintiffs.
In a separate state action, Pierce sued SAU #21,
the entity that oversees the operations of Winnacunnet High
School,2 alleging that it was negligent in hiring, training
and supervising Smart. Pierce claimed that the alleged
negligence caused her "loss of education, loss of past,
present and future earnings, loss of reputation and standing
in the community, and mental anguish."3 Neither writ of
summons4 in the underlying state actions specifically
mentioned the murder of Gregory Smart.
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2. Interestingly, Pierce named only SAU #21 as a defendant
while the other students and their parents named only
Winnacunnet. Both actions allege, inter alia, negligent
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hiring/employment although it appears from the record that
SAU #21 is the entity that hired Smart. In any case, no
party has raised any issue in this regard to us, and because
the policies issued to SAU #21 list Winnacunnet as an
additional insured, we treat the present coverage question as
unaffected by the difference in the underlying named
defendants.
3. At oral argument, the parties informed us that Pierce has
received $9,000 in settlement of her claim.
4. In New Hampshire, a writ of summons is the initial
pleading in a civil action at law. For simplicity, we will
refer to this pleading as a "writ."
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Winnacunnet and SAU #21 (collectively, "the
School") turned to National Union to defend and indemnify
them in the state actions under consecutive "School Leaders
Errors and Omissions" insurance policies, issued for one-year
periods beginning November 17, 1990 and 1991. Under the
policies, National Union was obligated to defend any action
and pay damages resulting from "any Wrongful Act (as herein
defined) of the Insured or of any other person for whose
actions the Insured is legally responsible." The policies
defined "Wrongful Act" as "any actual or alleged breach of
duty, neglect, error, misstatement, misleading statement or
omission committed solely in the performance of duties."
National Union declined coverage, citing the
following policy exclusions:
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.
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Upon National Union's denial of coverage, the
School petitioned the New Hampshire Superior Court for
Rockingham County for a declaratory judgment ordering
National Union to defend and provide coverage in the
students' and parents' (the "underlying plaintiffs")
lawsuits. National Union removed the action, based on
diversity jurisdiction, to the United States District Court
for the District of New Hampshire. On cross motions for
summary judgment, the district court denied the School's
motions and granted National Union's motions, reasoning that
policy exclusions (b) and (c) barred coverage because the
underlying claims arose out of the assault, battery, bodily
injury and death of Gregory Smart. The court did not discuss
the applicability of exclusion (a). The School appeals.
II.
II.
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Discussion
Discussion
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A. Summary Judgment Standard of Review
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We review a grant of summary judgment de novo,
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viewing the facts in the light most favorable to the non-
moving party and drawing all reasonable inferences in that
party's favor. Barbour v. Dynamics Research Corp., 63 F.3d
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32, 36 (1st Cir. 1995), cert. denied, 116 S. Ct. 914 (1996).
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Summary judgment is warranted when "the pleadings,
depositions, answers to interrogatories, and admissions on
file, together with the affidavits, if any, show that there
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is no genuine issue as to any material fact and that the
moving party is entitled to judgment as a matter of law."
Fed. R. Civ. P. 56(c).
In this case, the summary judgment victor, National
Union, bore the burden of proving lack of coverage. See N.H.
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Rev. Stat. Ann. 491:22-a (providing that, in petitions to
determine liability insurance coverage, the burden of proof
is on the insurer). Where, as here, "the moving party will
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bear the burden of persuasion at trial, that party must
support its motion with credible evidence -- using any of the
materials specified in Rule 56(c) -- that would entitle it to
a directed verdict if not controverted at trial." Celotex
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Corp. v. Catrett, 477 U.S. 317, 331 (1986) (Brennan, J.,
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dissenting on other grounds). In response, the non-moving
party must either submit a supportable request for additional
discovery time or "produce evidentiary materials that
demonstrate the existence of a 'genuine issue' for trial,"
id., and in so doing, that party "may not rest on mere
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allegations or denials of his pleading." Anderson v. Liberty
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Lobby, Inc., 477 U.S. 242, 256 (1986).
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B. Analysis
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The School contends that exclusions (b) and (c),
which preclude coverage for "any claims arising out of . . .
assault or battery" and "any claim arising out of bodily
injury to . . . or death of any person," do not apply because
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the underlying writs alleged none of these excluded acts.
