New York Court Addresses Coverage for School District’s Alleged Civil Rights Violations

In its recent decision in Graphic Arts Mut. Ins. Co. v. Pine Bush Central School District, 2018 N.Y. App. Div. LEXIS 1553 (N.Y. 2d Dep’t Mar. 9, 2018), the Second Department of the New York Appellate Division had occasion to consider a general liability insurer’s indemnity obligations with respect to a lawsuit alleging that the insured school district failed to adequately address anti-Semitic acts committed against students.

The Pine Bush Central School District and several individual administrators were named as  defendants in a suit brought by five students alleging that their civil rights had been violated as a result of defendants having been “deliberately indifferent to anti-Semitic harassment and discrimination perpetrated by other students.”  The District’s general liability insurer, Graphic Arts, provided a defense to the suit under a reservation of rights and ultimately disclaimed an indemnity obligation.  The suit later settled for approximately $4.5 million, none of which was paid by Graphic Arts.

Graphic Arts later commenced a declaratory judgment action, seeking a declaration of non-coverage on several grounds.  Among the arguments raised by Graphic Arts was that the underlying suit alleged that defendants had acted in an intentionally discriminatory manner, and that as such, coverage was precluded as a result of an exclusion for intentional discrimination and that in any event, the relief sought by the students did not qualify as loss resulting from an occurrence. The District moved to dismiss the complaint based on failure to state a claim.

While the lower court dismissed Graphic Arts’ causes of action pertaining to a duty to indemnify, leaving only a cause of action pertaining to the reasonableness of the underlying settlement, the appellate court reversed.  Of note to the court were several specific allegations in the underlying suit alleging that the acts of anti-Semitism were reported to the defendants and that defendants failed to take any action, thus allowing for the inference that defendants intended for the harassment to occur.  The appellate court agreed that while coverage can be afforded for the unintentional results of intentional acts, it could not rule out the possibility that the District and the various administrators intended these harms, at least on a duty to dismiss standard.  As the court explained:

While “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 the plaintiff is obligated to indemnify the defendants in the underlying action, and the other evidence submitted by the defendants did not utterly refute the factual allegations set forth in the plaintiff’s complaint. Whether the incidents set forth in the amended complaint in the underlying action were accidents present questions of fact which cannot be determined on a motion to dismiss pursuant to CPLR 3211(a)(1) and (7).





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