REINA v. TOWNSHIP OF UNION et al
OPINION & ORDER granting Liberty Mutual's 21 Motion to Dismiss the third party complt.; granting GSM's 26 Motion for Summary Judgment on third party complt.. Signed by Judge Stanley R. Chesler on 7/24/2013. (nr, )
NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
TOWNSHIP OF UNION, WILLIAM SHERIDAN :
LIBERTY MUTUAL INSURANCE COMPANY :
and GARDEN STATE MUNICIPAL JOINT
Hon. Stanley R. Chesler, U.S.D.J.
Civil Action No. 13-659 (SRC)
OPINION & ORDER
This matter comes before this Court on two motions: 1) the motion to dismiss William
Sheridan’s third-party Complaint for failure to state a valid claim for relief, pursuant to Federal
Rule of Civil procedure 12(b)(6), by third-party Defendant Liberty Mutual Insurance Company;
and 2) the motion for summary judgment on the Second Count of William Sheridan’s third-party
Complaint, pursuant to Federal Rule of Civil Procedure 56, by third-party Defendant Garden
State Municipal Joint Insurance Fund. For the reasons stated below, both motions will be
This dispute arises from the lawsuit by Plaintiff Imelda Reina against various defendants,
including William Sheridan (“Sheridan”), which alleges that Sheridan injured her during a visit
to her home which he made in his role as a housing inspector for the Township of Union.
Sheridan answered the Complaint and filed a third-party Complaint (the “TPC”) with two counts,
one seeking indemnification under a policy issued by third-party Defendant Liberty Mutual
Insurance Company (“Liberty”), the other seeking indemnification under a policy issued by thirdparty Defendant Garden State Mutual Joint Insurance Fund (“GSM”). Liberty has filed a motion
to dismiss the TPC, and GSM has filed a motion for summary judgment.
Liberty moves to dismiss the TPC on the ground that the TPC alleges that Sheridan was
acting in the course of his employment at the time of the injury, and that the policy at issue has an
exclusion for coverage for injuries arising out of the insured’s employment. In opposition,
Sheridan argues that the TPC contains two claims which are in the alternative: one for coverage
under his homeowner’s policy from Liberty, if Plaintiff’s injury is found to be for conduct
outside the course of his employment, and one for coverage under GSM, alleged to cover
employees of the Township of Union. Sheridan contends that pleading in the alternative is
permissible, and that it is too early in the litigation for the Court to determine whether or not he
injured Plaintiff while acting within the scope of his employment.
Yes, pleading in the alternative is permissible, but each alternative claim must
nonetheless meet the Supreme Court’s pleading requirements. A complaint will survive a
motion under Rule 12(b)(6) only if it states “sufficient factual allegations, accepted as true, to
‘state a claim for relief that is plausible on its face.’” Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949
(2009) (quoting Bell Atlantic v. Twombly, 550 U.S. 544, 570 (2007)). The pleading standard
imposed by Federal Rule of Civil Procedure 8(a) will be met if the complaint “pleads factual
content that allows the court to draw the reasonable inference that the defendant is liable for the
misconduct alleged.” Id. (citing Twombly, 550 U.S. at 556.) While the complaint need not
demonstrate that a defendant is probably liable for the wrongdoing, allegations that give rise to
the mere possibility of unlawful conduct will not do. Iqbal, 129 S.Ct. at 1949; Twombly, 550
U.S. at 557. “Factual allegations must be enough to raise a right to relief above the speculative
level on the assumption that all the allegations in the complaint are true (even if doubtful in
fact).” Twombly, 550 U.S. at 1965 (internal citations omitted).
The problem for Sheridan here is that the First Count of the TPC does not plead sufficient
facts to meet the requirement that it raise the right to relief from Liberty above the speculative
level. The TPC specifically identifies the insurance policy issued by Liberty and thereby
incorporates that document. In reviewing a motion to dismiss, pursuant to Rule 12(b)(6), a court
may consider the allegations of the complaint, as well as documents attached to or specifically
referenced in the complaint, and matters of public record. Pittsburgh v. W. Penn Power Co., 147
F.3d 256, 259 (3d Cir. 1998); see also 5B Charles Alan Wright & Arthur R. Miller, Federal
Practice & Procedure: Civil 3d § 1357 (3d ed. 2007). Sheridan does not dispute that this
insurance policy does, in fact, exclude coverage for liability for injuries he caused while acting
within the scope of his employment.
Sheridan contends that the First Count of the TPC should be read without reference to the
factual allegations in the Second Count. That is fine, but the First Count, standing alone, fails to
state a valid claim for relief. It fails to plead facts which make it plausible that Liberty has an
obligation under that policy to cover Sheridan. When the Supreme Court decided Twombly and
revised pleading standards, it eliminated this kind of speculative pleading. If Sheridan wishes to
assert a claim against Liberty, he must plead facts to support his claim that he is entitled to
coverage. The claim against Liberty will be dismissed without prejudice. If Sheridan believes
that he can plead sufficient facts to permit an amended TPC to withstand a Rule 12(b)(6) motion,
he may seek leave of the Court to do so.
GSM moves for summary judgment on the ground that, in short, the policy in question
contains an exclusion which bars insurance coverage for Sheridan.1 In opposition, Sheridan
argues that a material disputed factual question precludes the entry of judgment as a matter of
law. Sheridan concedes that he pleaded guilty to a charge of criminal sexual contact in the fourth
degree that relates to Plaintiff Reina’s claims, and that he did so prior to the date on which Reina
filed this suit. The parties do not dispute that the policy states this exclusion provision:
The Underwriters will not make payment for any loss, CLAIM or for any
DEFENSE COSTS for any employee, volunteer worker, official or other person
or persons. However, with respect only to this Insuring Agreement D.,
Underwriters agree, subject to all other policy limitations, terms and conditions,
that as to any CLAIM or SUIT for SEXUAL ABUSE, Underwriters will
indemnify the employee, volunteer worker or official for all reasonable DEFENSE
COSTS to the extent such DEFENSE COSTS are incurred prior to the date on
which, by either agreement, admission, or settlement of a CLAIM or by an
adjudication, it is determined that the employee, volunteer worker or official
committed an act of SEXUAL ABUSE.
