In action by plaintiff-insurance company seeking declaration that it did not owe coverage in underlying Title IX action by two female students alleging that defendant-insured/School District failed to prevent and inappropriately responded to sexual misconduct by male student, Dist. Ct. erred in granting defendant’s motion for judgment on pleadings, after finding that policy’s errors and omissions provisions provided coverage for underlying lawsuit. Record showed that errors and admissions’ provisions contained sexual misconduct exclusion that Dist. Ct. viewed as ambiguous, and that Dist. Ct. found that exclusion applied only to sexual misconduct by school employees and that it might not bar coverage for defendant’s reactions to student’s sexual misconduct. Ct. of Appeals, though, found that reasonable reading of exclusion indicated that exclusion applied to “any” sexual misconduct or molestation of “any person,” such that it would exclude coverage for claim based directly on male student’s misconduct. Moreover, Ct. of Appeals alternatively noted that if, as Dist. Ct. found, sexual misconduct exclusion barred only coverage for defendant’s employees’ actions, exclusion would still apply to underlying Title IX lawsuit, since: (1) defendant could be liable for discrimination in cases of student-on-student sexual misconduct under Title IX only if defendant had notice of said misconduct and was deliberately indifferent to said misconduct; and (2) liability for violation of Title IX depended on actions of defendant’s employees, and thus exclusion would apply under Dist. Ct.'s reading of sexual misconduct exclusion.
Federal 7th Circuit Court
Civil Court
Insurance