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Smith v. Liberty Mutual Insurance Company

Superior Court of Delaware

January 14, 2019

SCOTT D. SMITH Plaintiff,
v.
.LIBERTY MUTUAL INSURANCE COMPANY AND THE NETHERLANDS INSURANCE COMPANY Defendant.

          Submitted: January 9, 2019

         Upon Joint Motion for Reargument -Plaintiffs Motion for Summary Judgment is GRANTED; Defendant's Motion for Summary Judgment is DENIED.

          Lisa C. McLaughlin, Esquire, Attorney for Plaintiff.

          Daniel A. Griffith, Esquire, Attorney for Defendant.

          OPINION

          DIANE CLARKE STREETT, JUDGE

         Introduction

         On January 22, 2016, a Middletown High School student[1] (who also worked as a student aid) filed a complaint (the "Underlying Complaint") against the Board of Education of Appoquinimink School District (the "School Board") and Scott D. Smith ("Plaintiff), a gym/health teacher at Middletown High School and an employee of the School Board.[2] The Underlying Complaint alleges that between 2014-2015 the Student was 17-18 years-old when Plaintiff committed Assault and Battery, Intentional Infliction of Emotional Distress, Gross Negligent Infliction of Emotional Distress, and Gross Negligence.

         The School Board is insured with the Netherlands Insurance Company ("Defendant").[3] Plaintiff, in the instant case, seeks to have the Insurance Company also defend him in the Underlying Complaint.[4] Plaintiff asserts that he is an insured under the School Board's insurance policy and that Defendant has a duty to defend him in the underlying action. Defendant contends that it does not have a duty to defend because Plaintiff is not an insured under the policy definition, the alleged acts do not meet the policy's definition of occurrence, [5] and, even if Plaintiff was covered under those definitions, the Intentional Acts Exclusion and/or the Sexual Misconduct Exclusion extinguish its duty to defend since all of the allegations allege sexual misconduct. The parties filed cross-motions for summary judgment. The Court denied summary judgment as to both parties. Both parties then filed joint motions for reargument asking the Court to decide as a matter of law whether there is a duty to defend.[6] Upon instruction from the Court, the parties filed simultaneous, supplemental briefs. Having considered the Joint Motion for Reargument, the briefs, and a hearing on the matter, Plaintiffs Motion for Summary Judgment is GRANTED; Defendant's Motion of Summary Judgment is DENIED.

         Standard of Review

         Summary judgment may be granted by the Court 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 and that the moving party is entitled to summary judgment as a matter of law."[7] When cross-motions for summary judgments are filed, Superior Court Civil Rule 56(h) provides:

Where the parties have filed cross motions for summary judgment and have not presented argument to the Court that there is an issue of fact material to the disposition of either motion, the Court shall deem the motions to be the equivalent of a stipulation for decision on the merits based on the record submitted with the motions.[8]

         "In the event that parties file cross-motions for summary judgment, the parties implicitly concede the absence of material factual disputes and acknowledge the sufficiency of the record to support their respective motions."[9]

         Discussion

         By submitting cross motions for summary judgment, "the parties have implied there is no factual conflict, "[10] that the record is sufficient "to support their respective motions, "[11] and that there is no issue of material fact preventing summary judgment.[12] Moreover, both parties assert that the Court must decide, as a matter of law, whether there is a duty to defend in this case.[13] As such, the parties have asked the Court to decide whether the factual allegations in the Underlying Complaint trigger the insurer's duty to defend.

         The Underlying Complaint alleges the following:[14]

