USCA1 Opinion
UNITED STATES COURT OF APPEALS
UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
FOR THE FIRST CIRCUIT
____________________
No. 96-1620
STRATFORD SCHOOL DISTRICT,
Plaintiff, Appellee,
v.
EMPLOYERS REINSURANCE CORPORATION,
Defendant, Appellant.
____________________
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW HAMPSHIRE
[Hon. Paul J. Barbadoro, U.S. District Judge]
___________________
____________________
Before
Selya, Circuit Judge,
_____________
Aldrich, Senior Circuit Judge,
____________________
and Boudin, Circuit Judge.
_____________
____________________
Charles W. Grau with whom David P. Slawsky and Upton, Sanders &
________________ ________________ ________________
Smith were on brief for appellant.
_____
Bruce W. Felmly with whom Jeanmarie Papelian and McLane, Graf,
________________ ___________________ ______________
Raulerson & Middleton were on brief for appellee.
_____________________
____________________
January 30, 1997
____________________
ALDRICH, Senior Circuit Judge. This is a
_______________________
declaratory action brought to determine the rights of
Stratford [New Hampshire] School District ("Stratford"),
insured under a "claims-made" errors and omissions policy
issued by Employers Reinsurance Corporation ("Employers").
Both parties moved for summary judgment, and the court ruled
for Stratford. On this appeal Employers asserts that
Stratford's claim for coverage for a suit brought on behalf
of Crystal Buffington, post, matured within the policy
____
exclusion definition prior to the policy's issuance, and
that, in any event, the policy was voidable because of false
answers in the application. We affirm.
Starting at the beginning, we accept the facts,
recited in Employers' brief as undisputed, most favorable to
it. Morrissey v. Boston Five Cents Savings Bank, 54 F.3d 27,
___________________________________________
31 (1st Cir. 1995). One Harry Hikel became a music teacher
at Stratford in 1979. In 1983 Stratford conducted an
investigation and held a hearing to review allegations that
Hikel had inappropriately hugged and kissed female students.
After the hearing the Stratford School Board voted to
reprimand him severely. A reprimand letter was delivered to
him in January 1984. Stratford did not notify State Child
-2-
Protective Services in accordance with N.H. Rev. Stat. Ann.
169-C:29.1 Hikel left Stratford in 1986.
His next employer was the Lakeway Elementary School
in Littleton, New Hampshire. According to one of his
students there, Crystal Buffington, he began sexually
molesting her during the fall of 1990 and continued to do so
until the fall of 1992. In 1993 the Manchester Union Leader
reported this, although not identifying Crystal, and asserted
that the Department of Education was investigating charges
that Hikel had sexually abused students when he taught in
Littleton. For present purposes we assume that this came to
Stratford's attention. Thereafter, on October 3, 1993, a
Grafton County Grand Jury issued a subpoena in connection
with an investigation of criminal sexual misconduct of Harry
Hikel in the Littleton School District, seeking Stratford's
records on Hikel. Stratford received the subpoena on October
4. On October 8 it applied for the present policy.
While obviously the subpoena was a strong reminder
that other such conduct might occur, the question is whether
it suggested to Stratford (of which there is no evidence), or
should have suggested, something more immediately
____________________
1. This statute contains no language giving causes of action
to children who could prove personal injury that might have
been avoided had it been observed. In Marquay v. Eno, 662
_______ ___
A.2d 272, 278 (N.H. 1995), the court held that the statute
created no personal rights. We are not moved by Employers'
contention that this ruling should not be applied
retroactively.
-3-
troublesome. So contending, Employers complains -- in terms
of warranty -- of Stratford's negative answers in the policy
application to questions 25 and 26:
25. Has the applicant, Board and/or its
employees been involved in or have any
knowledge of any pending federal, state
or local legal actions or proceedings,
including EEOC, against the entity, its
board members, or employees within the
last ten years? If yes, attach details
stating nature of claim, date of claim,
loss date, loss payments and disposition,
carrier handling claims, etc.
26. Are there any circumstances
indicating the probability of a claim or
action known by any person to be covered
by this insurance? If yes, attach
details.
In view of the lack of analysis in Employers' brief we regard
25 as being included in 26 and ask what claims, or
"circumstances," to quote question 26, affecting Stratford,
the subpoena might be thought to suggest. Certainly no
criminal proceedings. Nor could it be thought that
Stratford's former students were attempting to reactivate a
cause of action arising from behavior that had occurred a
decade ago outside of Littleton. Very likely Hikel was
charged with new conduct and the grand jury, before
indicting, wished to look at the whole picture. Nothing more
had yet happened. But might some imaginative lawyer
representing some student in connection with this new
-4-
conduct, think of claiming against Stratford for not having
published2 Hikel's prior behavior? Anything is possible, but
how likely, let alone probable?
Employers cites no authority contradicting our
belief that a personal claim would be wholly frivolous. The
New Hampshire court's refusal to recognize such rights even
in the statute cited supra, n.1, confirms this. If an
_____
insurance applicant is told he has to conceive of, and
report, every possibility that someone "might" (Employers'
brief) bring a frivolous law suit, Employers' solicitors
would starve. It is because there are possibilities that
people take out insurance. The application announced the
standard for reporting -- not possibility, but probability.
The application, however, was not the only
standard-setter. The policy itself, by its terms, provides
that it does not cover if "the Insured ha[d] become aware of
a proceeding, event or development which has resulted in or
could in the future result in the institution of a claim
_____ ______
against the Insured. . . ." (Emphasis supplied.) "Possibly
________
could result?" "Reasonably could result?"3 "Probably could
__________ ________
result?" Even apart from the principle that ambiguities in
insurance contracts are to be resolved against the insurer,
____________________
2. At the risk, incidentally, of incurring a claim for
defamation, depending on how the duty is conceived.
3. The New Hampshire case from which the court drew the more
limited word "reasonable" involved different policy language.
-5-
Trombly v. Blue Cross/Blue Shield of New Hampshire-Vermont,
_______ __________________________________________________
423 A.2d 980, 985 (N.H. 1980), it makes business sense here
to construe the exclusion clause together with the
application questionnaire. Cf. Commercial Union Assurance
___ ___________________________
Co. v. Gilford Marina, Inc., 408 A.2d 405, 407 (N.H. 1979)
____________________________
(contradictory clauses in an insurance contract must be
interpreted to reflect the reasonable expectations of the
insured). Hence we take probable. For the insurer to go the
other way, and say we do not cover matters of which you had
notice, even though that notice was too remote for you to
have to tell us about it, makes no sense; indeed, it would
seem affirmatively misleading. We can not think the facts
charged Stratford of a probability that some Littleton
student would sue it.
Finally, Employers' makes a claim of malice. This
requires no comment.
Affirmed.
_________
-6-
