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Liberty U loses insurance coverage for kidnapping lawsuit

Liberty University may have won dismissal from a lawsuit accusing the school of participating in an abduction scheme, but the school likely will have to cover its own legal costs.

The 4th U.S. Circuit Court of Appeals this month ruled the school’s insurance policy doesn’t cover the claims in the lawsuit arising from the Miller-Jenkins same-sex parents controversy.

The ruling reverses the decision of Lynchburg U.S. District Judge Norman K. Moon, who said the insurance policy should cover the school for its defense costs in the lawsuit.

In 2009, Lisa Miller, with her 7-year-old daughter, fled the country in the face of court orders giving custody of the child to her former partner, Janet Jenkins. Miller had renounced homosexuality and resisted sharing custody with Jenkins.

A federal grand jury in Buffalo, New York, recently indicted Miller and two others on charges of conspiracy and international parental kidnapping. A Virginia man earlier was convicted in Vermont of aiding the scheme.

In 2012, Jenkins sued a number of people she alleged were involved in the kidnapping. Jenkins included Liberty among the defendants, claiming the school and its agents helped Miller abscond to Nicaragua.

The suit claimed that the school assisted Miller both directly and through the actions of a student worker. Liberty asked for a defense from Citizens Insurance Company of America, which had issued a liability policy for the school.

Liberty was dismissed from Jenkins’ lawsuit in 2013 when a Vermont federal judge concluded there was no support for claims that a Miller supporter was acting as an agent for the school. Nevertheless, the school continued its effort to have the insurance company cover its “substantial” legal defense costs.

Liberty contended it did not owe coverage under either its Commercial General Liability plan or its School and Educators Legal Liability plan. Moon said coverage applied, but a three-judge 4th Circuit panel disagreed in a July 10 opinion.

Because the lawsuit alleged only intentional conduct, it does not plead an “occurrence” as that term is interpreted under Virginia law, the appeals court said.

In the first place, the Supreme Court of Virginia would hold that an allegation of “respondeat superior” liability would not state an “occurrence,” the judges concluded.

The “pivotal issue,” therefore, was whether the policy’s Separation of Insureds provision altered Virginia’s rule that the expectations and bad intentions of Liberty’s agents were imputed to Liberty. The appeals court said it did not.

The Separation of Insureds provision requires the coverage claims of each named insured to be judged separately from one another. That provision does not change Virginia’s rule that an agent’s intentionally tortious act cannot be considered “unexpected” by a vicariously liable principal, the court said.

The court said Liberty was seeking coverage beyond what the parties intended in the purchase of the policy.

Moon’s ruling “Would nullify the Expected Injury Exclusion for allegations of vicarious liability against organizational or corporate insureds, creating a windfall to [the insurance company],” wrote Judge Stephanie D. Thacker for the court.

The appeals court panel faulted Moon for weighing the plausibility of Jenkins’ claims against Liberty. The test is whether the alleged facts and circumstances fall within the four corners of the policy, the appeals court said.

The Jenkins lawsuit “clearly alleges facts and circumstances” demonstrating that Liberty is liable in respondeat superior for kidnapping and racketeering through its agent, the student worker, according to the court’s opinion.

Even if the Jenkins lawsuit alleged “personal and advertising injury,” the policy’s Criminal Acts Exclusion would bar coverage under that portion of the policy, the court said.

The same exclusion bars coverage for the SELL coverage, as well, the court ruled.

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