(GSM’s Reply Ex. 1 at 33.) The parties also do not dispute that the policy defines “sexual
abuse” as follows:
GSM’s brief points out that it is not, in actuality, an insurer, but is the policyholder of an
insurance policy issued by Lloyd’s, London. These facts are neither disputed nor material to the
SEXUAL ABUSE means any actual, attempted or alleged criminal sexual conduct
of a person by another person, or persons acting in concert, regardless if criminal
charges or proceedings are brought, which causes physical and/or mental injuries.
SEXUAL ABUSE also includes actual, attempted or alleged: sexual molestation,
sexual assault, sexual exploitation or sexual injury.
But SEXUAL ABUSE does not include SEXUAL HARASSMENT.
(GSM’s Ex. D at 20.) Sheridan rests his argument on the following part of the definition of
“sexual abuse:” “which causes physical and/or mental injuries.” Sheridan argues that it has yet to
be determined by this Court whether he caused Reina any injuries, and so it has yet to be
determined whether he committed an act of sexual abuse, within the meaning of the exclusion
The New Jersey Supreme Court has recently summarized the law of interpretation of
insurance policies as follows:
Insurance policies are construed in accordance with principles that govern the
interpretation of contracts; the parties’ agreement will be enforced as written when
its terms are clear in order that the expectations of the parties will be fulfilled.
The terms of insurance contracts are given their plain and ordinary meaning, with
ambiguities resolved in favor of the insured. Nonetheless, courts cannot write for
the insured a better policy of insurance than the one purchased.
Memorial Properties, LLC v. Zurich American Ins. Co., 210 N.J. 512, 525 (2012) (citations
omitted). “While coverage provisions are given a broad interpretation by the courts, a strict
interpretation is required when there is an exclusion clause which is also strictly construed
against the insurer.” Stafford v. T.H.E. Ins. Co., 309 N.J. Super. 97, 103 (N.J. Super. Ct. App.
Div. 1998). Nonetheless, in that same decision, the Appellate Division held:
We recognize that if there is a second fair interpretation of an exclusion available
to an injured plaintiff, the insurance policy will be construed for coverage against
the insurer. This does not mean however that any far-fetched interpretation of a
policy exclusion will be sufficient to create an ambiguity requiring coverage.
Id. at 105 (citations omitted). The question, then, for this Court is whether the parties here have
proposed two fair readings of the policy.
Sheridan proposes that the “date on which, by either agreement, admission, or settlement
of a loss, occurrence or suit or by an adjudication, it is determined that the employee, volunteer
worker or official committed an act of sexual abuse” has not yet occurred, and that it will not
occur until this Court determines whether his sexual acts injured the Plaintiff.
Sheridan’s argument is unpersuasive. It is undisputed that Sheridan pleaded guilty to
criminal sexual contact in the fourth degree, in violation of N.J.S.A. 2C:14-3b, which states: “An
actor is guilty of criminal sexual contact if he commits an act of sexual contact with the victim
under any of the circumstances set forth in section 2C:14-2 c.(1) through (4). Criminal sexual
contact is a crime of the fourth degree.” There is no dispute that, after Sheridan pleaded guilty to
this charge in criminal court, and prior to the date Plaintiff Reina filed the instant case, there was
a criminal adjudication of Sheridan, within the meaning of the policy.
Sheridan contends that the conditions of the policy definition have not been met. This is
unpersuasive because Sheridan has overlooked that the definition, quoted above, has three parts:
the sentence that Sheridan relies on, then a sentence, using the word “also,” which adds to the
scope of the definition, and then a third sentence which excludes sexual harassment from the
definition. The second sentence states: “SEXUAL ABUSE also includes actual, attempted or
alleged: sexual molestation, sexual assault, sexual exploitation or sexual injury.” (GSM’s Ex. D
at 20) (emphasis added). Thus, even if this Court agreed with Sheridan’s interpretation of the
first sentence – which it does not –, Sheridan’s conviction for fourth degree criminal sexual
contact fits within the scope of “sexual assault” in the second sentence. Sheridan’s conviction
fits within the scope of the policy’s definition of sexual abuse under the second sentence, which,
because of the word “also,” states an alternative definition to the first sentence.
This Court thus concludes that, even if Sheridan’s proposed interpretation of the language
of the policy were a fair one, it would not be sufficient to defeat operation of the exclusion
clause. GSM has shown that no disputed material facts preclude entry of a judgment that the
unambiguous language of the insurance policy states that insurance liability ended on the date
that Sheridan’s criminal charge was adjudicated. As such, the determination of his civil liability
is not an issue of material fact that precludes entry of judgment on GSM’s motion as a matter of
law. GSM’s motion will be granted, and judgment on the Second Count of the TPC will be
entered in GSM’s favor.
For these reasons,
IT IS on this 24th day of July, 2013
ORDERED that Liberty’s motion to dismiss the third-party Complaint (Docket Entry
No. 21) is GRANTED, and the First Count of the third-party Complaint is hereby dismissed
without prejudice; and it is further
ORDERED that GSM’s motion for summary judgment (Docket Entry No. 26) is
GRANTED, and Judgment on the Second Count of the third-party Complaint is hereby entered
in GSM’s favor.
s/ Stanley R. Chesler
STANLEY R. CHESLER, U.S.D.J.
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