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Pine Bluff School District v. ACE American Insurance Co.

United States District Court, E.D. Arkansas, Pine Bluff Division

July 12, 2019

PINE BLUFF SCHOOL DISTRICT PLAINTIFF
v.
ACE AMERICAN INSURANCE COMPANY DEFENDANT

          OPINION AND ORDER

          Kristine G. Baker United States District Judge.

         Before the Court is a motion for summary judgment filed by defendant ACE American Insurance Company (“ACE”) (Dkt. No. 13). Plaintiff Pine Bluff School District (“PBSD”) responded in opposition (Dkt. No. 23), and ACE replied (Dkt. No. 26). PBSD then filed a supplement to response to motion for summary judgment (Dkt. No. 38). For the following reasons, the Court grants the motion for summary judgment (Dkt. No. 13).

         I. Factual Background

         Unless otherwise noted, the following facts are taken from ACE's statement of undisputed material facts in support of ACE's motion for summary judgment and from PBSD's response to statement of undisputed facts (Dkt. Nos. 14, 25). The Court notes that Local Rule 56.1 of the Local Rules of the United States District Court for the Eastern and Western Districts of Arkansas provides that all material facts set forth in the statement filed by the moving party shall be deemed admitted unless controverted by the statement filed by the non-moving party. Local Rule 56.1(c). As such, the Court deems admitted each parties' statement of material facts to the extent statements are not controverted by the opposing party.

         A. The 2015 Policy

         ACE issued ACE Scholastic Advantage Educators Legal Liability Policy No. EON G23670471 003 to PBSD for the period April 2, 2015, to February 1, 2016 (“the 2015 Policy”) (Dkt. No. 25, at 1). The Declarations for the 2015 Policy contain a statement in bold and capital letters stating that “THIS POLICY IS A CLAIMS MADE AND REPORTED POLICY. EXCEPT AS OTHERWISE PROVIDED HEREIN, THIS POLICY COVERS ONLY CLAIMS FIRST MADE AGAINST THE INSUREDS AND REPORTED TO THE INSURER DURING THE POLICY PERIOD . . . ” (Id.) (emphasis in original). The Insuring Agreement for the Employment Practices Liability coverage section in the 2015 Policy provides that “[t]he Insurer will pay on behalf of the Insureds all Damages and Claims Expenses for which the Insured becomes [sic] legally obligated to pay by reason of a Claim first made against an Insured and reported to the Insurer during the Policy Period . . . ” (Id., at 1-2).

         The 2015 Policy defines “Claim” to include “a civil, administrative or regulatory proceeding against any Insured commenced by . . . the issuance of a notice of charge or formal investigative order, including without limitation any such proceeding by or in association with . . . the Equal Employment Opportunity Commission” (Id., at 2). The 2015 Policy also defines “Claim” to include “a civil proceeding against any Insured seeking monetary Damages or non-monetary or injunctive relief, commenced by the service of a complaint or similar pleading” (Id.). Although PBSD admits this language appears in the 2015 Policy, PBSD submits that there are several other subparagraphs setting forth instances which fall within the definition of “Claim” (Id.). The Limit of Liability Section for the 2015 Policy provides, in part, “[a]ll Claims arising out of the same Wrongful Act and all Interrelated Wrongful Acts of the Insureds shall be deemed to be one Claim. Such Claim shall be deemed to be first made on the date the earliest of such Claim is first made, regardless of whether such date is before or during the Policy Period” (Id., at 2-3).

         “Wrongful Acts” are defined in the 2015 Policy to include “Wrongful Employment Practices committed or attempted by the Educational Institution or by any Insured Educator acting solely in their capacity as such and on behalf of the Educational Institution . . . ” (Id., at 3). “Wrongful Employment Practices” include “1. [W]rongful dismissal, discharge or termination, whether actual or constructive; . . . 3. Discrimination; . . . 4. Sexual Harassment or unlawful workplace harassment; . . . 8. [W]rongful discipline; [and] 9. Retaliation . . . of any past, present[, ] or prospective full-time, part-time, seasonal and temporary Employee . . . of the Educational Institution” (Id.). Although PBSD admits this language appears in the 2015 Policy, PBSD contends that these are only portions of the defined terms (Id.). “Interrelated Wrongful Acts” are defined in the 2015 Policy as “[a]ll Wrongful Acts that have as a common nexus any fact, circumstance, situation, event, transaction, cause of series of related facts, circumstances, situations, events, transactions[, ] or causes” (Id.).

