Opinion ID: 1707332
Heading Depth: 1
Heading Rank: 2

Heading: business pursuits endorsement

Text: (Section II Only) In consideration of an additional premium, it is agreed that such insurance as is afforded by this policy under Coverage E  Personal Liability and, indicated below by an X, as included, Coverage F  Medical Payments to Others is extended to apply with respect to the business pursuits of the Insured(s) named below in connection with the business stated below, subject to the following provisions: (emphasis added) Name of Insured(s) Michael & Linda Phillips Business Teacher with Corporal Punishment (D-E) Liability for corporal punishment [X] included       This insurance does not apply:       4. when the insured is a member of the faculty or teaching staff of any school or college;       b. to bodily injury to any pupil arising out of corporal punishment administered by or at the direction of the Insured, but this exclusion does not apply under Coverage E  Personal Liability if liability for corporal punishment is indicated above by an X, as included. Appellants argue the policy is unambiguous in that the business pursuits-teaching endorsement is subject only to the exclusions listed in the endorsement itself. The argument is without merit. The endorsement says such insurance as is afforded by this policy under Coverage E  Personal Liability    is extended    subject to the following provisions. The liability insurance afforded under Coverage E is limited by a list of exclusions within that section of the policy, including the intentional injury exclusion. Because there is no coverage under the main policy for intentional injuries, there is no extended coverage for an intentional injury under the endorsement, unless the act involves corporal punishment inflicted while engaged in the business pursuit of teaching. The main policy does not cover intentional acts of the insured. The business pursuits endorsement merely provides coverage for the act of administering corporal punishment while the insured is engaged in the business of teaching. Corporal punishment is covered by express coverage language in the business pursuits endorsement. Likewise, the business pursuit of teaching is no longer excluded under the business pursuits exclusion in the main policy, but if there is no express coverage language elsewhere for the occurrence involved, the insurer has no duty to indemnify or defend. Next, appellants argue the policy with the endorsement is ambiguous as to which exclusions apply and, therefore, must be construed in favor of the insured. See, e.g., Caspersen, 298 Minn. at 98, 213 N.W.2d at 330; see also Northwest Airlines, Inc. v. Globe Indemnity Co., 303 Minn. 16, 26, 225 N.W.2d 831, 837 (1975); Farkas v. Hartford Accident and Indemnity Co., 285 Minn. 324, 327, 173 N.W.2d 21, 24 (1969). The coverage provided under Coverage E (subject to the Coverage E exclusions) is extended under the endorsement. In the endorsement Security relisted some of those main policy exclusions, but not all of them. Notwithstanding, it appears clear there exists no ambiguity. The first sentence of the endorsement makes perfectly clear the limits of coverage under the endorsement. Some of the exclusions listed on the endorsement are merely redundant because the same exclusions which limit coverage are listed under Coverage E of the main policy. Finally, appellants argue the provisions of the main policy conflict with the endorsement. [W]here provisions in the body of the policy conflict with an endorsement, the provision of the endorsement governs. Dairyland Insurance Co. v. Implement Dealers Insurance Co., 294 Minn. 236, 245, 199 N.W.2d 806, 811 (1972); see also Wyatt v. Wyatt, 239 Minn. 434, 437-38, 58 N.W.2d 873, 875-76 (1953) (no conflict between body of policy and endorsement and coverage excluded). Appellants school district and Fireman's Fund find a conflict because, [t]o read them [the main policy and the endorsement exclusions] together would result in a duplication of two of the exclusions, and    would render the Business Pursuits Endorsement itself a nullity. Duplication does not raise a conflict between the policy and endorsement. It just creates superfluous policy language. There is, however, a conflict between the intentional injury exclusion and corporal punishment coverage under the endorsement. But this conflict only warrants applying the endorsement language rather than the intentional injury exclusion to cover corporal punishment inflicted by the insured while engaged in the business of teaching. It does not void the intentional injury exclusion of the main policy in all other respects. The policy endorsement language is clear, and the only conflict between the main policy intentional injury exclusion and the endorsement is over coverage of corporal punishment. The net result of reading the policy and endorsement together is that the endorsement completely modifies the original business pursuits exclusion and creates a limited exception to the original intentional injury exclusion. This in no way creates additional coverage for intentional injuries caused other than by corporal punishment under the policy. 3. The trial court denied Fireman's Fund's first motion for partial summary judgment [5] on the grounds there was no exclusion under the penal statute violation exclusion of the policy [6] because the exclusion applied only to personal injury (defined in the policy as false arrest or imprisonment, libel, slander, invasion of privacy, and invasion of the right of private occupancy) whereas R.L.E. had suffered bodily injury. The trial court held there were factual issues whether Phillips' actions were willful violations of a penal statute or ordinance and also whether Phillips' actions were within the scope of his employment duties so as to make him an additional insured under the policy. In June 1983, Fireman's Fund made a second motion for summary judgment based on the policy definition of occurrence, which contained an exclusion for intentional injuries. The trial court likewise denied this motion. We conclude the applicable policy language demonstrates that no covered occurrence took place in the instant case, and therefore the trial court erred by denying this second motion for summary judgment. The Fireman's Fund policy contained the following pertinent language: DEFINITIONS       occurrence means an accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured;       