
USCA1 Opinion

	














                            UNITED STATES COURT OF APPEALS
                            UNITED STATES COURT OF APPEALS

                                FOR THE FIRST CIRCUIT
                                FOR THE FIRST CIRCUIT
                                 ____________________

        No. 96-1620

                              STRATFORD SCHOOL DISTRICT,

                                 Plaintiff, Appellee,

                                          v.

                          EMPLOYERS REINSURANCE CORPORATION,

                                Defendant, Appellant.

                                 ____________________


                     APPEAL FROM THE UNITED STATES DISTRICT COURT

                          FOR THE DISTRICT OF NEW HAMPSHIRE

                    [Hon. Paul J. Barbadoro, U.S. District Judge]
                                             ___________________

                                 ____________________

                                        Before

                                 Selya, Circuit Judge,
                                        _____________

                            Aldrich, Senior Circuit Judge,
                                     ____________________

                              and Boudin, Circuit Judge.
                                          _____________

                                 ____________________


            Charles  W. Grau with  whom David P. Slawsky  and Upton, Sanders &
            ________________            ________________      ________________
        Smith were on brief for appellant.
        _____
            Bruce W.  Felmly with  whom Jeanmarie  Papelian and McLane,  Graf,
            ________________            ___________________     ______________
        Raulerson & Middleton were on brief for appellee.
        _____________________

                                 ____________________

                                   January 30, 1997
                                 ____________________


















                      ALDRICH,  Senior  Circuit   Judge.     This  is   a
                                _______________________

            declaratory  action  brought  to  determine  the   rights  of

            Stratford  [New  Hampshire]  School  District  ("Stratford"),

            insured under  a "claims-made"  errors  and omissions  policy

            issued  by  Employers Reinsurance  Corporation ("Employers").

            Both parties moved for summary judgment, and the  court ruled

            for  Stratford.    On  this  appeal  Employers  asserts  that

            Stratford's claim for coverage for  a suit brought on  behalf

            of  Crystal  Buffington,  post,  matured  within  the  policy
                                      ____

            exclusion  definition prior  to  the policy's  issuance,  and

            that,  in any event, the policy was voidable because of false

            answers in the application.  We affirm.

                      Starting  at the  beginning, we  accept the  facts,

            recited in Employers' brief  as undisputed, most favorable to

            it.  Morrissey v. Boston Five Cents Savings Bank, 54 F.3d 27,
                 ___________________________________________

            31 (1st Cir. 1995).  One  Harry Hikel became a music  teacher

            at  Stratford  in  1979.    In  1983 Stratford  conducted  an

            investigation and  held a hearing to  review allegations that

            Hikel had  inappropriately hugged and kissed female students.

            After  the  hearing  the  Stratford  School  Board  voted  to

            reprimand him severely.  A  reprimand letter was delivered to

            him  in January 1984.   Stratford did not  notify State Child









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            Protective Services  in accordance with N.H.  Rev. Stat. Ann.

              169-C:29.1  Hikel left Stratford in 1986.

                      His next employer was the Lakeway Elementary School

            in  Littleton,  New  Hampshire.    According  to  one  of his

            students   there,  Crystal  Buffington,   he  began  sexually

            molesting her during the fall of 1990  and continued to do so

            until the fall of 1992.  In 1993 the Manchester Union  Leader

            reported this, although not identifying Crystal, and asserted

            that  the Department of  Education was  investigating charges

            that Hikel had  sexually abused  students when  he taught  in

            Littleton.   For present purposes we assume that this came to

            Stratford's  attention.   Thereafter, on  October 3,  1993, a

            Grafton  County Grand  Jury issued  a subpoena  in connection

            with an investigation of  criminal sexual misconduct of Harry

            Hikel in the  Littleton School District, seeking  Stratford's

            records on Hikel.  Stratford received the subpoena on October

            4.  On October 8 it applied for the present policy.

                      While  obviously the subpoena was a strong reminder

            that other such conduct might occur,  the question is whether

            it suggested to Stratford (of which there is no evidence), or

            should   have   suggested,    something   more    immediately

                                
            ____________________

            1.  This statute contains no language giving causes of action
            to children who could  prove personal injury that might  have
            been avoided  had it been observed.   In Marquay v.  Eno, 662
                                                     _______     ___
            A.2d  272, 278 (N.H. 1995),  the court held  that the statute
            created no personal rights.   We are not moved  by Employers'
            contention   that  this   ruling   should  not   be   applied
            retroactively.