         The Notice Section for the 2015 Policy states that “[t]he Insured shall, as a condition precedent to their rights under this Policy, give to the Insurer written notice of any Claim as soon as practicable, but in no event later than 30 days after: 1. The end of the Policy Period . . . ” (Id., at 3-4). Although PBSD admits this language appears in the 2015 Policy, PBSD submits that this is only a portion of the “Notice” section (Id., at 4). Endorsement 4 to the 2015 Policy amends the Notice provision “by deleting the phrase ‘30 days' and inserting the phrase ‘60 days'” (Id.).

         ACE contends that the 2015 Policy includes the following definition for “Policy Period”: “The period of time specified in Item 2 of the Declarations, subject to prior termination pursuant to Section VIX, Termination of the Policy” (Dkt. No. 14, ¶ 9). PBSD denies that the definition of “Policy Period” refers to Section VIX and submits that it actually refers to Section XIV (Dkt. No. 25, at 4). Item 2 of the Declarations identifies the Policy Period for the 2015 Policy as spanning “From 12:01 a.m. 04/02/2015 To 12:01 a.m. 02/01/2016” (Id., at 4-5).

         B. The 2016 Policy

         ACE issued Ace Scholastic Advantage Educators Legal Liability Policy No. EON G23670471 004 to PBSD for the period February 1, 2016, to February 1, 2017 (“the 2016 Policy”) (Id., at 5). The Declarations for the 2016 Policy contain a statement in bold and capital letters stating that “THIS POLICY IS A CLAIMS MADE AND REPORTED POLICY. EXCEPT AS OTHERWISE PROVIDED HEREIN, THIS POLICY COVERS ONLY CLAIMS FIRST MADE AGAINST THE INSUREDS AND REPORTED TO THE INSURER DURING THE POLICY PERIOD . . . ” (Id.) (emphasis in original). The Insuring Agreement for the Employment Practices Liability coverage section in the 2016 Policy provides that “[t]he Insurer will pay on behalf of the Insureds all Damages and Claims Expenses for which the Insured becomes [sic] legally obligated to pay by reason of a Claim first made against an Insured and reported to the Insurer during the Policy Period . . . ” (Id.).

         The 2016 Policy defines “Claim” to include “a civil, administrative or regulatory proceeding against any Insured commenced by . . . the issuance of a notice of charge or formal investigative order, including without limitation any such proceeding by or in association with . . . the Equal Employment Opportunity Commission” (Id., at 5-6). The 2016 Policy also defines “Claim” to include “a civil proceeding against any Insured seeking monetary Damages or non-monetary or injunctive relief, commenced by the service of a complaint or similar pleading” (Id., at 6). Although PBSD admits this language appears in the 2016 Policy, PBSD submits that there are several other subparagraphs setting forth instances which fall within the definition of “Claim” (Id.). The Limit of Liability Section for the 2016 Policy provides, in part, “[a]ll Claims arising out of the same Wrongful Act and all Interrelated Wrongful Acts of the Insureds shall be deemed to be one Claim. Such Claim shall be deemed to be first made on the date the earliest of such Claim is first made, regardless of whether such date is before or during the Policy Period” (Id., at 6).

         “Wrongful Acts” are defined in the 2016 Policy to include “Wrongful Employment Practices committed or attempted by the Educational Institution or by any Insured Educator acting solely in their capacity as such and on behalf of the Educational Institution . . . ” (Id., at 6). “Wrongful Employment Practices” include “1. [W]rongful dismissal, discharge or termination, whether actual or constructive; . . . 3. Discrimination; . . . 4. Sexual Harassment or unlawful workplace harassment; . . . 8. [W]rongful discipline; [and] 9. Retaliation . . . of any past, present[, ] or prospective full-time, part-time, seasonal and temporary Employee . . . of the Educational Institution” (Id., at 7). Although PBSD admits this language appears in the 2016 Policy, PBSD contends that these are only portions of the defined terms (Id.). “Interrelated Wrongful Acts” are defined in the 2016 Policy as “[a]ll Wrongful Acts that have as a common nexus any fact, circumstance, situation, event, transaction, cause of series of related facts, circumstances, situations, events, transactions[, ] or causes” (Id.).

