Watch the full video at https://rumble.com/v2d9f14-criminal-sexual-abuse-of-students-excluded.html and at https://youtu.be/hkzyvP35B7Q
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 child sexual abuser. Because Nicole Dufault (“Defendant” or “Dufault”) was convicted of the crime, Nautilus sought an explanation from the USDC and provided:
- A motion for summary judgment seeking a declaration that it is not obligated to defend or indemnify defendant Nicole Dufault in several underlying civil actions; 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”)
The underlying plaintiffs, in separate civil actions, alleged that defendant Nicole Dufault, an insured high school teacher formerly at 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 the defendant, charging her with aggravated sexual assault in the first degree and endangering the welfare of a child in the second degree. The indictment accused the defendant of having sexual relations with six male students under the age of 16 in 2013 and 2014.
In 2020, the defendant pleaded guilty in the criminal case to three counts of third-degree felony sexual intercourse with three of the abused minors.
The dispute over Nautilus policies and coverage
Plaintiff issued an Excess Educators Employment Liability Policy to the New Jersey Education Association, of which Defendant is a member, covering September 2013 through September 2015. (the “Nautilus Policies”). The Nautilus policies provided defense and indemnity coverage on behalf of an insured educator, but only for claims arising out of the insured’s “educational employment activities.”
In order for defense and indemnity coverage to attach under Nautilus policies, the subject matter of the litigation for which coverage is sought must be based on “educational employment activities.” The Nautilus policies expressly define “educational employment activities” as either: “(1) pursuant to the express or implied terms of his or her employment by an educational entity; 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.”
Although coverage is linked to “educational employment activities,” Nautilus policies contain exclusions that disclaim coverage for claims arising from a “criminal proceeding that has resulted in the insured’s conviction” or “[o]events involving damages which are the intended consequence of actions taken by the insured.”
Nautilus waives all defense and indemnification for the underlying claims.
Instant Actions for Summary Judgment and Default Judgment
Specifically, the 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 Policy’s definition of “educational employment activity;”
- her convictions for criminal sexual contact, the actions 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 Injury” provisions of the Nautilus policies.
Plaintiff argued that Defendant’s alleged sexual assault clearly falls outside the definition of covered “educational employment activity,” and thus Defendant cannot invoke coverage under the Nautilus policies.
The court agreed with the plaintiff and entered a declaratory judgment in favor of Nautilus.
The terms of the Nautilus policies are clear and unambiguous – Nautilus waives its obligation to defend and indemnify civil suits where 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 the defendant’s (or any other teacher’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 did not arise out of her “educational employment activities.”
The plaintiff’s motion for summary judgment against the defendant was granted and the plaintiff’s motion for default judgment against the defendant was granted.
No liability insurance covers all possible claims against its insured. Almost all, like the Nautilus policies, exclude intentional and criminal acts. Because the defendant was convicted of felony sexual assault of minor students, was not part of her employment as a teacher, and was clearly intentional, there was no possibility that Nautilus had a duty 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 serving as an insurance consultant specializing in insurance coverage, insurance claims management, 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 attorney and more than 54 years in the insurance industry. He can be reached at http://www.zalma.com and firstname.lastname@example.org
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