
USCA1 Opinion

	




                            UNITED STATES COURT OF APPEALS                            UNITED STATES COURT OF APPEALS                                FOR THE FIRST CIRCUIT                                FOR THE FIRST CIRCUIT                                 ____________________        No. 96-1620                              STRATFORD SCHOOL DISTRICT,                                 Plaintiff, Appellee,                                          v.                          EMPLOYERS REINSURANCE CORPORATION,                                Defendant, Appellant.                                 ____________________                     APPEAL FROM THE UNITED STATES DISTRICT COURT                          FOR THE DISTRICT OF NEW HAMPSHIRE                    [Hon. Paul J. Barbadoro, U.S. District Judge]                                             ___________________                                 ____________________                                        Before                                 Selya, Circuit Judge,                                        _____________                            Aldrich, Senior Circuit Judge,                                     ____________________                              and Boudin, Circuit Judge.                                          _____________                                 ____________________            Charles  W. Grau with  whom David P. Slawsky  and Upton, Sanders &            ________________            ________________      ________________        Smith were on brief for appellant.        _____            Bruce W.  Felmly with  whom Jeanmarie  Papelian and McLane,  Graf,            ________________            ___________________     ______________        Raulerson & Middleton were on brief for appellee.        _____________________                                 ____________________                                   January 30, 1997                                 ____________________                      ALDRICH,  Senior  Circuit   Judge.     This  is   a                                _______________________            declaratory  action  brought  to  determine  the   rights  of            Stratford  [New  Hampshire]  School  District  ("Stratford"),            insured under  a "claims-made"  errors  and omissions  policy            issued  by  Employers Reinsurance  Corporation ("Employers").            Both parties moved for summary judgment, and the  court ruled            for  Stratford.    On  this  appeal  Employers  asserts  that            Stratford's claim for coverage for  a suit brought on  behalf            of  Crystal  Buffington,  post,  matured  within  the  policy                                      ____            exclusion  definition prior  to  the policy's  issuance,  and            that,  in any event, the policy was voidable because of false            answers in the application.  We affirm.                      Starting  at the  beginning, we  accept the  facts,            recited in Employers' brief  as undisputed, most favorable to            it.  Morrissey v. Boston Five Cents Savings Bank, 54 F.3d 27,                 ___________________________________________            31 (1st Cir. 1995).  One  Harry Hikel became a music  teacher            at  Stratford  in  1979.    In  1983 Stratford  conducted  an            investigation and  held a hearing to  review allegations that            Hikel had  inappropriately hugged and kissed female students.            After  the  hearing  the  Stratford  School  Board  voted  to            reprimand him severely.  A  reprimand letter was delivered to            him  in January 1984.   Stratford did not  notify State Child                                         -2-            Protective Services  in accordance with N.H.  Rev. Stat. Ann.              169-C:29.1  Hikel left Stratford in 1986.                      His next employer was the Lakeway Elementary School            in  Littleton,  New  Hampshire.    According  to  one  of his            students   there,  Crystal  Buffington,   he  began  sexually            molesting her during the fall of 1990  and continued to do so            until the fall of 1992.  In 1993 the Manchester Union  Leader            reported this, although not identifying Crystal, and asserted            that  the Department of  Education was  investigating charges            that Hikel had  sexually abused  students when  he taught  in            Littleton.   For present purposes we assume that this came to            Stratford's  attention.   Thereafter, on  October 3,  1993, a            Grafton  County Grand  Jury issued  a subpoena  in connection            with an investigation of  criminal sexual misconduct of Harry            Hikel in the  Littleton School District, seeking  Stratford's            records on Hikel.  Stratford received the subpoena on October            4.  On October 8 it applied for the present policy.                      While  obviously the subpoena was a strong reminder            that other such conduct might occur,  the question is whether            it suggested to Stratford (of which there is no evidence), or            should   have   suggested,    something   more    immediately                                            ____________________            1.  This statute contains no language giving causes of action            to children who could  prove personal injury that might  have            been avoided  had it been observed.   In Marquay v.  Eno, 662                                                     _______     ___            A.2d  272, 278 (N.H. 1995),  the court held  that the statute            created no personal rights.   