Hofstra University v. United Educators

Summary

The Appellate Division, First Department, affirmed an order interpreting an insurance-policy exclusion for losses arising from a demand for the return of funds to include tuition and fees paid by students. The court held that the exclusion barred reimbursement claims for tuition and fees but did not establish that all damages sought in related class actions were limited to such payments. Because the underlying complaints also sought other damages and relief, dismissal was premature and the insurer's duty to defend was triggered.

Holdings

1. The plain meaning of "funds" in the policies' exclusion is sufficiently clear to include sums paid by students as tuition and fees; the exclusion therefore bars claims seeking reimbursement of tuition and fees.
2. The policies are not illusory because they continue to provide coverage for other covered losses despite the potentially broad funds exclusion.
3. Dismissal based on the funds exclusion was premature because the underlying complaints sought damages and relief beyond solely a return of tuition and fees.
4. The argument that public policy barred the claims because the underlying class actions sought recovery of wrongfully acquired funds was unavailing.
5. The underlying class actions triggered United Educators' duty to defend because they raised the possibility of coverage and sought damages beyond tuition and fees.

Questions Presented

1. Whether the policies' exclusion for losses arising from a demand for the return of funds includes student tuition and fees.
2. Whether applying the funds exclusion renders the insurance policies illusory.
3. Whether dismissal of the amended complaint was proper when the underlying class actions sought damages beyond reimbursement of tuition and fees.
4. Whether the underlying claims triggered United Educators' duty to defend because they raised the possibility of coverage.
5. Whether public policy barred the plaintiffs' insurance claims because the underlying actions concerned allegedly wrongfully acquired funds.

Disposition

affirmed