         ACE contends that the 2016 Policy includes the following definition for “Policy Period”: “The period of time specified in Item 2 of the Declarations, subject to prior termination pursuant to Section VIX, Termination of the Policy” (Dkt. No. 14, ¶ 17). PBSD denies that the definition of “Policy Period” refers to Section VIX and submits that it actually refers to Section XIV (Dkt. No. 25, at 7). Item 2 of the Declarations identifies the Policy Period for the 2016 Policy as spanning “From 12:01 a.m. 02/01/2016 To 12:01 a.m. 02/01/2017” (Id., at 8).

         C. Celeste Alexander's Sexual Harassment Claim

         Celeste Alexander was a math teacher at Pine Bluff High School during the 2014-2015 school year (Id.). Michael Nellums was the principal of Pine Bluff High School and was Ms.

         Alexander's supervisor (Id.). Ms. Alexander alleged in a lawsuit she filed against PBSD on September 22, 2016, that Mr. Nellums began sexually harassing her in or around November 2014 (Id.). She alleged that Mr. Nellums retaliated against her after she rejected his advances by calling her to meetings where no one was present; ignoring her emails; improperly scrutinizing her work; and falsely accusing her of unprofessional conduct (Id.). Ms. Alexander was notified in April 2015 that she was one of several teachers terminated in a reduction of force. In her complaint against PBSD, Ms. Alexander alleged that her termination and failure to be rehired were in retaliation for her reaction to Mr. Nellums' alleged sexual harassment (Id.). Ms. Alexander alleged in her complaint that she reported the alleged sexual harassment to PBSD on or around June 3, 2015 (Id., at 8-9). PBSD admits that Ms. Alexander alleged these matters in her lawsuit but does not admit the accuracy of the allegations in the underlying case (Id., at 9).

         Ms. Alexander filed a charge of discrimination, Charge No. 493-2016-00340, with the Equal Employment Opportunity Commission (“EEOC”) on December 1, 2015 (Id.). Her charge lists PBSD as “the Employer . . . That I Believe Discriminated Against Me or Others” (Id.). In her charge, Ms. Alexander marked a box indicating that her discrimination was based on “Retaliation” (Id.). PBSD admits that these allegations were included in the charge of discrimination but denies that the allegations were accurate (Id.).

         Ms. Alexander alleged in her EEOC charge: “I was hired September 19, 2014, as a [m]ath [l]ab [c]oordinator/[m]ath [t]eacher. I was identified for [reduction in force] in April 2015. I filed a sexual harassment complaint against my [p]rincipal in June 2015. I was not hired for the next school year and my employer hired uncertified and lesser-qualified math teachers in August 2015. I was told that I would never be rehired for making false allegations. I believe I was not rehired in retaliation for filing sexual harassment allegations in violation of Title VII of the Civil Rights Act of 1964, as amended” (Id., at 9-10). PBSD admits that Ms. Alexander made these allegations in her charge of discrimination but denies that her allegations were accurate (Id., at 10).

         PBSD received the December 1, 2015, EEOC charge and filed a response and provided documents to the EEOC (Id., at 10). PBSD submitted a mediation statement to the EEOC on January 21, 2016, and it submitted a position statement to the EEOC on January 28, 2016 (Id.). On January 29, 2016, PBSD submitted written responses and documents in response to 18 inquiries and requests for documentation that the EEOC requested from PBSD (Id.). The EEOC issued a dismissal and notice of rights on June 24, 2016 (Id.). The EEOC's right to sue letter gave Ms. Alexander 90 days from her receipt of the notice of rights to file suit (Id.).

