March 19, 2018

Students sue school district alleging school district administrators violated their civil rights



Students sue school district alleging school district administrators violated their civil rights
Graphic Arts Mut. Ins. Co. v Pine Bush Cent. Sch. Dist., 2018 NY Slip Op 01565, Appellate Division, Second Department

Commercial General Liability [CGL] issued School District and Educators Legal Liability policies well as CGL umbrella policies to the Pine Bush Central School District.

In lawsuit commenced in the United States District Court, Southern District of New York, captioned T.E. v Pine Bush Central School Dist., Docket #12-CV-2303), [the Federal Case] five students [T.E.] alleged that certain Pine Bush officers [the Defendants] and other school administrators violated their civil rights by being deliberately indifferent to anti-Semitic harassment and discrimination perpetrated by other students against them. The school district's superintendent, one of the named defendants, advised the Defendants that CGL had indicated that CGL would pay the costs of the defense in the action but reserved its right to disclaim coverage upon further investigation of the allegations.

CGL did pay the costs of defending the Defendants through the resolution of the Federal Case and during mediation, the parties to the Federal Case agreed to settle that action for a total of $3,000,000 in compensatory damages and $1,480,000 in attorneys' fees. A representative of CGL attended the mediation but did not contribute toward the settlement, disclaiming any duty to indemnify the Defendants with respect to the Federal Action.

CGL then commenced this action, Graphic Arts Mutual Insurance Co. v Pine Bush Central School District [State Case]. CGL, alleging five causes of action and sought a judgment declaring that CGL was not obligated to indemnify Defendants in the Federal Case under the various policies issued by it to the School District with respect to the allegations of "intentional discriminatory conduct related to disparate treatment."

CGL claimed that exclusions in the policies [1] "precluded coverage for claims seeking damages stemming from intentional discriminatory conduct," and [2] that those claims did not fall under the definition of either a covered "occurrence" or 'loss' as those terms were defined by the policies.*

The Defendants moved pursuant to CPLR §3211(a)(1) and (7) to dismiss CGL's  complaint. Supreme Court granted those branches of the Defendants' motion which were pursuant to CPLR 3211(a)(1) and (7) to dismiss the first, second, third, and fourth causes of action. The Appellate Division reversed the Supreme Courts order, on the law, with costs.

The Appellate Division noted that a motion to dismiss on the basis of CPLR §3211(a)(1) may be granted "only where the documentary evidence utterly refutes plaintiff's factual allegations, conclusively establishing a defense as a matter of law."

As to the motion to dismiss a claim pursuant to CPLR §3211(a)(7) for failure to state a cause of action, "the court must accept the facts alleged in the complaint as true, accord the plaintiff the benefit of every possible favorable inference, and determine only whether the facts as alleged fit within any cognizable legal theory."

According to the language employed in the CGL coverage part of CGL's primary policies, coverage was provided for bodily injury caused by an "occurrence," which was defined as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions." The SDELL coverage part of the policies "afforded coverage for a 'loss,' which excluded matters that may be deemed uninsurable under the law."

However, said the court, the question of whether a loss is the result of an accident must be determined from the point of view of the insured and where the loss is unexpected, unusual, or unforeseen from the point of view of the insured, the loss constitutes an accident.

Significantly, the Appellate Division explained that an act that is intentionally committed or performed may still be considered an accident within the meaning of an insurance policy, as long as the insured did not expect or intend the harm caused. Accordingly, whether an event or series of events qualifies as an accident is a question of fact.

In the words of the Appellate Division, "[R]egardless of the initial intent or lack thereof as it relates to causation, or the period of time involved, if the resulting damage could be viewed as unintended by the fact finder the total situation could be found to constitute an accident" and "The duty to defend is measured against the allegations of pleadings but the duty to pay is determined by the actual basis for the insured's liability to a third person."

The relevant allegations set forth in the Federal Action "averred that the Defendants deliberately ignored complaints and their own observations of student-on-student anti-Semitic harassment and discrimination or responded in an unreasonable or inadequate manner to such complaints and observations."

T.E., in the Federal Action, further alleged that repeated and frequent incidents of anti-Semitic harassment and discrimination against them by other students, which were reported to school officials on numerous occasions and directly observed on other occasions by school personnel, gave rise to an inference that the Defendants "intended for the harassment to occur" based upon the Defendants' practices, policies, and customs in dealing with reports and observations of anti-Semitic harassment and discrimination; that the Defendants "intentionally discriminated" against the plaintiffs, that the defendants' conduct "aided and incited" unlawful discrimination; and that the Defendants' acts and omissions were "undertaken recklessly and with the intent to engage in wrongful conduct."

The Appellate Division explained that "it is not legally impossible to find accidental results flowing from intentional causes, i.e., that the resulting damage was unintended although the original act or acts leading to the damage were intentional," the insurance policies do not conclusively establish that CGL is obligated to indemnify the Defendants in the Federal Action, and "the other evidence submitted by the Defendants did not utterly refute the factual allegations set forth in T.E.'s complaint."

Accordingly, whether the incidents set forth in the Federal Action concerning "intentional causes" were accidents present questions of fact which cannot be determined on a motion to dismiss pursuant to CPLR 3211(a)(1) and (7) and  Supreme Court should have denied those branches of the Defendants' motion which were pursuant to CPLR 3211(a)(1) and (7) to dismiss the first, second, third, and fourth causes of action.
* CGL, in a fifth cause of action, sought a declaration that, in the event it was found the CGL had a duty to indemnify Defendants in the Federal Action, the duty to indemnify would be limited to that part of the settlement that was found to be reasonable, as CGL alleged that the settlement amount in the Federal Action was excessive. 
N.B. In the companion appeal to this action, Graphic Arts Mutual Insurance Company v Pine Bush Central School District, 2018 NY Slip Op 01566, the Appellate Division ruled that "it is premature to render a determination on the reasonableness of the settlement amount tendered by the defendants in the underlying action entitled T.E. v Pine Bush Central School Dist., commenced in the United States District Court for the Southern District of New York under case number 12-CV-2203, until the issue of indemnification has been decided."

The decision is posted on the Internet at: