AI Generated Opinion Summaries

This summary was computer-generated without any editorial revision. It is not official, has not been checked for accuracy, and is NOT citable.

Facts

A federal lawsuit was filed against a school district, its principal, and a special education teacher, alleging sexual molestation of a student, negligence in hiring and supervising the teacher, failure to ensure the student’s safety, and violations of the student’s constitutional and educational rights. The school district sought defense and indemnification from its insurer, the New Mexico Public Schools Insurance Authority, which denied coverage based on a sexual misconduct exclusion in the policy.

Procedural History

• District Court of San Miguel County: Granted summary judgment in favor of the school district, holding that the insurer had a duty to defend the federal lawsuit because some claims were separate from the sexual misconduct allegations and fell within the policy’s coverage.

Parties' Submissions

• Appellant (New Mexico Public Schools Insurance Authority): Argued that the policy excluded coverage for all claims arising from sexual misconduct and that the errors and omissions endorsement was subject to the same exclusions as the general liability coverage.
• Appellees (School District): Contended that the federal lawsuit included claims unrelated to sexual misconduct, such as violations of the student’s Individualized Education Program (IEP) and constitutional rights, which were covered under the policy.

Legal Issues

• Did the insurer have a duty to defend the school district in the federal lawsuit despite the sexual misconduct exclusion in the policy?
• Was the errors and omissions endorsement subject to the same exclusions as the general liability coverage?

Disposition

• The Supreme Court of New Mexico affirmed the trial court’s decision, holding that the insurer had a duty to defend the school district until it could establish in the primary lawsuit that all claims fell within the exclusion.

Reasons

Per Ransom CJ (Franchini and Frost JJ. concurring):

• The court found that the errors and omissions endorsement was subject to the same terms and exclusions as the general liability coverage, including the exclusion for claims arising from sexual misconduct.
• However, the insurer had a duty to defend the school district because the federal lawsuit included general allegations of civil rights violations and IEP failures that could potentially fall within the policy’s coverage. The insurer could not conclusively prove that all claims arose from the excluded sexual misconduct.
• The court emphasized that the duty to defend is broader than the duty to indemnify and arises whenever the allegations in the complaint suggest a possibility of coverage under the policy. The insurer must fulfill this duty until it can establish in the primary lawsuit that the claims are excluded.
• The trial court’s grant of summary judgment was affirmed because the insurer failed to meet its burden of proving that all claims were excluded as a matter of law.