Moreover, the School argues, the assault and death of Gregory
Smart need not be shown to prove the negligence claims and
thus, they do not "arise out of" those acts. National Union
responds that the exclusions apply because the alleged
injuries, which constitute a critical element of the
negligence actions, are entirely related to the murder of
Gregory Smart and its aftermath.5
New Hampshire courts have consistently viewed
"arising out of" as a "`very broad, general and comprehensive
term . . . meaning originating from or growing out of or
flowing from.'" Merrimack Sch. Dist. v. National Sch. Bus
_____________________ __________________
Serv., Inc., 661 A.2d 1197, 1199 (N.H. 1995) (reading phrase
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broadly in context of indemnity agreement which is itself
strictly construed) (quoting Carter v. Bergeron, 160 A.2d
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348, 353 (N.H. 1960) (internal alteration omitted)
(construing insurance policy)). Indeed, the concept embodied
in the phrase "arising out of" appears to be something
broader than the concept of proximate causation. See Carter,
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160 A.2d at 353 (observing that injuries need not have been
"directly and proximately caused by the use of the insured
vehicle" to be deemed to "arise out of" that use). Here, if
the underlying plaintiffs' negligence claims arise out of any
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5. National Union concedes that the policies would have
covered the claims but for the exclusions.
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of the excluded acts, National Union need not defend or
indemnify the School against those claims.
While a duty to defend6 may be found solely on the
facts pleaded in the cause of action, a court may inquire
into the underlying facts "to avoid permitting the pleading
strategies, whims, and vagaries of third party claimants to
control the rights of parties to an insurance contract." M.
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Mooney Corp. v. United States Fidelity & Guar. Co., 618 A.2d
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793, 796-97 (N.H. 1992); see also Titan Holdings Syndicate,
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Inc. v. City of Keene, 898 F.2d 265, 271 (1st Cir. 1990)
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(noting that a court must review the facts alleged in the
underlying suit and that "the legal nomenclature the
plaintiff uses to frame the suit is relatively unimportant")
(discussing New Hampshire law). We find it appropriate in
this case to look beyond the conclusory pleadings to
determine the applicability of the disputed exclusions.
In their depositions, all of the underlying
plaintiffs state that the reason they brought the action was
their belief that the school was negligent in hiring Smart
and in supervising her activities with the students. Thus,
not surprisingly, and consistent with their writs, the
underlying plaintiffs unanimously conclude that the School's
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6. The duty to defend is broader than the duty to indemnify,
as an insurer may be obligated to defend a groundless lawsuit
that ultimately does not give rise to indemnification.
United States Fidelity & Guar. Co. v. Johnson Shoes, 461 A.2d
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85, 87 (N.H. 1983).
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alleged breach of duty caused their harm. Whether or not
that is true, however, does not resolve the dispositive issue
in this appeal: whether the underlying plaintiffs' claims
"arise out of" the murder of Gregory Smart.
An essential element of the negligence claim is the
resulting damage. See Trudeau v. Manchester Coal & Ice Co.,
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192 A. 491, 492 (N.H. 1937) (explaining that "actual damage
is an essential element" of negligence actions that "[are]
brought not to vindicate a right but to recover compensation
for negligently inflicted personal injuries"). Thus, where
the damages arise entirely out of excluded acts, the whole
claim does as well. Cf. All Am. Ins. Co. v. Burns, 971 F.2d
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438, 442 (10th Cir. 1992) (concluding that alleged injuries
in otherwise-covered negligence action triggered exclusions);
Continental Casualty Co. v. City of Richmond, 763 F.2d 1076,
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1081 (9th Cir. 1985) (finding no coverage where the
plaintiffs would have no claim for relief against the insured
if the alleged misconduct "[had] not manifested itself in the
injury"). Here, if the underlying plaintiffs cannot prevail
on their negligence claims without showing how the murder of
Gregory Smart affected them, then their claims must "arise
out of" the excluded acts of assault, battery, bodily injury
and death.
All of the evidence in the record points to the
murder and its aftermath as the source of the injuries. For
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example, Pierce testified in her deposition that the reason
for her "loss of education" was that she missed many days of
school because she had to testify at Smart's trial,
eventually left Winnacunnet during her junior year, and had
trouble getting into college because she was uncomfortable
asking Winnacunnet for help with her applications. She
stated that her "loss of earnings" resulted from having to
quit her job in order to testify and assist in the trial.