We are not moved  by Employers'            contention   that  this   ruling   should  not   be   applied            retroactively.                                         -3-            troublesome.  So contending,  Employers complains -- in terms            of  warranty -- of Stratford's negative answers in the policy            application to questions 25 and 26:                      25.   Has the applicant, Board and/or its                      employees  been involved  in or  have any                      knowledge of any  pending federal,  state                      or  local  legal actions  or proceedings,                      including EEOC, against  the entity,  its                      board  members,  or employees  within the                      last ten  years?  If yes,  attach details                      stating nature  of claim, date  of claim,                      loss date, loss payments and disposition,                      carrier handling claims, etc.                      26.  Are    there    any    circumstances                      indicating  the probability of a claim or                      action known by any  person to be covered                      by  this  insurance?    If   yes,  attach                      details.            In view of the lack of analysis in Employers' brief we regard            25   as  being  included  in  26  and  ask  what  claims,  or            "circumstances," to quote  question 26, affecting  Stratford,            the subpoena  might  be thought  to  suggest.   Certainly  no            criminal  proceedings.     Nor  could  it   be  thought  that            Stratford's former  students were attempting to  reactivate a            cause of  action arising  from behavior  that had  occurred a            decade  ago outside  of  Littleton.   Very  likely Hikel  was            charged  with   new  conduct  and  the   grand  jury,  before            indicting, wished to look at the whole picture.  Nothing more            had  yet  happened.     But  might  some  imaginative  lawyer            representing  some  student  in   connection  with  this  new                                         -4-            conduct, think  of claiming against Stratford  for not having            published2 Hikel's prior behavior?  Anything is possible, but            how likely, let alone probable?                      Employers  cites  no  authority  contradicting  our            belief  that a personal claim would be wholly frivolous.  The            New Hampshire  court's refusal to recognize  such rights even            in  the statute  cited  supra, n.1,  confirms  this.   If  an                                    _____            insurance  applicant  is  told  he has  to  conceive  of, and            report,  every possibility  that someone  "might" (Employers'            brief)  bring a  frivolous  law suit,  Employers'  solicitors            would starve.   It  is because there  are possibilities  that            people  take out  insurance.   The application  announced the            standard for reporting -- not possibility, but probability.                      The   application,  however,   was  not   the  only            standard-setter.   The policy itself, by  its terms, provides            that it does  not cover if "the Insured ha[d] become aware of            a proceeding, event or development  which has resulted in  or            could  in the  future result  in the  institution of  a claim            _____                 ______            against  the Insured. . . ."  (Emphasis supplied.)  "Possibly                                                                 ________            could result?"  "Reasonably  could result?"3  "Probably could                             __________                    ________            result?"  Even  apart from the principle  that ambiguities in            insurance contracts  are to be resolved  against the insurer,                                            ____________________            2.  At  the  risk, incidentally,  of  incurring  a claim  for            defamation, depending on how the duty is conceived.            3.  The New Hampshire case from which the court drew the more            limited word "reasonable" involved different policy language.                                         -5-            Trombly v. Blue  Cross/Blue Shield of New  Hampshire-Vermont,            _______   __________________________________________________            423 A.2d 980, 985  (N.H. 1980), it makes business  sense here            to   construe  the   exclusion   clause  together   with  the            application  questionnaire.   Cf. Commercial  Union Assurance                                          ___ ___________________________            Co.  v. Gilford Marina, Inc.,  408 A.2d 405,  407 (N.H. 1979)            ____________________________            (contradictory  clauses  in  an insurance  contract  must  be            interpreted  to reflect  the reasonable  expectations of  the            insured).  Hence we take probable.  For the insurer to go the            other way, and  say we do not cover matters  of which you had            notice, even though  that notice  was too remote  for you  to            have to  tell us about it,  makes no sense; indeed,  it would            seem affirmatively  misleading.  We  can not think  the facts            charged  Stratford  of  a  probability  that  some  Littleton            student would sue it.                      Finally, Employers' makes a  claim of malice.  This            requires no comment.                      Affirmed.                      _________                                         -6-
