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Judge: Insurer has no duty to defend false sex assault claim

October 19, 2018

A federal judge has ruled an insurer does not owe a duty to defend a female student who made a false accusation of sexual assault against a Butler University student who subsequently sued the university and his accuser.

Christian Ayala sued Butler University, several university employees and fellow student/accuser Jane Smith after he was expelled from the Indianapolis school in May 2015. Ayala’s expulsion came after he and Smith engaged in consensual sexual activity in his dorm room, but an embarrassed Smith told her friends she had been sexually assaulted by Ayala.

Smith told her friends in the early morning hours of April 19 that Ayala had assaulted her shortly before, and on April 20 Butler opened an investigation into her allegations. However, Smith later admitted that she never gave Ayala any indication that she did not consent to their conduct, a fact that was attested to at a May 2015 hearing.

But before the school’s investigation began, Smith’s father “placed extreme pressure on Butler to expel Ayala.” The school ultimately expelled the freshman on May 18, 2015, and he was subsequently rejected from seven universities despite having a B+ average.

Ayala responded with a suit alleging civil rights violations, defamation, breach of contract, negligent infliction of emotional distress and other tort claims, though Smith was eventually dismissed as a defendant. However, her participation in the investigation and subsequent lawsuit was still at issue Wednesday in Christian Ayala, a/k/a John Doe v. Butler University, et al.; Unitrin Preferred Insurance Company v. Privilege Underwriters, Inc., 1:16-cv-01266.

Wednesday’s ruling on cross-motions for summary judgment, handed down by Southern District Judge Tanya Walton Pratt, concerned a dispute between Unitrin Preferred Insurance Company and Privilege Underwriters, Inc., or PURE, both of which issued insurance policies to the Smith family at some point in time. The PURE policy went into effect on April 29, 2015, so Unitrin argued PURE had a duty to defend Smith in Ayala’s lawsuit and, thus, should reimburse Unitrin for the costs it incurred in defending her.

But Pratt agreed with PURE that the only actionable conduct taken by the Smiths — Jane’s false accusation and her father’s demand that Ayala be expelled — occurred on April 19 and 20, before the PURE policy took effect. Thus, PURE did not owe a duty to Smith, so it could not be compelled to reimburse Unitrin’s costs.

“The allegations against Jane Smith in the underlying complaint assert actionable conduct on April 18-20, 2015, before PURE’s insurance policy took effect,” Pratt wrote. “Butler’s conduct in April and May 2015 is not attributable to Jane Smith, and thus, does not fall under PURE’s insurance policy.”

Pratt also terminated Unitrin and PURE from the litigation on Wednesday, finding all of their claims had been adjudicated. Ayala’s complaint against the university is part of a trend of male college students suing their schools after claiming to be falsely accused of sexual misconduct. Indiana Lawyer reported at least six such lawsuits have been filed against Indiana colleges and universities in recent years.

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