Criminal Sexual Abuse of Students Excluded

Sexual Abuse of Students not Educational Employment Activities

In Nautilus Insurance Company v. Nicole Dufault, Isaiah Ziyambe-Freeman, Uchechi Ike, Matthew Derilus, Isaiah Gavin, Ormond Simpkins, Frankie Jerome, Brandon Hayes, and John Does 1-10, Civil Action No. 22-cv-836, United States District Court, D. New Jersey (March 9, 2023) Nautilus refused to defend or indemnify a convicted sexual abuser of children. Because Nicole Dufault (“Defendant” or “Dufault”) was convicted of the crime Nautilus sought a declaration form the USDC and brought:

A motion for summary judgment seeking a declaration that it is not obligated to defend or indemnify Defendant Nicole Dufault in several underlying civil lawsuits; and
A motion for default judgment against defendants Matthew Derilus, Isaiah Gavin, Ormond Simpkins, Frankie Jerome, Brandon Hayes, Isaiah Ziyambe-Freeman, and Uchechi Ike (collectively, the “Default Defendants” or “Underlying Plaintiffs”)
BACKGROUND

The Underlying Plaintiffs, in separate civil actions, alleged that Defendant Nicole Dufault, an insured high-school teacher formerly of Columbia High School in New Jersey, sexually abused them while they were under the age of 16.

On February 11, 2015, an Essex County grand jury returned a 40-count indictment against Defendant, charging her with first-degree aggravated sexual assault and second-degree endangering welfare of a child. The Indictment accused Defendant of engaging in sexual relations with six male students under the age of 16 in 2013 and 2014.

In 2020 Defendant pleaded guilty in the criminal action to three counts of third-degree aggravated criminal sexual contact as to three of the abused minors.

The Nautilus Policies and Coverage Dispute

Plaintiff issued an Excess Educators Employment Liability Insurance Policy to the New Jersey Education Association, of which Defendant is a member, covering September 2013 through September 2015. (hereinafter, the “Nautilus Policies”). The Nautilus Policies provided defense and indemnity coverage on behalf of an insured educator, but only for claims arising from the insured's “education employment activities.”

For defense and indemnity coverage to attach under the Nautilus Policies, the subject matter of the suit for which coverage is sought must be premised on “education employment activities.” The Nautilus Policies expressly define “education employment activities” as either: “(1) pursuant to the express or implied terms of his or her employment by an educational unit; or (2) at the express request or with the express approval of his or her supervisor, provided that, at the time of such request or approval, the supervisor was performing what would appear to be his or her educational employment activities.”

Even if coverage attaches through “education employment activities,” the Nautilus Policies contain exclusions that disclaim coverage for claims arising out of a “criminal proceeding that has resulted in the Insured's conviction,” or “[o]ccurrences involving damages which are the intended consequence of action taken by the Insured.”

Nautilus disclaimed all defense and indemnity coverage for the underlying claims.

The Instant Actions for Summary Judgment and Default Judgment

Specifically, Plaintiff sought a declaration from the Court that it has no duty to indemnify or defend Dufault in the civil actions brought by the Underlying Plaintiffs because:

her conduct does not fall within the Nautilus Policies' definition of “educational employment activities;”
her convictions for criminal sexual contact, the acts of which constitute the underlying lawsuits, preclude coverage under the Nautilus Policies' exclusions; and
her intentional sexual abuse of minor children excluded her from coverage under the “Intentional Damages” provision of the Nautilus Policies.
DISCUSSION

Plaintiff argued that Defendant's purported sexual abuse clearly falls outside the definition of covered “education employment activities,” and thus Defendant may not invoke coverage under the Nautilus Policies.

The Court agreed with Plaintiff and granted a declaratory judgment in Nautilus' favor.

The terms of the Nautilus Policies are clear and unambiguous - Nautilus disclaims its obligation to defend and indemnify civil lawsuits in which the underlying subject matter is not related to “educational employment activities."

It was undisputed that the alleged sexual abuse of minor students was not conducted pursuant to the terms of Defendant's (or any educator's) educational employment. Therefore, the court found that coverage does not attach to Defendant under the Nautilus Policies because the Underlying Plaintiffs' claims against Defendant do not arise out of her “educational employment activities.”

Plaintiff's motion for summary judgment against Defendant was granted and Plaintiff's motion for default judgment against the Default Defendants - was granted.

ZALMA OPINION

No liability insurance policy covers every possible claim against its insureds. Almost all, like the Nautilus policies, exclude intentional and criminal acts. Since defendant was convicted of a crime, the sexual abuse of minor students, was not part of her employment as a teacher and was clearly intentional, there was no possibility that Nautilus had an obligation to defend or indemnify the abusive teacher.

(c) 2023 Barry Zalma & ClaimSchool, Inc.

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Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com

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