6. At the beginning of her senior year, in late summer 2014, [Student] began serving as a student aid to [Plaintiff] during the school day and particularly during her fourth period.
7. It was in connection with her duties as a student aid that she gave [Plaintiff] her cell phone number.
8. During the fall of 2014 [Plaintiff] began texting [Student] regarding non-student aid matters. It began as one to two texts per day but increased to six per day. The texting increased throughout the Spring of 2015.
9. [Student] stopped aiding [Plaintiffs] class in January 2016.[15] After this, [Plaintiffs] texts to [Student] increased.
10. [Plaintiff] texted [Student] during all times throughout the day, including during the weekday during his work hours and when he was on school property.
11.Another time [Plaintiff] texted [Student] that he wanted to come over and snuggle with her.
12.During the Spring of 2015, the only access to the weight room was through [Plaintiff]. Instead of helping the baseball players who he coached, he focused more on [Student] instead, making her uncomfortable.
13. [Plaintiff] asked [Student] to come to his office one day and he pulled out his University of Delaware freshman year school identification card, showed it to her, and said "See what would be following you around all day" and gave her a creepy smirk.
14. [Plaintiff] pulled [Student] out of her AP classroom and told her he had emailed her teachers to see if [Student] could be excused so that he could give her good luck and give her a hug.
15. [Plaintiff] put his arm around [Student] and touch [sic] her several times at school and on school property, which was unwanted and made her feel scare [sic] and uncomfortable.
16.Employees of Appoquinmink School District... saw [Plaintiff] put his arm around [Student].
17. [Plaintiff] showed up uninvited at [Student's] house during the Spring of 2015. He insinuated himself into her family.
18. [Plaintiffs] entire course of behavior implied sexual innuendo or directly stated it.
19. [Plaintiff] lied to his wife about being with [Student].
20.As [Student] tried to limit this contact with [Plaintiff], he became more insistent and texted [Student] more frequently.
21. [Plaintiff] waited for [Student] to walk by his classroom in the mornings, and her friends witnessed this behavior.
22.One time [Student] and her sister were home alone and [Plaintiff] texted that he was right outside in the front of her house.
23. [Plaintiff] would tell [Student] about getting treatment for his problems with anger.
24.On April 22, 2015 [Student] complained to Appoquinmink School District employees Miss Tiberi (now Krieger) and Miss Wyndley, the assistant principal, about the behavior of [Plaintiff] as set forth above.
25.Between April 27, 2015 and May 2015 [Plaintiff] sent 36 text messages to [Student].
26. Subsequently, an employee of Appoquinimink School district reported [Plaintiffs] behavior to Middletown Police Department.
27.Upon information and belief, someone from Middletown Police Department warned [Plaintiff] not to contact [Student] again.
28.However, [Plaintiff] continued to contact [Student] and her family until his arrest by Middletown Police Department.[16]

         The Underlying Complaint also alleges that "[Plaintiff] was actuated at least in part by a purpose to serve the [School] Board."[17]

         The issue, whether an insurer has a duty to defend, has been analyzed previously by Delaware Courts. Generally, the Court has found a duty to defend unless, as a matter of law, there is "no possible factual or legal basis upon which the insurer might eventually be obligated to indemnify the insured."[18]

         "The determination of whether a party has a duty to defend should be made at the outset of the case."[19] The Court explained that "[a]n early decision provides the insured with a defense at the beginning of the litigation and permits the insurer to control the defense strategy."[20]

         In Tyson Foods. Inc. v. Allstate Ins. Co., the Superior Court stated that "[t]he Court generally will look to two documents in its determination of the insurer's duty to defend: the insurance policy and the pleadings of the underlying lawsuit."[21] "The test is whether the complaint alleges a risk within the coverage of the policy."[22]

         The Delaware Supreme Court, in Continental Casualty. Co. v. Alexis I. DuPont School Dist., [23] set forth guidelines to apply when "considering whether an insurer is bound to defend an action against its insured."[24] The Court stated:

(a) Where there exists some doubt as to whether the complaint against the insured alleges a risk insured against, that doubt should be resolved in favor of the insured;
(b)Any ambiguity in the pleadings should be resolved against the carrier;
(c) If even one count or theory of plaintiff s complaint lies within the coverage of the policy, the duty to defend arises.[25]

         In Rhone-Poulenc Basic Chemicals Co., the Delaware Superior Court concluded that the "[t]he adoption of [the first] principle in Continental Casualty confirms that in Delaware, an insurer's duty to defend its insured arises when the allegations of the underlying complaint show a potential that liability within coverage will be established." [26] It also held that "in determining an insurer's obligation to defend, any doubt as to whether the complaint against the insured alleges a risk insured against should be resolved in favor of the insured."[27] Thus, "[a]n insurer [...] can be excused from its duty to defend only if it can be determined as a matter of law that there is no possible factual or legal basis upon which the insurer might eventually be obligated to indemnify the insured."[28]

         Plaintiff contends that he is an insured and entitled to a defense by Defendant because he acted within the scope of his employment pursuant to Restatement (Second) of Agency §228.[29] Plaintiff claims that the Underlying Complaint reflects that some of the alleged conduct occurred on school property, during work hours, and that Plaintiff was actuated, at least in part, by the purpose of serving the School Board. Plaintiff asserts that "[t]he factual allegations in paragraphs 8, 9, 10, 12, 13, 14, 15, 17, 21 and 25, when viewed in a light most favorable to [Plaintiff], support the inference that [Plaintiff] was acting within the scope of his employment."[30]

