NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

The opinion of the court was delivered by

FUENTES, P.J.A.D.

Plaintiffs P.D.1 and J.D. filed a declaratory judgment action against defendants, the Germantown Insurance Company and the Philadelphia Contributionship Insurance Company (collectively defendant), seeking coverage under their homeowner's insurance policy for their son M.D. (Matthew) in connection with a lawsuit filed against him by A.B. (Ann), a fellow student at his school. Ann alleged she was "manipulate[d] by deception . . . into an unlocked, unsecured and unguarded [men's faculty] bathroom" at school, where she was "attack[ed], assault[ed], [and] sexually molest[ed]" by Matthew. Ann's complaint also named P.D. and J.D. as defendants, alleging negligent supervision as a theory of liability.

Defendant disclaimed liability, arguing the underlying facts of Ann's complaint against plaintiffs and their son did not constitute an "occurrence" causing "bodily injury," as those terms are defined under plaintiffs' homeowner's insurance policy. Defendant also argued plaintiffs' homeowner's insurance policy specifically excluded from coverage any bodily injury arising from acts of sexual molestation.

After joinder of issue, plaintiffs moved before the Law Division seeking summary judgment limited to defendant's duty to defend Matthew in the underlying suit. While their motion was pending, plaintiffs entered into a Griggs Settlement2 with Ann through which they agreed to confess judgment in the amount of $350,000 in exchange for a covenant not to execute judgment against plaintiffs and an assignment of plaintiffs' homeowner's insurance policy rights to Ann.

Approximately three weeks later, defendant filed a cross-motion for summary judgment seeking the dismissal of plaintiffs' declaratory judgment complaint in its entirety. Acting under the authority conferred by the assignment of rights executed by plaintiffs, Ann's attorney responded on plaintiffs' behalf and filed a cross-motion for summary judgment seeking complete indemnification under plaintiffs' homeowner's insurance policy. After considering the arguments of counsel, the motion judge held defendant had a duty to defend P.D. and J.D. against Ann's claims based on negligent supervision. However, the motion judge concluded defendant was not contractually obligated to pay the cost of Matthew's defense or to indemnify him or plaintiffs for any damages recovered by Ann in her cause of action. The motion judge also formally denied plaintiffs' cross-motion for summary judgment.

On January 25, 2013, plaintiffs' original counsel filed an application with the court to recover $44,656.32, representing attorney's fees and costs incurred by plaintiffs defending against Ann's underlying action. Defendant opposed this application. After considering oral argument from the parties, the trial court again found defendant had a duty to defend plaintiffs in the underlying action and awarded them $44,656.32, in full satisfaction of their defense-cost application.

Plaintiffs now appeal to this court arguing the motion judge erred in relying only on the pleadings of the underlying action, as opposed to the facts developed from the discovery process, to deny their claims for indemnification. Plaintiffs also argue that the policy's sexual molestation exclusion provision is inapplicable in this case because their son lacked the requisite criminal intent to commit a sexual assault. Alternatively, if we were to conclude that the policy's sexual molestation exclusion bars coverage for Matthew, plaintiffs argue they are entitled to indemnification coverage against Ann's claim based on negligent supervision. Finally, assuming Ann's claims are covered under the policy, plaintiffs argue the Griggs Settlement was reasonable and binds defendant to indemnify them for the amount specified in the consent judgment.

Represented by his own attorney, Matthew argues defendant owed him a duty to provide a defense in Ann's underlying action because she alleged he "negligently . . . sexually molest[ed] [her]." According to Matthew, defendant has a duty to defend him in the underlying action until all potential covered claims are dismissed or otherwise resolved. Matthew also claims the policy's sexual molestation exclusion is ambiguous and therefore should be read in a manner consistent with his reasonable expectations of coverage, especially when the evidence shows he did not have a subjective intent to harm Ann.3

Defendant argues the motion judge correctly denied indemnification coverage under the policy's clear and unambiguous exclusion for acts of sexual molestation. Defendant argues the facts of the underlying case support the Law Division's denial of coverage under the policy's clear language limiting coverage for "bodily injury" arising from an "occurrence" as those terms are defined in the policy. By way of cross-appeal, defendant argues the trial court erred when it granted plaintiffs' application for counsel fees incurred in defending the negligent supervision claims in the underlying action.

