Horace Mann Ins. Co. v. Barbara B.

Horace Mann Ins. Co. v. Barbara B.

Opinion

 [*1078]  [**793]  [***211]    We granted review in this case to address the question of whether [****2]  an insurer may owe a duty to defend a teacher who is insured under an educator's liability policy in a minor student's action seeking damages resulting from the teacher's sexual and other misconduct. Relying on our decision in J. C. Penney Casualty Ins. Co. v. M. K. (1991) 52 Cal.3d 1009, 1019 [278 Cal.Rptr. 64, 804 P.2d 689], the Court of Appeal concluded that the insurer had no duty to  [**794]   [***212]  defend, and affirmed the decision of the trial court awarding summary judgment to the insurer in its declaratory relief action.

The lower courts erred. Because the evidence adduced in the summary judgment proceedings demonstrated the existence of unresolved factual issues as to the insurer's potential liability under the policy based on misconduct separable from the sexual molestation, the insurer remained under a duty to defend the underlying action. The judgment of the Court of Appeal is, accordingly, reversed.

FACTUAL AND PROCEDURAL BACKGROUND

During the 1986-1987 school year, Barbara B. was a 13-year-old student at Kramer Junior High School in the Placentia Unified School District (the  [*1079]  District).  [****3]  Barbara B. and her parents sued her seventh grade band teacher, Gary Lawrence Lee, alleging she had suffered injuries caused by Lee's intentional and negligent conduct toward her. ¹ The conduct was alleged to have consisted of sexual molestation and other harassing conduct. ² 

 [****4]  Lee, who pleaded nolo contendere to one count of violating Penal Code section 288, subdivision (a), arising out of his molestation of Barbara, was insured under an educator's liability policy issued by Horace Mann. The policy covered damages "which the insured shall become legally obligated to pay as a result of any claim arising out of an occurrence in the course of the insured's educational employment activities, and caused by any acts or  [*1080]  omissions of the insured . . .." The policy excluded coverage of civil suits arising from criminal acts other than corporal punishment. It contained a promise to defend Lee in "any civil suit against the insured seeking damages which are payable under the terms of  [***213]  this  [**795]  policy even if such suit is groundless, false or fraudulent . . .."

Horace Mann accepted tender of defense in Barbara B.'s suit against Lee, reserving its rights to disclaim coverage or an obligation to defend. In its reservation-of-rights letter, Horace Mann took the position that in light of Lee's criminal conviction, the allegations of the complaint did not fall within policy coverage of educational activities. ³ Horace Mann also cited the policy's [****5]  exclusion for civil suits arising out of an act, other than corporal punishment, that has been held to be a crime and the exclusion for occurrences involving damages that are the intended consequence of action taken by the insured.

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