         Plaintiff then asserts that the Intentional Acts Exclusion and the Sexual Misconduct Exclusion do not extinguish Defendant's duty to defend. Plaintiff argues that the duty to defend exists if any of the alleged acts is covered under the terms of the policy. Plaintiff also asserts that the factual allegations must be "liberally construed" in favor of the insured. Thus, according to Plaintiff, because the Underlying Complaint alleges acts that could be construed as non-sexual and as supporting the claim of negligence, the Intentional Acts and Sexual Misconduct Exclusions do not apply.

         Lastly, Plaintiff contends that Sherman v. State Dept. of Public Safety[31], in adopting Restatement (Second) of Agency §219, [32] expanded the scope of employment test. Plaintiff argues that "[u]nder Sherman, Delaware courts now must consider §228 in tandem with §219 of the Restatement (Second) of Agency (...) when determining whether an employee's conduct falls within the scope of employment."[33] He argues that "[i]f the employee's conduct falls under one of the exceptions enumerated in §219, there is no obligation to satisfy §228 to be considered within the scope of employment."[34] Here, Plaintiff asserts that he was acting within the scope of employment under §219(2)(c) because teachers owe a non-delegable duty to their students and under §219(2)(d) because Plaintiff was aided in accomplishing the alleged torts by the existence of his agency relation with the School Board.

         Defendant contends that it does not owe Plaintiff a duty to defend because Plaintiff is not an insured under the policy terms as he was not acting within the scope of his employment and the alleged acts do not meet the policy's definition of an occurrence because the alleged conduct was not an 'accident.'

         Defendant argues that Plaintiff does not satisfy any of the §228 prongs because "sexually harassing a student is not the kind of conduct he was hired to perform," "much of the relevant conduct was alleged to have occurred off property, "[35] "the conduct was not limited to the time and space limits of the school day, "[36] and "there can be no reasonable argument that Plaintiffs sexual harassment of a student was activated, at least in part, by a purpose to serve the school district."[37] Defendant characterizes Plaintiffs claims as "unfathomable" and challenges Plaintiffs argument that teacher sexual misconduct toward a student is a 'foreseeable risk.' Defendant writes:

[Plaintiffs] position [that he was acting within the scope of his employment] is completely unfathomable, especially in light of the obvious reality that the vast majority of high school students are minors. The logical conclusion reached from [Plaintiffs] argument is that sexual assault and harassment must be "not unexpectable" for teenage high school students from their teachers. Stated differently, sexual assault at the hands of a teacher is a "foreseeable risk" of attending high school.[38]

         In addition, Defendant contends that Sherman is distinguishable from the instant case for two reasons: the instant case "is an insurance dispute with an explicit coverage provision-the Sexual Misconduct Exclusion-that precludes coverage" and the insurance policy in the instant case explicitly defines "an insured" as "[Y]our 'employees' ... but only for acts within the scope of their employment by you or while performing duties related to the conduct of your business..."[39] Therefore, Defendant argues, "the Policy actually requires that the employees, in this case, [Plaintiff], be within the course and scope of employment, for coverage to apply."[40]

         Defendant then argues that, even when analyzed under §219, Plaintiff would not satisfy any exceptions to §228 because none of the allegations supports a finding that Plaintiff acted or spoke on behalf of the school or on behalf of the school district, that Plaintiff accomplished the torts by the existence of the agency relationship, or that Student relied on Plaintiffs apparent authority. Defendant then asserts that Plaintiff "will not be able to cite legal precedent that extends the Sherman decision, or its rationale, to high school teachers."[41]

         Lastly, Defendant asserts that, even if the Court finds that Plaintiff qualifies as an insured under the insurance policy terms, the Intentional Acts Exclusion and/or the Sexual Misconduct Exclusion in the insurance policy would extinguish Defendant's duty to defend Plaintiff in the underlying action because the Underlying Complaint alleges intentional criminal sexual harassment.

         In the instant case, this Court is guided by Sherman v. State Dept. of Public Safety, a recent Delaware Supreme Court case holding that:

Although ... the question of whether a tortfeasor is acting within the scope of his employment is fact-specific, and ordinarily, is for the jury to decide, the question of whether tortious conduct falls within the scope of employment is decided by the court if the answer is clearly indicated.[42]

         Thus, in determining whether Defendant owes Plaintiff a duty to defend, the Court must first find that Plaintiff is an insured under the insurance policy. If the Court finds that Plaintiff has met that threshold, the Court must then determine whether the Intentional Acts Exclusion and/or Sexual Misconduct Exclusion would extinguish the duty to defend.