COVERAGE PART  COMPREHENSIVE GENERAL LIABILITY INSURANCE       1. COVERAGE A  BODILY INJURY LIABILITY COVERAGE B  PROPERTY DAMAGE LIABILITY The Company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of Coverage A. bodily injury or Coverage B. property damage to which this insurance applies, caused by an occurrence   . (emphasis added) This language is identical to the policy language in Hill. In that case we said: Under the policy Fireman's agreed to pay, on behalf of the insured, all damages for which the insured became liable because of bodily injury or property damage caused by an occurrence. An occurrence was defined as an accident which results in bodily injury or property damage. The policy excluded from coverage bodily injury or property damage which is either expected or intended from the standpoint of the insured. Hill, 314 N.W.2d at 835 (emphasis added). Hill governs this case. Therefore, we hold the trial court should have granted Fireman's Fund's second motion for summary judgment on its duties to defend and indemnify Phillips. 4. Appellant school district claims the trial court erred in denying its motion for partial summary judgment on its duty to defend Phillips in the main action. The trial court ruled that under Minn.Stat. § 127.03, subd. 2 (1982) [7] the school district had an absolute duty to defend Phillips. The court also held the school district's duty to indemnify raised a fact issue under Minn.Stat. § 466.07, subd. 1a (1982). [8] Section 127.03, subd. 2 clearly establishes the school district's absolute duty to defend a teacher when the claim against the teacher arises out of or in connection with the employment of such teacher with such school district. Moreover, we note that section 466.07, subd. 1a provides that the school district shall    provide defense for any employee    in connection with any tort claim or demand arising out of an alleged act or omission occurring within the scope of his employment   . The last sentence of section 466.07, subd. 1a provides: The provisions of this subdivision requiring indemnification do not apply in the case of malfeasance in office or willful or wanton neglect of duty. The school district concludes that since the title of section 466.07, subd. 1a uses the term indemnify while the body of the subdivision uses the terms indemnify and provide a defense, the term indemnify as used in the statute includes the term defense. Therefore, it contends, there is no duty to either indemnify or defend if Phillips' alleged acts constituted malfeasance in office or willful or wanton neglect of duty. In our view, there is no merit to this argument. Section 127.03, subd. 2 clearly establishes an absolute duty to defend Phillips. Moreover, section 466.07, subd. 1a mandates a duty to defend. The latter section only limits the school district's obligation to indemnify against judgments or settlements if malfeasance or willful or wanton neglect of duty exists. 5. The school district next contends that if Fireman's Fund coverage of Phillips is excluded as a matter of law, the district should be excused from liability under the Municipal Tort Liability Act. Minn.Stat. ch. 466 (1982). In support of this claim, it relies on Scott v. Independent School District No. 709, Duluth, 256 N.W.2d 485 (Minn.1977), for the proposition that a school district is only liable for its employees' torts to the extent of insurance coverage. In that case, the school district was held liable for negligence per se up to the maximum statutory liability limit of the tort liability act, although it had not procured insurance coverage to the maximum limit. Scott involved the issue of the school district's liability for its own negligent actions, not the issue of indemnity for the torts of its employees. It is, therefore, irrelevant to the issue here presented. If the school district is itself negligent, the Fireman's Fund policy carries a liability limit well in excess of the maximum school district liability under Minn.Stat. § 466.04, subd. 1 (1982). The complaint in the main action does charge the school district with negligent hiring and supervision. As to those claims, Fireman's Fund under its policy would have to defend and indemnify the school district. But here, the issue is not the liability of the school district for its own negligence, but rather one of liability to indemnify against Phillips' liability. [9] Furthermore, because the district attempted to obtain liability insurance to cover the district and its employees, it has waived the defense of governmental immunity to the extent of the liability stated in the policy. Minn.Stat. § 466.06 (1982). Thus, the procurement of insurance coverage waives the immunity defense up to the policy limits even though the employee's tort may be subject to a policy exclusion. However, we do agree with the school district that the trial court erred in denying its motion for partial summary judgment on the indemnity issue. The malfeasance in office or willful or wanton neglect of duty exception of section 466.07, subd. 1a releases the school district from the duty of indemnifying its employee Phillips. It can hardly be seriously argued that sexual contact by Phillips alleged in the main action did not constitute malfeasance or willful neglect of duty by a school athletic coach, teacher and counselor. When an adult teacher-counselor engages in sexual contact with a 16-year-old student, the exception of section 466.07, subd. 1a applies as a matter of law. See, e.g., Jacobsen v. Nagel, 255 Minn. 300, 304, 96 N.W.2d 569, 573 (1959), citing Daugherty v. Ellis, 142 W.Va. 340, 97 S.E.2d 33 (1956) (defining malfeasance); In re Olson, 211 Minn. 114, 117, 300 N.W. 398, 400 (1941) (neglect of duty). The order and judgment granting Horace Mann and Security summary judgment is affirmed. The order denying Fireman's Fund's second motion for summary judgment is reversed. It is ordered that summary judgment in favor of Fireman's Fund be entered on the issues of defense and indemnification of Phillips. It is further ordered that summary judgment be entered in favor of the school district adjudging it is not liable to indemnify Phillips for any of his acts. The order holding that the school district had the duty to defend Phillips is affirmed. The order denying the school district partial summary judgment on the issue of indemnification of Phillips is reversed. [10] Affirmed in part; reversed in part.