After carefully reviewing the record before us and mindful of prevailing legal standards, we affirm the Law Division's decision holding defendant was not contractually obligated to indemnify plaintiffs under their homeowner's insurance policy for the claims of sexual molestation or negligent supervision asserted by Ann in the underlying action. We reverse, however, the court's decision holding defendant had a duty to defend P.D. and J.D. against the negligent supervision claim. Consequently, we vacate the order awarding $44,656.32 to plaintiffs' counsel.

Because the trial court decided these issues as a matter of law, we will review the record before us de novo, Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995), applying the same legal standards used by the trial court. Town of Kearny v. Brandt, 214 N.J. 76, 91-92 (2013).

I

The Underlying Action

On July 22, 2009, Ann filed a second amended nine-count civil complaint naming as defendants her school district's board of education, the school district's superintendent, the principal of her high school, the school district's director of special services, several other unnamed school district employees, Matthew, his parents P.D. and J.D., and several other business entities associated with or responsible for providing transportation and security to students attending this school district. Ann alleged that, at all times relevant to the issues raised in the complaint, she was a minor and "a classified student known to have Asberger's [sic] Syndrome,4 communication delays and other learning disabilities."

In the second count of the complaint, Ann alleged she and Matthew attended the same high school in May 2005. She was a sophomore and Matthew was "an upper classman." On a particular date in May 2005, Ann alleged Matthew "did manipulate by deception the plaintiff [Ann] into an unlocked, unsecured and unguarded bathroom reserved for faculty use, and did negligently attack, assault, sexually molest and sexually penetrate the plaintiff [Ann]." In the seventh count of the complaint, Ann alleged

Ann filed a third amended complaint (though no filing date is included in the record), to add three additional counts to her original none-count complaint. The tenth count alleges that Matthew "did negligently assault, sexually molest and sexually penetrate . . . [Ann]." The eleventh count alleges that "[o]n or about December 1, 2008 defendant [Matthew] did manipulate by deception the plaintiff [Ann] to enter his home . . . [and] did intentionally assault, sexually molest and sexually penetrate the plaintiff [Ann]." The twelfth count names P.D. and J.D. as defendants and alleges that

A police investigation report dated June 6, 2005, included as part of the appellate record, shows Ann's mother reported to the local police department that her daughter had had a sexual encounter with Matthew in a faculty bathroom located in the high school they both attended. Under the heading "Modus Operandi," the report states, "2 juveniles engaged in consensual sex in a teacher's bathroom[.]" The police report elaborates on the encounter as follows:

In a discovery deposition taken in connection with the underlying action, Matthew explained that he met Ann through a mutual friend at school and the two started dating when he was a sophomore and she was a freshman. Matthew claimed Ann's parents did not like him and were against their dating relationship. According to Matthew, he communicated with Ann by phone and over the internet, but only after she reached out to him because he did not have her phone number. Matthew claimed Ann was the one who pursued him and wanted to have a sexual relationship with him, hoping he would "get her pregnant." As Matthew explained in his deposition, in approximately December 2005, Ann posted messages on his "Myspace" saying, "I want you to get me pregnant. I want to have babies with you." According to Matthew, "I deleted Myspace because of her. The stuff that she was sending me."5

Ann claimed she never had a dating relationship with Matthew. However, her version of events, as reflected in her deposition testimony, differed only in the manner in which she characterized the encounter. She testified she passively followed Matthew as he took her by the hand and walked her to the faculty bathroom. Once inside, he took down her pants and engaged in vaginal sexual intercourse with her until he saw blood and stopped. According to Ann, neither one of them said anything immediately thereafter. She walked home and told her brother, who in turn told her parents.