She attributed her "loss of reputation" to the fact that she
was recognizable from her involvement in the trial and
complained that she lost friends as a result. Pierce also
testified that her mental anguish stemmed from the foregoing
and acknowledged that if Gregory Smart had not been murdered,
she would not have sued.
During Randall's deposition, he asserted, "I'm not
suing the school because I'm in jail," but also stated "[i]f
I never got caught for killing Greg Smart, I would have never
brought a lawsuit." He agreed that his involvement in the
murder and subsequent incarceration were the reasons why he
(1) lost his liberty and employment opportunities, (2) was
unable to finish high school, (3) was separated from his
parents and fellow Winnacunnet students, and (4) suffered
emotional pain. While he declared, "I still suffered the
harm whether I got caught or whether I got away with [the
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murder]," that assertion does not negate the fact that his
injuries derived from his involvement in the murder.
Flynn testified that he believed that because of
the School's negligence, "something happened that may have
been averted," and acknowledged his incarceration is the
reason why he suffers from being separated from his parents.
Lattime acknowledged that neither he nor his parents would
have brought the action if he had not been involved in the
murder.
The parents' deposition testimony on this issue
also reveals that the injuries were related to their
children's involvement in the murder. For example, Patricia
Randall testified that she brought the lawsuit "[b]ecause
what happened to my son I don't want to happen to anybody
else" and acknowledged that "what happened" to her son was
his incarceration for his involvement in the murder. Frank
Randall testified that while he thought Smart should have
been properly supervised, he was also suing because his son
was incarcerated. Elaine Flynn testified that her reason for
bringing the suit was her belief that the School's negligence
caused "the situation that occurred." Naomi Lattime stated
that "had [the School] followed up or done anything to
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investigate a faculty/student relationship, . . . possibly
this never would have happened or gone as far as it did."7
While the School's alleged negligence in hiring and
supervising Smart could have caused the underlying plaintiffs
injuries unrelated to the murder, nothing in the record
supports the existence of any such injury. The underlying
plaintiffs' allocation of blame for their suffering, while
indicative of their belief that the School was at fault, does
not obviate the fact that the record evidence establishes
that all of the alleged damages (e.g., harm from loss of
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liberty, lost education and earnings, separation of students
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7. Further support for the conclusion that the alleged
damages flow entirely from the students' involvement in the
murder is found in the notice of claim sent to Winnacunnet,
which states in part:
[Winnacunnet's negligence] directly
resulted in the manipulative relationship
with Pamela Smart, which ultimately
caused the loss of liberty to [the
students]. Moreover, their parents lost
any rights of parental enjoyment with
their sons, including but not limited to
loss of parental rights, loss of
consortium, etc. [Lattime's parents]
were also required to expend exorbitant
funds, in excess of $70,000.00, in
defense of criminal charges brought
against their son. As a result of these
damages, the Plaintiff[s] demand maximum
amount of monetary damages allowable
under the Statutes and/or the policy
limits of the insurance of the School
insurance policy, whichever is greater.
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and parents) originate from, or "arise out of," the murder.8
The School has failed to rebut, with evidence sufficient to
raise a genuine issue of material fact, National Union's
showing that the exclusive source of the underlying
plaintiffs' injuries (and, therefore, their claims) was the
murder of Gregory Smart and its attendant excluded acts of
assault, battery, bodily injury and death.
The facts of this case are not unlike those in All
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Am. Ins. Co. v. Burns, 971 F.2d 438, 440 (10th Cir. 1992),
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involving a church bus driver who was convicted of sexually
assaulting two children whom he was transporting. The
victims sued the church and its board members alleging, inter
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alia, negligent hiring. Id. The board members turned to
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their insurer for defense and indemnification, but the court
found applicable a policy exclusion for "personal injury
arising out of the willful violation of a penal statute."