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            troublesome.  So contending,  Employers complains -- in terms

            of  warranty -- of Stratford's negative answers in the policy

            application to questions 25 and 26:

                      25.   Has the applicant, Board and/or its
                      employees  been involved  in or  have any
                      knowledge of any  pending federal,  state
                      or  local  legal actions  or proceedings,
                      including EEOC, against  the entity,  its
                      board  members,  or employees  within the
                      last ten  years?  If yes,  attach details
                      stating nature  of claim, date  of claim,
                      loss date, loss payments and disposition,
                      carrier handling claims, etc.

                      26.  Are    there    any    circumstances
                      indicating  the probability of a claim or
                      action known by any  person to be covered
                      by  this  insurance?    If   yes,  attach
                      details.

            In view of the lack of analysis in Employers' brief we regard

            25   as  being  included  in  26  and  ask  what  claims,  or

            "circumstances," to quote  question 26, affecting  Stratford,

            the subpoena  might  be thought  to  suggest.   Certainly  no

            criminal  proceedings.     Nor  could  it   be  thought  that

            Stratford's former  students were attempting to  reactivate a

            cause of  action arising  from behavior  that had  occurred a

            decade  ago outside  of  Littleton.   Very  likely Hikel  was

            charged  with   new  conduct  and  the   grand  jury,  before

            indicting, wished to look at the whole picture.  Nothing more

            had  yet  happened.     But  might  some  imaginative  lawyer

            representing  some  student  in   connection  with  this  new






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            conduct, think  of claiming against Stratford  for not having

            published2 Hikel's prior behavior?  Anything is possible, but

            how likely, let alone probable?

                      Employers  cites  no  authority  contradicting  our

            belief  that a personal claim would be wholly frivolous.  The

            New Hampshire  court's refusal to recognize  such rights even

            in  the statute  cited  supra, n.1,  confirms  this.   If  an
                                    _____

            insurance  applicant  is  told  he has  to  conceive  of, and

            report,  every possibility  that someone  "might" (Employers'

            brief)  bring a  frivolous  law suit,  Employers'  solicitors

            would starve.   It  is because there  are possibilities  that

            people  take out  insurance.   The application  announced the

            standard for reporting -- not possibility, but probability.

                      The   application,  however,   was  not   the  only

            standard-setter.   The policy itself, by  its terms, provides

            that it does  not cover if "the Insured ha[d] become aware of

            a proceeding, event or development  which has resulted in  or

            could  in the  future result  in the  institution of  a claim
            _____                 ______

            against  the Insured. . . ."  (Emphasis supplied.)  "Possibly
                                                                 ________

            could result?"  "Reasonably  could result?"3  "Probably could
                             __________                    ________

            result?"  Even  apart from the principle  that ambiguities in

            insurance contracts  are to be resolved  against the insurer,

                                
            ____________________

            2.  At  the  risk, incidentally,  of  incurring  a claim  for
            defamation, depending on how the duty is conceived.

            3.  The New Hampshire case from which the court drew the more
            limited word "reasonable" involved different policy language.

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            Trombly v. Blue  Cross/Blue Shield of New  Hampshire-Vermont,
            _______   __________________________________________________

            423 A.2d 980, 985  (N.H. 1980), it makes business  sense here

            to   construe  the   exclusion   clause  together   with  the

            application  questionnaire.   Cf. Commercial  Union Assurance
                                          ___ ___________________________

            Co.  v. Gilford Marina, Inc.,  408 A.2d 405,  407 (N.H. 1979)
            ____________________________

            (contradictory  clauses  in  an insurance  contract  must  be

            interpreted  to reflect  the reasonable  expectations of  the

            insured).  Hence we take probable.  For the insurer to go the

            other way, and  say we do not cover matters  of which you had

            notice, even though  that notice  was too remote  for you  to

            have to  tell us about it,  makes no sense; indeed,  it would

            seem affirmatively  misleading.  We  can not think  the facts

            charged  Stratford  of  a  probability  that  some  Littleton

            student would sue it.

                      Finally, Employers' makes a  claim of malice.  This

            requires no comment.

                      Affirmed.
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