U.S. Fire moved for summary judgment, asserting that the underlying state court lawsuits were limited by a provision capping its liability at $100,000 for all claims arising from "abuse" or "molestation." Therefore, U.S. Fire argued, it had satisfied all coverage obligations by depositing $100,000 into the court's registry. It asked the district court to rule that it had "no further obligation to defend or indemnify [Mother Earth School] because it ha[d] exhausted the available limits of its policy."

The District Court's Decision

The district court denied the motion.

In its decision, the district court explained that, although Oregon courts had not reviewed the terms "abuse" or "molestation" in the context of an insurance policy, the "plain and ordinary meanings" of those terms "necessarily require[d] intentional conduct."

Therefore, the district court continued, the abuse or molestation provision in the U.S. Fire insurance policy would limit U.S. Fire's liability to $100,000 only if the alleged acts of abuse and molestation were performed intentionally.

The district court then found that the complaints against Mother Earth School raised allegations that could include both intentional and nonintentional conduct, including "bullying," "harassment," and "unduly rough play." In the district court's opinion, unduly rough play "could certainly encompass non-intentional conduct."

The district court, therefore, denied U.S. Fire's motion for summary judgment on whether it had extinguished its duty to indemnify Mother Earth School by placing $100,000 into the court's registry.

The district court also rejected U.S. Fire's contention that it had extinguished its duty to defend by depositing $100,000 into the court's registry.

The district court observed that the U.S. Fire policy provided that U.S. Fire's "right and duty" to defend ended when it used up the applicable limit of insurance "in the payment of judgments or settlements."

The district court was not persuaded by U.S. Fire's argument that its payment of a sum into the court's registry was "tantamount to settlement," therefore extinguishing its duty to defend. The district court noted that U.S. Fire had not provided any authority to support this argument.

Moreover, the district court added, the dictionary definitions of "judgment" and "settlement" (neither of which was defined in the U.S. Fire insurance policy) did not suggest that U.S. Fire's payment of $100,000 into the court's registry was a payment of a judgment or a settlement.

Accordingly, the district court concluded, U.S. Fire still had a duty to defend Mother Earth School.

The case is United States Fire Ins. Co. v. Mother Earth School, No. 3:18-cv-01762-HZ (D. Ore. Oct. 31, 2019). Attorneys involved include: Thomas Lether, Eric J. Neal, Lether and Associates, PLLC, Attorneys for Plaintiff; Randall Vogt, Barbara C. Long, Vogt & Long PC, Robert E.L. Bonaparte, Shenker & Bonaparte, LLP, Attorneys for Defendant Brice Lemke, Gilion C. Dumas, Ashley L. Vaughn, Dumas Law Group, LLC, Attorneys for Defendant Michelle Moore, Scott T. Schauermann, Hitt Hiller Monfils Williams LLP, Attorney for Defendant Mother Earth School.