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Essex Insurance Co. v. Associates for Renewal in Education

August 30, 2006

ESSEX INSURANCE COMPANY, PLAINTIFF,
v.
ASSOCIATES FOR RENEWAL IN EDUCATION, INC., ET AL., DEFENDANTS.



The opinion of the court was delivered by: Gladys Kessler U.S. District Judge

MEMORANDUM OPINION

Plaintiff Essex Insurance Company ("Essex") brings this common law action against Defendants Associates for Renewal in Education ("ARE") and John Doe, a minor, through his next friend Bob Doe, invoking this Court's diversity jurisdiction pursuant to 28 U.S.C. § 1332(a)(1). Essex seeks a declaratory judgment clarifying several provisions contained in the liability insurance policy it issued to ARE in 2001.

This matter is before the Court on Defendant Doe's Motion for Partial Summary Judgment [#31] and Plaintiff's Amended Motion for Summary Judgment [#44]. Upon consideration of the Motions, Oppositions, Replies, and the entire record herein, and for the reasons stated below, Defendant Doe's Motion for Partial Summary Judgment is denied and Plaintiff's Amended Motion for Summary Judgment is granted in part and denied in part.

I. BACKGROUND

A. Facts

Plaintiff is an insurance company incorporated under Virginia law and with its principal place of business in that state. Compl. ¶ 2. On August 23, 2001, it issued Commercial General Liability Policy 2CD 4003 ("Policy") to Defendant ARE, a District of Columbia corporation that operates residential care facilities under contracts with the D.C. government, including a facility known as Columbia House II. Pl.'s Statement of Undisputed Material Facts ¶ 1; Compl. ¶ 3.

The Policy ran from August 23, 2001 through August 23, 2002 and included general liability coverage up to an aggregate limit of $2 million, subject to numerous terms and conditions including a Sexual Abuse and/or Misconduct Limitation Endorsement ("Sublimit Endorsement"). Pl.'s Statement of Undisputed Material Facts ¶¶ 1-3. In relevant part, the Sublimit Endorsement reads: THIS ENDORSEMENT CHANGES THE POLICY.

In consideration of the premium charged, this endorsement will provide limited coverage under COMMERCIAL GENERAL LIABILITY claims made against you, caused by one of your employees . . . alleging injury or damages arising out of SEXUAL ABUSE OR MISCONDUCT which is caused by or contributed to by your failure to

1. Properly train, hire, or supervise any employee; or

2. Properly control, monitor, or supervise the treatment and care of the person whose care has been entrusted to you.

SUBLIMIT OF LIABILITY

Each claim limit: $100,000

Aggregate limit: $300,000

Id. ¶¶ 3-4 (emphasis in original).

The Sublimit Endorsement contains a lengthy and seemingly comprehensive definition of "Sexual Abuse and/or Misconduct." Id. ¶ 5. It further provides that:

The sublimit of liability shown in this endorsement is the most we will pay for all damages including investigation and defense because of injury arising out of any one claim for SEXUAL ABUSE AND/OR MISCONDUCT in any "policy year." If our limits are tendered or exhausted heron under this endorsement, we will not defend or continue to defend any suit.

Id. ¶ 6 (emphasis in original). Such language is often included in policies issued by Essex to residential care facilities, although the ARE Policy includes coverage amounts significantly higher than those contained in similar policies. See Pl.'s Am. Mot. for Summ. J. at 4.

The Policy includes provisions that restrict ARE's power to settle any claims or assign its rights without the consent of Essex. Specifically, the "consent clause" provides that "[n]o insured will, except at the insured's own cost, voluntarily make a payment, assume any obligation, or incur any expense . . . without our consent." Id., Ex. A, Essex Insurance Commercial General Liability Policy 2CD 4003 (hereinafter "Policy") ΒΆ G. Likewise, the anti-assignment clause states that "[ARE's] rights and duties ...


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