                                                                                                                           Opinions of the United
2008 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


5-23-2008

Old Bridge Twp Bd Ed v. Gen Star Indemnity
Precedential or Non-Precedential: Non-Precedential

Docket No. 07-1261




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                                            NOT PRECEDENTIAL

     UNITED STATES COURT OF APPEALS
          FOR THE THIRD CIRCUIT

                   ___________

                    No. 07-1261
                    __________

OLD BRIDGE TOWNSHIP BOARD OF EDUCATION,

                                       Appellant
                          v.

   GENERAL STAR INDEMNITY COMPANY

                          v.

   GENERAL STAR INDEMNITY COMPANY,

                                       Third Party Plaintiff

                          v.

 INSURANCE CORPORATION OF HANNOVER,

                                       Third Party Defendant



   On Appeal from the United States District Court
            for the District of New Jersey
             (D.C. Civ. No. 05-cv-05681)
     District Judge: Hon. Garrett E. Brown, Jr.



     Submitted under Third Circuit LAR 34.1(a)
                 on March 7, 2008
               Before: FISHER, GREENBERG and ROTH, Circuit Judges

                               (Opinion filed: May 28, 2008)



                                          OPINION


ROTH, Circuit Judge:

        Old Bridge Township Board of Education (the Board) appeals an order of the

U.S.District Court for the District of New Jersey, denying the Board’s motion for summary

judgment and granting summary judgment in favor of General Star Indemnity Company. The

issue on appeal is whether General Star is obligated to indemnify the Board for attorneys’

fees awarded in a lawsuit filed against the Board. For the reasons set forth below, we will

affirm the order of the District Court.

I. Background and Procedural History

        Because the facts are well known to the parties, we will discuss them only briefly

here.

        From July 1, 2002, until July 1, 2003, the Board held a School Board Legal Liability

Policy issued by General Star. Pursuant to that policy, General Star provided the Board with

insurance coverage for certain legal claims. The policy provided, “The Company [General

Star] will pay on behalf of the INSURED all sums which the INSURED shall become legally

obligated to pay as damages to which this insurance applies, as a result of CLAIMS first

made against the INSURED . . .             by reason of WRONGFUL ACT(S) by the

                                             2
EDUCATIONAL ENTITY . . ..” 1 Under the agreement, General Star had the “duty to

defend any suit against the INSURED seeking damages to which this insurance applies,

arising from WRONGFUL ACT(S) even if any of the allegations of the CLAIM or suit are

groundless, false, or fraudulent.” In addition, a provision, entitled “Supplemental Payments,”

obligated General Star to pay “court costs incurred in any suit to which this insurance applies

and which the Company is defending hereunder.”

       The policy included a number of exclusions. In particular, the policy provided that

General Star “shall not make any payment nor defend any suit in connection with any

CLAIMS made against the INSURED . . . [f]or any damage arising from bodily injury,

sickness, emotional distress, mental anguish . . . humiliation and disparagement . . . [w]hether

or not based upon, arising out of or related to any civil rights or other violation of statutory,

constitutional or common law” or “[f]or back wages or salary, employment benefits,

overtime, future wages or salary or similar CLAIMS . . ..” The policy also excluded “any

costs, fees including attorney’s fees, or expenses which the INSURED shall be legally

obligated to pay as a result of any adverse judgment for injunctive or declaratory relief . . ..”

       In June 2002, Jeanne Cook, a substitute teacher employed by the Board, filed suit

against the Board (as well as other defendants) in the Superior Court of New Jersey under

the New Jersey Law Against Discrimination. Cook alleged that the Board had engaged in


   1
    The policy defined “Wrongful Acts” as “[a]ny actual or alleged errors, misstatements,
misleading statements, acts or omissions, neglect or breach of duty, individually or
collectively, including actual or alleged Civil Rights violations . . . .”

                                               3
disability discrimination, failed to provide reasonable accommodation for her disabilities,

created a hostile work environment, retaliated against her for engaging in protected activities,

and committed intentional infliction of emotional distress. Cook alleged that she had

suffered “emotional distress, humiliation, embarrassment, bodily injury coupled with physical

manifestation of emotional distress, loss of income and other severe financial losses.” She

sought compensatory and punitive damages, as well as back pay, front pay, attorneys’ fees,

interest, and costs.

       General Star engaged counsel and provided a defense on behalf of the Board, subject

to a “Reservation of Rights” and Non-Waiver Agreement. The Reservation of Rights letter

stated that General Star was reserving its rights under the policy, claiming that “[t]here is no

coverage for any damages that may be awarded as excluded by exclusion (2), which

involve[s] body injury and/or emotional distress or mental anguish. Additionally, there is no

coverage for any damages that might be awarded as excluded by exclusion (12), [which

excludes] back pay, future pay, or employee benefits.”