         Ms. Alexander filed a complaint for damages against PBSD and Mr. Nellums in the United States District Court for the Eastern District of Arkansas on September 22, 2016, No. 5:16-cv-00300-BSM (Id.). Ms. Alexander alleged that she “timely filed a charge of discrimination against [PBSD] with the EEOC” and that her lawsuit was “commenced within [90] days of receipt of the ‘[n]otice of [r]ight to [s]ue'” (Id., at 10-11). The complaint alleged that Ms. Alexander “was not called back from the ROF or rehired[] because of her complaints of sexual harassment” and that “[o]ther teachers were hired . . . despite being lesser qualified that [Ms.] Alexander in violation of [PBSD's] [r]eduction of [f]orce [p]olicies” (Id., at 11). PBSD admits that these allegations were made but denies that the allegations were accurate (Id.).

         Ms. Alexander's December 1, 2015, EEOC charge is a “Claim” as defined in the ACE Policies as: “a civil, administrative or regulatory proceeding against any Insured commenced by . . . the issuance of a notice of charge or formal investigative order, including without limitation any such proceeding by or in association with . . . the [EEOC]” (Id.). Ms. Alexander's September 22, 2016, complaint for damages is a “Claim” as defined in the ACE Policies as: “a civil proceeding against any Insured seeking monetary Damages or non-monetary or injunctive relief, commenced by the service of a complaint . . . ” (Id., at 11-12). The December 1, 2015, EEOC charge and PBSD's responses to the EEOC on January 26, 2016, January 28, 2016, and January 29, 2016, all occurred during the 2015 Policy period between April 2, 2015, and February 1, 2016 (Id., at 12).

         D. PBSD's Demand For Insurance Coverage From ACE

         PBSD first reported Ms. Alexander's Claim (her lawsuit) to ACE on October 3, 2016 (Id.). PBSD's insurance agent attached to the loss notice a copy of the lawsuit and an email from PBSD's counsel (Id.). The email states that “[t]here was a related EEOC claim and investigation by the Arkansas Department of Education Professional Licensure Standards Board, which dismissed the allegations. The EEOC issued a right to sue letter on June 24, 2016” (Id.). ACE acknowledged receipt of Ms. Alexander's Claim and sent an email to PBSD's superintendent, Dr. Michael Robinson, on October 20, 2016 (Id.). ACE requested that PBSD provide “a copy of the EEOC charge filed against Ms. Alexander, ” along with “any documents relating to the [June 2015] grievance process” (Id., at 12-13).

         ACE sent PBSD a letter on October 25, 2016, requesting that PBSD provide ACE with “(i) a copy of the charge filed by [Ms.] Alexander with the U.S. Equal Employment Opportunity Commission (“EEOC”) and (ii) a copy of any written demands, complaints, grievances, etc., from [Ms.] Alexander received by the Insured prior to the EEOC charge and lawsuit” (Id., at 13). The October 25, 2016, ACE letter states that ACE “reserves the right to amend and/or deny coverage based on review of this information” (Id.). ACE's October 25, 2016, letter states that it reserves “the right to withdraw the defense provided in this matter and the right . . . to address additional coverage issues as they may arise, based upon the Policy and/or additional facts that may come to [ACE's] attention” (Id.). ACE also stated in the letter that “[n]othing contained in this letter, and no action on [ACE's] part in investigating these matters, should be construed as an admission of coverage or as a waiver of any right, remedy or defense that may be available to [ACE]” (Id.). PBSD admits the language was included in the October 25, 2016, letter. ACE contends that the letter constituted a complete reservation of rights, and PBSD denies the characterization that this language “constituted a complete reservation of rights” (Id.).

         ACE submits that PBSD first provided the EEOC charge to ACE on November 22, 2017 (Dkt. No. 14, ¶ 34). PBSD admits that the EEOC charge appears to have been sent to ACE on November 22, 2017, by PBSD's counsel, but PBSD denies this statement to the extent that it suggests that PBSD was not diligent in sending this document earlier (Dkt. No. 25, at 14). Further, PBSD denies the statement to the extent that it suggests that ACE demonstrated sufficient diligence in obtaining the document and to the extent that the statement suggests that ...


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