         Delaware courts follow the Restatement (Second) of Agency §228 when determining whether an employee was acting within the scope of employment for the purpose of employer liability.[43] §228 contains four prongs that must be satisfied to find that an employee was acting within the scope of employment:

         (1) Conduct of a servant is within the scope of employment if, but only if:

(a) it is of the kind he is employed to perform;
(b) it occurs substantially within the authorized time and space limits;
(c) it is actuated, at least in part, by a purpose to serve the master, and
(d) if force is intentionally used by the servant against another, the use of force is not unexpectable by the master.[44]

Sherman v. State Dept. of Public Safety involved a state police officer who sexually assaulted an arrestee during the time that he was responsible for transporting the arrestee. That case analyzed §228 and its complement, §219.[45] The Court in Sherman found that the officer satisfied the first two prongs of §228 but that the officer did not satisfy the third prong (the Motivation Prong) of §228.[46] As such, the Court held that the State could not be held liable under an isolated analysis of §228[47] even though the Court found that "there is no question of fact" that the fourth prong (the Foreseeability Prong) was satisfied because there was undisputed evidence that sexual misconduct by police officers was generally foreseeable.[48]

         Nevertheless, the Court ultimately found that the employer was liable when Restatement §228 was analyzed with its "complementary" section, Restatement (Second) of Agency §219.[49] The Court held that §228 "should operate within the context of its Restatement counterpart, §219, as the Restatement intends, "[50] explaining that §219 "is referenced as a companion provision in §228, and when embracing the Restatement, this Court should be inclined to embrace its relevant provisions in their entirety and not cherry-pick isolated sections."[51] Sherman held that "[w]hen §219's exceptions apply, an employer can be held responsible under respondeat superior even if §228 is not satisfied."[52]

         The §219 exceptions are:

(2) A master is not subject to liability for the torts of his servants acting outside the scope of their employment, unless'.
(a) the master intended the conduct or the consequences, or
(b) the master was negligent or reckless, or
(c) the conduct violated a non-delegable duty of the master, or
(d) the servant purported to act or to speak on behalf of the principal and there was reliance upon apparent authority, or he was aided in accomplishing the tort by the existence of the agency relation.[53]

         The Court in Sherman instructed that §219 should be used to "bypass" the requirements of §228 when justified:

By widening our lens to consider §219, which was designed to provide exceptions to §228 by allowing a plaintiffs claims to bypass all of §228's requirements when justified, we believed we would better position ourselves to give §228 its most sensible interpretation.[54]

         In Sherman, the Court focused on Restatement subsections §219(2)(c) and §219(2)(d). The Court explained that §219(2)(c) provides for respondeat superior liability outside the scope of employment when the employer owed a non-delegable duty to the tortfeasor's victim and §219(2)(d) provides respondeat superior liability outside the scope of employment when the tortfeasor was aided in accomplishing the tort by the existence of the agency relationship.[55]

         The Court found that §219(2)(c) was applicable because police departments owe a non-delegable duty to their arrestees. The Court held that "[w]hen the State authorizes police officers to take away the liberty of arrestees, it cannot delegate away its own responsibility to make sure that an arrestee is not harmed by the tortious conduct of its arresting officers."[56] The Court in Sherman also found that the State was liable for the police officer's act under §219(2)(d) because police officers have "potent coercive power" and "presumptive legal authority to deprive a person of [...] liberty."[57] The Court noted that there are serious consequences for resisting arrest and explained that an arrestee "would rightly fear that if she refused the Officer, he would seek to put her in jail."[58] Moreover, the Court stated that "there is no question that the Officer was aided in accomplishing the sexual misconduct by his position of authority, because the wrongful acts flowed from the very exercise of this authority."[59]

         Following the same sequence of analysis used by the Supreme Court in Sherman, this Court will first analyze whether Plaintiffs alleged acts in the Underlying Complaint were within the scope of employment under the four prongs of §228 and then whether any §219 subsection applies. Here, all four prongs in §228 are satisfied and §219 is also satisfied.

         In Doe v. State,[60] the Delaware Supreme Court analyzed ยง228's first and second prongs together. In that case, the Court held that prong one and two of ...


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