Of particular significance, Ann admitted in her deposition that she was nervous when her parents became involved:

The psychological report prepared in support of Ann's claims in the underlying action indicated Ann characterized the school incident, as well as a sexual encounter she allegedly had with Matthew at his home, as assaults. The psychologist described Ann's account of the first incident:

As to the second incident, the report merely states, "[Ann] then followed [Matthew] into his house and into his room. He then sexually assaulted her again."

After the encounter in the school's faculty bathroom, Ann's mother reported the incident to the local police department as a sexual assault. As we noted earlier, law enforcement authorities considered this matter as a consensual sexual encounter between two juveniles. No criminal charges were ever filed against Matthew.

The Homeowner's Insurance Policy

Matthew resided with his parents P.D. and J.D. and was a member of their household at all times relevant to this matter. He was sixteen years old in May 2005, the time Ann alleged he sexually molested her. Matthew attended special education classes throughout his elementary education and his high school years.6 He began working with his father pruning trees during summer recess when he was fourteen years old. He continues to work with his father as an adult.

Plaintiffs' homeowner's policy was issued by defendant with a term of coverage effective December 21, 2004 to December 21, 2005. The policy provided third-party personal liability coverage up to $500,000 and included the following provisions describing the scope of coverage:

"Insured" includes P.D. and J.D. and residents of the household who are relatives. It is not disputed that Matthew falls within the definition of "insured." "Bodily injury" is defined as "bodily harm, sickness or disease, including required care, loss of services and death that results." "Occurrence" is defined as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions, which results, during the policy period, in: (a) `Bodily injury'; or (b) `Property damage[.]'"

The policy also contains a provision labeled "Section II Exclusions," which describes a long list of activities or events excluded from coverage, even if these activities or events cause "bodily injury" or "property damage." There are two exclusions relevant to this case:

Plaintiffs forwarded Ann's complaint to defendant expecting coverage under the policy. Matthew, who was by then twenty-one years old, drafted and filed a pro se answer. By letter dated March 4, 2010, defendant acknowledged receipt of Ann's complaint and informed plaintiffs it was reserving the right "to set up any and all defenses including, but not limited to a denial of coverage under [the homeowner's] policy[.]"

By letter dated May 18, 2010, defendant formally informed plaintiffs the claims asserted by Ann "do not fall within the coverage afforded by the . . . policy." Consequently, defendant declined to provide a defense to these claims or indemnify plaintiffs in connection with any settlement or judgment entered against them. Specifically citing the allegations reflected in the second amended complaint (the only pleading available at the time), defendant stated:

As we noted earlier in this opinion, the parties entered into a Griggs settlement through which plaintiffs confessed to a judgment of $350,000 in exchange for a stipulation of dismissal with prejudice and an assignment to Ann of their rights to pursue their claims against their insurance carrier. The court found the settlement amount was reasonable because it was within the $500,000 policy limit and exonerated plaintiffs from any personal liability.

II

The declaratory judgment action came before the Law Division on cross-motions for summary judgment. The motion judge made detailed factual findings and explained the bases of his rulings in a comprehensive sixty-page memorandum of opinion. Based on the facts discussed here, the motion judge found the allegations contained in Ann's complaint fell squarely within the policy's exclusion for acts constituting sexual molestation:

The motion judge reached a different conclusion, however, with respect to Ann's claims based on plaintiffs' negligent supervision as they related to defendant's duty to defend:

The court thereafter granted plaintiffs' counsel's application for an award of counsel fees in the amount of $44,656.32, representing the fees and costs incurred in defending plaintiffs.

III

Under Rule 4:46-2, summary judgment must be granted 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 challenged and that the moving party is entitled to a judgment or order as a matter of law." R. 4:46-2(c). To determine whether there is a genuine issue of material fact, the judge must evaluate whether

The court may grant summary judgment when "the evidence `is so one-sided that one party must prevail as a matter of law[.]'" Ibid.

As an appellate court, we use the same standard as the trial court in deciding whether summary judgment was properly granted. Townsend v. Pierre, 221 N.J. 36, 59 (2015). We must first decide whether there was a genuine issue of fact, and if there was not a genuine issue of fact, we then decide whether the trial court's ruling on the law was correct. See Town of Kearny, supra, 214 N.J. at 91.