Id. at 441. The court explained that a negligence action
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8. We note that the district court carefully reviewed the
School's motions to reconsider its summary judgment ruling,
permitting the parties to supplement their pleadings on the
very issue of the source of the claimed injuries. The School
failed then to produce evidence establishing any issue of
material fact on this question. Finally, at oral argument
before this court, counsel for the School stated that Pierce
"felt much anguish" on the night of the murder, and thus, she
suffered whether or not the murder was committed. This
assertion is too little to late. Not only is it unsupported
by any record evidence, the purported "anguish" stems from
the murder conspiracy and likely falls within exclusion (a)
which bars coverage for "any claim involving allegations of .
. . criminal acts."
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depends not only upon a breach of duty, "`but also upon
damage or injury suffered by the plaintiff as a consequence
of the violation of duty.'" Id. (quoting 57A Am. Jur. 2d
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Negligence 142, at 202-03 (1989)). Thus, the court found
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that the general negligence allegations in the complaint did
not compel coverage because the claimed injuries undeniably
stemmed from the sexual assault. Id. at 442.9
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Our resolution of this case is consistent with
cases in other jurisdictions, relied upon by the district
court, recognizing that an exclusion for a claim arising out
of an assault also bars coverage for a claim that an insured
negligently allowed an assault to occur. See, e.g., United
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Nat'l Ins. Co. v. Entertainment Group, Inc., 945 F.2d 210,
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213-14 (7th Cir. 1991) (applying Illinois law); Audubon
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Indem. Co. v. Patel, 811 F. Supp. 264, 265 (S.D. Tex. 1993)
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9. The School relies on Durham City Bd. of Educ. v. National
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Union Fire Ins. Co., 426 S.E.2d 451, 455 (N.C. Ct. App.),
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review denied, 431 S.E.2d 22 (N.C. 1993), involving identical
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exclusions in a similar errors and omissions policy. In that
case, a student who allegedly had been raped by a school
coach sued the school board for, inter alia, negligent hiring
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and supervision. Id. at 454. In a brief and conclusory
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analysis, the court found that the exclusions did not bar the
duty to defend because the allegations were for "money
damages suffered as a result of . . . negligent supervision"
and did not include the rape as a "necessary feature." Id.
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at 456, 457.
We find this perfunctory treatment unpersuasive.
Unlike that court, we are not content to decide the coverage
issue based solely on the allegations on the face of the
writ. Here, the underlying plaintiffs' damages, a "necessary
feature" of their negligence claim, have all been shown to be
inextricably related to the excluded acts.
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(applying Texas law); St. Paul Surplus Lines Ins. Co. v. 1401
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Dixon's Inc., 582 F. Supp. 865, 867-68 (E.D. Pa. 1984)
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(applying Pennsylvania law). These cases held that coverage
was barred because the excluded acts, assault and battery,
were the immediate cause of the injury giving rise to the
action.
The School argues that these cases are completely
inapposite because (1) unlike those cases, the underlying
plaintiffs here are not the ones who suffered the assault and
(2) in any event, the writs do not allege a negligent failure
to prevent assault. We are not persuaded. The School's
first "distinction" runs afoul of exclusion (c), which
applies in the case of bodily injury or death of "any
person." As to the second, from the evidence pertaining to
the alleged damages here, it is as if the underlying
plaintiffs, though styling their claims as negligent
hiring/supervision, have alleged that the School negligently
permitted an assault to occur. Cf. United Nat'l Ins. Co. v.
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The Tunnel, Inc., 988 F.2d 351, 354 (2d Cir. 1993) (denying
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coverage where "plaintiff is seeking to recover by `dressing
up the substance' of one claim, here a battery, in the
`garments' of another, here negligence"). Finally, it would
make little sense to bar coverage for an action brought by
the estate of Gregory Smart -- the one who suffered the
bodily injury and death -- but find coverage for an action by
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those who actually inflicted the injury and who claim damages
relating entirely to that event.
III.
III.
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Conclusion
Conclusion
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While undoubtedly there are cases in which a
negligent hiring or supervision claim does not seek
compensation for damages arising entirely out of excluded
acts, this is not one of them.10 For the foregoing
reasons, the judgment of the district court is affirmed.
affirmed
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Costs to appellee.
Costs to appellee
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10. Because we agree with the district court's well-reasoned
conclusion that policy exclusions (b) and (c) barred coverage
of the claims against the School, we need not reach the issue
of the applicability of exclusion (a).
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