       A jury found that the Board and other defendants had failed to provide Cook with

reasonable accommodation, discriminated against her based on her handicap, retaliated

against her, and failed to engage in the interactive process. The jury determined that Cook

was not entitled to economic damages but awarded her $250,000 for “emotional distress and

suffering.” The Superior Court of New Jersey awarded Cook attorneys’ fees and costs.




                                               4
        The Board then filed a complaint in the Superior Court against General Star seeking

indemnification for the award of attorneys’ fees and costs.2 Both the Board and General Star

filed a motion for summary judgment. The action was subsequently removed to the U.S.

District Court for the District of New Jersey.

        The District Court granted General Star’s motion and denied the Board’s motion. In

so doing, the District Court reasoned that, by virtue of the exclusions for claims for back

wages or emotional distress, the policy agreement did not provide coverage for Cook’s

claims. Because the policy agreement provided that General Star would pay “court costs in

any suit to which this insurance applies” (emphasis added), the District Court concluded that

General Star did not have to pay costs in connection with Cook’s suit.

        The Board timely appealed.

II. Analysis

        The District Court had jurisdiction pursuant to 28 U.S.C. § 1332.          We have

jurisdiction under 28 U.S.C. § 1291.

        We exercise plenary review of the District Court’s order granting summary judgment.

Newport Assocs. Dev. Co. v. The Travelers Indem. Co. of Illinois, 162 F.3d 789, 791 (3d Cir.

1998). Summary judgment will be affirmed only if “there is no genuine issue as to any




    2
    It is undisputed that the policy does not cover the $250,000 in emotional damages
awarded to Cook.

                                             5
material fact and . . . the moving party is entitled to judgment as a matter of law.” F ED. R.

C IV. P. 56(c).

        We also exercise plenary review of the District Court’s interpretation of state law.

Chemical Leaman Tank Lines, Inc. v. Aetna Cas. & Sur. Co., 89 F.3d 976, 983 (3d Cir.

1996). In this case, New Jersey law applies.

       Under New Jersey law, an insurance policy is interpreted “according to its plain and

ordinary meaning.” Voorhees v. Preferred Mut. Ins. Co., 607 A.2d 1255, 1260 (N.J. 1992).

However, because insurance contracts are contracts of adhesion, New Jersey law requires

that courts “assume a particularly vigilant role in ensuring their conformity to public policy

and principles of fairness.” Gibson v. Callaghan, 730 A.2d 1279, 1282 (N.J. 1999) (internal

quotation omitted). As such, “when there is ambiguity in an insurance contract, courts [must]

interpret that contract to comport with the reasonable expectations of the insured.” Zacarias

v. Allstate Ins. Co., 775 A.2d 1262 168 N.J. 590, 594 (N.J. 2001). In addition, exclusions in

an insurance policy must be narrowly construed, and the insurer bears the burden of bringing

the case within a policy exclusion. American Motorists Ins. Co. v. L-C-A Sales Co., 713

A.2d 1007, 1013 (N.J. 1998). Nonetheless, in the absence of any ambiguity, a court “should

not write for the insured a better policy of insurance than the one purchased.” Voorhees, 607

A.2d at 1260.

       The policy at issue in this case unambiguously requires General Star to pay “all sums

which [the Board] shall become legally obligated to pay as damages to which this insurance



                                               6
applies . . .” as well as “court costs incurred in any suit to which this insurance applies . . .”

(emphasis added). Thus, the Board is only entitled to payment for Cook’s attorneys’ fees if

her suit was one “to which this insurance applies.”

       In her claims against the Board, Cook claimed that she had suffered “emotional

distress, humiliation, embarrassment, bodily injury coupled with physical manifestation of

emotional distress, loss of income and other severe financial losses.” Having prevailed on

certain of her claims, she was awarded only emotional damages.

       The exclusions to the policy clearly state that General Star “shall not make any

payment . . . in connection with any CLAIMS . . . [f]or any damage arising from bodily injury

. . . emotional distress, mental anguish . . . humiliation and disparagement . . .” or “[f]or back

wages or salary, employment benefits, overtime, future wages or salary or similar CLAIMS

. . . ” (emphasis added). While we are mindful that we must construe exclusions to an

insurance policy narrowly, Cook’s claims fall squarely within the types of claims excluded

by the policy at issue in this case.3 By its terms, the policy provides that General Star will

not make any payment in connection with such claims. Indemnification of attorneys’ fees

would constitute a payment. Cook’s suit is not one to which the insurance applies; it is




   3
    The Board argues that the District Court improperly placed the burden of proving that
the exclusions did not apply on the Board. However, the exclusions clearly apply to Cook’s
case. The plain language of the policy satisfies General Star’s burden with respect to
showing that the exclusions apply here.

                                                7
specifically excluded from coverage. As such, General Star is not obligated to pay for

Cook’s attorneys’ fees under the policy.

III. Conclusion

      For the reasons set forth above, we will affirm the judgment of the District Court.




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