Winnacunnet Cooperative School District v. National Union Fire Ins.

United States Court of Appeals
United States Court of Appeals
For the First Circuit
For the First Circuit

No. 95-2068

WINNACUNNET COOPERATIVE SCHOOL DISTRICT,
Plaintiff, Appellant,

v.

NATIONAL UNION FIRE INS. CO. OF PITTSBURGH, PA,
Defendant, Appellee.

No. 95-2069

SCHOOL ADMINISTRATIVE UNIT #21,
Plaintiff, Appellant,

v.

NATIONAL UNION FIRE INS. CO. OF PITTSBURGH, PA,
Defendant, Appellee.

APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW HAMPSHIRE

[Hon. Paul J. Barbadoro, U.S. District Judge]

Before

Selya, Stahl, and Lynch,

Circuit Judges.

Robert A. Casassa with whom Casassa and Ryan was on brief for

appellants.
Gordon A. Rehnborg with whom Doreen F. Connor and Wiggin & Nourie

PA were on brief for appellee.

May 23, 1996

STAHL, Circuit Judge. Plaintiff-appellants
STAHL, Circuit Judge.

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.

Factual Background and Prior Proceedings
Factual Background and Prior Proceedings

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

v. Smart, 622 A.2d 1197, 1202 (N.H.), cert. denied, 114 S.

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

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,

1. The facts at trial, see Smart, 622 A.2d at 1200-02,

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.

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

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.

Discussion
Discussion

A. Summary Judgment Standard of Review

We review a grant of summary judgment de novo,

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

32, 36 (1st Cir. 1995), cert. denied, 116 S. Ct. 914 (1996).

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.

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

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

Corp. v. Catrett, 477 U.S. 317, 331 (1986) (Brennan, J.,

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

allegations or denials of his pleading." Anderson v. Liberty

Lobby, Inc., 477 U.S. 242, 256 (1986).

B. Analysis

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

broadly in context of indemnity agreement which is itself

strictly construed) (quoting Carter v. Bergeron, 160 A.2d

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,

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

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.

Mooney Corp. v. United States Fidelity & Guar. Co., 618 A.2d

793, 796-97 (N.H. 1992); see also Titan Holdings Syndicate,

Inc. v. City of Keene, 898 F.2d 265, 271 (1st Cir. 1990)

(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

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

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.,

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

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,

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

liberty, lost education and earnings, separation of students

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

Am. Ins. Co. v. Burns, 971 F.2d 438, 440 (10th Cir. 1992),

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

alia, negligent hiring. Id. The board members turned to

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

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

Negligence 142, at 202-03 (1989)). Thus, the court found

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

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

Nat'l Ins. Co. v. Entertainment Group, Inc., 945 F.2d 210,

213-14 (7th Cir. 1991) (applying Illinois law); Audubon

Indem. Co. v. Patel, 811 F. Supp. 264, 265 (S.D. Tex. 1993)

9. The School relies on Durham City Bd. of Educ. v. National

Union Fire Ins. Co., 426 S.E.2d 451, 455 (N.C. Ct. App.),

review denied, 431 S.E.2d 22 (N.C. 1993), involving identical

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

and supervision. Id. at 454. In a brief and conclusory

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.

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

Dixon's Inc., 582 F. Supp. 865, 867-68 (E.D. Pa. 1984)

(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.

The Tunnel, Inc., 988 F.2d 351, 354 (2d Cir. 1993) (denying

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.

Conclusion
Conclusion

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

Costs to appellee.
Costs to appellee

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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