The issues we must address relate to an insurer's duties to defend and to indemnify. These two contractual obligations

Whether an insurer is obligated to defend against claims brought against its insured "depends upon a comparison between the allegations set forth in the complainant's pleading and the language of the insurance policy." Ibid. (citing Voorhees v. Preferred Mut. Ins. Co., 128 N.J. 165, 173 (1992)). "In making that comparison, it is the nature of the claim asserted, rather than the specific details of the incident or the litigation's possible outcome, that governs the insurer's obligation." Ibid. (citing Ohio Cas. Ins. Co. v. Flanagin, 44 N.J. 504, 512 (1965)).

When a court undertakes this evaluation, "doubts are resolved in favor of the insured and, therefore, in favor of reading claims that are ambiguously pleaded, but potentially covered, in a manner that obligates the insurer to provide a defense." Ibid. (citing Cent. Nat'l Ins. Co. v. Utica Nat'l Ins. Grp., 232 N.J.Super. 467, 470 (App. Div. 1989)). If a complaint includes multiple claims, "the duty to defend will attach as long as any of them would be a covered claim and it continues until all of the covered claims have been resolved." Id. at 444-45 (citing Voorhees, supra, 128 N.J. at 174). The Appellate Division has directed courts to evaluate an insurer's duty to defend by placing the complaint "alongside the policy" and making a determination "as to whether, if the allegations are sustained, the insurer will be required to pay the resulting judgment[.]" Id. at 445 (quoting Danek v. Hommer, 28 N.J.Super. 68, 77 (App. Div. 1953), aff'd o.b., 15 N.J. 573 (1954)).

Due to the complexity surrounding whether a duty to defend arises when a complaint alleges several theories of liability, "the insurer is obligated to provide a defense until all potentially covered claims are resolved, but the resolution may be through adjudication of the complaint or in a separate proceeding between insured and insurer either before or after that decision is reached." Id. at 447. An insurer's duty to defend "will not be triggered absent a potentially-coverable occurrence." Voorhees, supra, 128 N.J. at 180.

On appeal, Matthew, represented by his own attorney, argues the motion judge erred by finding defendant did not have a contractual obligation to defend Matthew against Ann's claims of sexual molestation. Matthew argues a duty to defend existed because the second amended complaint articulated a theory of liability based on negligence as part of the molestation claim. Under this line of reasoning, the policy's intentional tort exclusion is inapplicable. According to Matthew, the deposition testimony both he and Ann provided reveals acts of consensual sex. Defendant thus reached an imprudent and hasty conclusion that it did not have a contractual duty to defend Matthew based only on a cursory reading of the pleadings.

We disagree. The second amended complaint filed by Ann stated, "the defendant [Matthew] did manipulate by deception the plaintiff [Ann] into an unlocked, unsecured and unguarded bathroom reserved for faculty use, and did negligently attack, assault, sexually molest and sexually penetrate the plaintiff [Ann]." Acts of manipulation and deception are products of intentional malice and schemes involving subterfuge. Regardless of the label a plaintiff attaches to its theory of liability, the facts relied on by Ann to support her claims against Matthew describe intentional acts constituting a sexual assault. Affixing the label of "negligence" to otherwise clear allegations of intentional conduct is nothing more than a transparent attempt to trigger coverage under plaintiffs' homeowner's insurance policy.

As the motion judge correctly noted in his memorandum of opinion, "when . . . one [literally] reviews [Ann's] complaint, it is not the wording but what is being claimed by [Ann] which is without question sexual molestation no matter how you look at it or try to characterize it, the claim is for sexual molestation of [Ann] by [Matthew]." Furthermore, in paragraph four of their statement of undisputed material facts, plaintiffs conceded: "The Second Amended Complaint in [Ann's] Litigation alleged that the Plaintiffs' son, [Matthew], had committed an act of sexual molestation upon [Ann] on May 23, 2005, which was during the coverage period."

Plaintiffs' argument attacking the clarity of "sexual molestation" in plaintiffs' policy is equally unavailing. It is long settled that "an insurance policy should be interpreted according to its plain and ordinary meaning." Voorhees, supra, 128 N.J. at 175 (citing Longobardi v. Chubb Ins. Co., 121 N.J. 530, 537 (1990)). However, because insurance policies are contracts of adhesion, "courts must assume a particularly vigilant role in ensuring their conformity to public policy and principles of fairness." Ibid. (citing Sparks v. St. Paul Ins. Co., 100 N.J. 325, 335 (1985)).

"When the meaning of a phrase is ambiguous, the ambiguity is resolved in favor of the insured and in line with an insured's objectively-reasonable expectations." Ibid. (citation omitted). If the insured's "`reasonable expectations' contravene the plain meaning of a policy, even its plain meaning can be overcome." Ibid. (citing Werner Indus., Inc. v. First State Ins. Co., 112 N.J. 30, 35-36 (1988)). However, courts shall not "write for the insured a better policy of insurance than the one purchased." Ibid. (quoting Longobardi, supra, 121 N.J. at 537) (internal quotation marks omitted).

A policy's exclusionary clauses "are presumptively valid and are enforced if they are specific, plain, clear, prominent, and not contrary to public policy. If the words used in an exclusionary clause are clear and unambiguous, a court should not engage in a strained construction to support the imposition of liability." Flomerfelt, supra, 202 N.J. at 441-42 (citations omitted) (internal quotation marks omitted).

Our Supreme Court has acknowledged that it is against public policy "for an insurer to agree to indemnify an insured against the civil consequences of his own willful criminal act." Ruvolo v. Am. Cas. Co., 39 N.J. 490, 496 (1963). Indeed,

Although Matthew was never charged with a crime, the allegations described in Ann's complaint describe an intentional act by Matthew of taking advantage of Ann's psychological and developmental disabilities to perpetrate an act of sexual molestation. We recognize that the evidence in this case is far from one-sided on the question of liability. However, we are not here to evaluate the merits of Ann's claims. Our task is to determine if those claims trigger defendant's contractual obligation to defend and indemnify its insured. We are satisfied the motion judge correctly concluded plaintiffs' homeowner's insurance policy does not obligate defendant to defend or indemnify Matthew.

We reach a different conclusion with respect to the Law Division's decision ordering defendant to pay plaintiffs' defense costs related to Ann's claims based on negligent supervision. Defendant argues the motion court erred by ruling it had a duty to defend plaintiffs against Ann's negligent supervision claim because the negligent supervision arose from and intertwined with the excluded claim based on sexual molestation. We agree.

As the Court noted in Flomerfelt, supra, 202 N.J. at 456, the phrase "arising out of," as used in an insurance policy means that the injury "`originates in,' `grows out of' or has a `substantial nexus' to the excluded act." On its face, the underlying complaint against plaintiffs alleging negligent supervision arises out of the exclusion for sexual molestation. The underlying cause of action seeks compensatory damages from plaintiffs because they negligently performed their duty as parents to supervise Matthew and prevent him from sexually molesting or assaulting Ann. This leaves no ambiguity. The negligent supervision claim arises from a clear exclusion in the policy. Defendant is not contractually obligated to defend plaintiffs in connection with this claim.

To summarize, we affirm the Law Division's order dismissing plaintiffs' declaratory judgment action seeking indemnification and defense costs for their son Matthew in connection with an underlying complaint filed against him by Ann alleging sexual molestation. We also affirm the order denying indemnification to plaintiffs, Matthew's parents, for the allegations of negligent supervision included as part of the underlying cause of action against Matthew. We reach this conclusion substantially for the same reasons expressed by the trial judge in his memorandum of opinion. However, we reverse the court's order finding defendant had a contractual obligation to defend plaintiffs and vacate the order awarding plaintiffs $44,656.32, representing attorney's fees and costs incurred by plaintiffs in the defense of Ann's underlying action.

Affirmed on plaintiffs' direct appeal and reversed on defendant's cross-appeal. We do not retain jurisdiction.