Sexual Assault: Is There Coverage for That?

The #MeToo movement has brought greater attention to victims of sexual abuse. Media outlets focus on allegedly pervasive misconduct and the public demands that time restrictions on criminal and civil actions be stayed or lifted. Recently, Governor Cuomo signed the Child Victims Act which: (1) extends the time to bring felony charges by five years (until the victim turns 28); (2) allows victims to seek civil relief against abusers and enabling institutions until they turn 55 (expanding, significantly, the earlier five-year statute of limitations); (3) opens a one-year/one-time window, beginning Aug. 14, 2019, for victims to seek compensation regardless of the abuse date; and (4) removes the 90-day notice-of-claim requirement for bringing claims against municipalities and school districts for child sexual abuse claims. As a result of this type of legislation, civil suits stemming from these sexually-based offenses will undoubtedly flourish, thereby exposing academic institutions, religious institutions, employers, and municipal entities to claims alleging negligence with respect to the hiring, supervision, and retention of the alleged perpetrators.

While any litigation can hobble a company and its insurance carrier, sex-based accusations create a particularly significant exposure, and the defending entity’s ability to mitigate the associated costs may ultimately determine whether it survives. In 2018, for example, USA Gymnastics saw fit to declare bankruptcy in response to litigation over Larry Nassar’s sexual abuse of young female athletes.

There are a number of insurance coverage issues that are likely to be raised as a result of this newly passed legislation. New York state courts have long held that the injuries alleged to have been caused by sexual abuse of minors is “inherent in the nature of the acts alleged” so that the injuries were, as a matter of law, intentionally caused by the perpetrator, precluding coverage under most liability insurance policies. See generally Allstate Ins. Co. v. Mugavero, 79 N.Y.2d 153 (1992). However, claims against employers and institutions raise different coverage concerns, including when coverage is triggered, the scope of sexual abuse exclusions, and the number of occurrences at issue where there are multiple victims, or the alleged abuse takes place over extended periods of time.

The determination of what is insurable in this area requires a nuanced approach. While the “intentional act” exclusion is relevant, its scope varies with the circumstances and the jurisdiction interpreting the policy. Significantly, sexual molestation is often presumed to be an act of intentional harm, subjective intent notwithstanding.

Whether an intentional act is attributable to the employer is incident-specific. If the employer instructs security guards to use force in performing their duties, the employer may be liable for a patron’s injuries which result from the intentional use of such force. However, if the facts demonstrate that an employee was not furthering the purpose of the entity’s business, the employer will not be liable for the intentional harm which he caused.

In an attempt to circumvent the intentional act exclusion, plaintiffs’ attorneys frequently seek to blame those in a supervisory capacity for negligently hiring, retaining or handling the offender. As a result, policies drafted more recently contain specific exclusions for claims of sexual “molestation,” “physical abuse,” and/or “sexual harassment.” While older policies exclude acts based upon the actor’s status (i.e., insured or insured’s employee), newer ones focus on the acts themselves, regardless of who the actor is.

The Court of Appeals has held that an employee’s alleged sexual assault against a customer is “obviously expected or intended by the (employee) and not an accident from his point of view,” leaving the question of whether said expectation/intention is attributable to the employer. In RJC v. Republic Franklin Insurance, 2 N.Y.3d 158 (2004), the court noted that parties agreed that the subject policy only covers an “accident” (i.e., not acts which RJC “expected or intended”), and they reasonably could have anticipated that respondeat superior would govern the corporate entity’s responsibility. Since the employee departed from his duties solely for personal—not to further a business objective—his actions were “unexpected, unusual and unforeseen” from RJC’s viewpoint. Accordingly, the conduct was a covered “accident,” and not excluded by the “expected or intended” clause.” Had the court found that RJC condoned or tolerated these actions, the court probably would have attributed the acts to the employer.

Further, the separation of insurance condition requires the insurer to view the policy exclusions for the employer and the employee separately.

New York’s High Court addressed insurance coverage for sexual abuse claims in Roman Catholic Diocese v. National Union Fire Ins., 969 N.Y.S.2d 808 (2013). The Diocese had sued its insurer to recover the $2 million it paid a minor who claimed a priest sexually abused him over six years at multiple locations.

The Appellate Division reversed the order of Supreme Court (which had denied summary judgment), declaring that the alleged acts of sexual abuse constituted multiple occurrences, and that the settlement amount should be allocated on a pro rata basis over the seven policy periods, requiring the concomitant satisfaction of the SIR attendant to each implicated policy. 87 A.D.3d 1057 (2011).

The Appellate Division, Second Department, held unanimously in National Union’s favor and reversed the trial court, stating:

• the pro rata allocation methodology which the Court of Appeals approved in Consolidated Edison Co. of New York v. Allstate Insurance Co., 774 N.E.2d 687 (2002) was consistent with the allegations of “bodily injury,” and with the clear and unambiguous language of the CGL policies. Further, the Second Department noted that the allocation method advocated by the Diocese, the “joint and several” method, conflicted with both New York law and the CGL policies’ requirement that any “bodily injury” take place during the applicable policy period in order to be covered (but not before or after that period). Thus, because victim allegedly sustained “bodily injury” during several different policy periods in a six-year span, the Appellate Court held that the Diocese’s settlement must be allocated on a pro rata basis across all of the periods;



• the subject acts of sexual abuse constituted multiple occurrences under New York’s “unfortunate events” test because they occurred over many years, at different times, and at various locations. Accordingly, the Appeals Court held that the Diocese was required to exhaust a separate $250,000 SIR for each CGL policy, and it rejected the Diocese’s argument that the policies’ definition of “occurrence” should be construed as permitting it to aggregate the multiple acts of sexual abuse as a single occurrence; and



• the requirement that a carrier timely disclaim coverage under §3420(d) did not apply to National Union’s SIR-based defense. The Appellate Court relied upon the statute’s plain language and two Appellate Division, First Department, decisions on the issue. The court further found that National Union did not waive its right to assert an affirmative defense related to the CGL policies’ “Other Insurance” clause, or its argument that the Diocese’s settlement be allocated on a pro rata basis across all seven policy periods.



The Court of Appeals affirmed the Second Department’s decision, ruling that National Union had not waived its “multiple occurrence” argument, that the Diocese was required to exhaust a separate $250,000 SIR per occurrence for each CGL policy, and that the Diocese’s settlement must be allocated across each of the seven policy periods. The court noted that while §3420(d) precludes an insurer from denying coverage where the bases are not timely asserted, the statute does not apply to defenses that simply limit the insurer’s ultimate liability.

Turning to the merits, the court addressed whether the several acts of sexual abuse constitute multiple occurrences. This is the first time the court addressed the meaning of “occurrence” in the context of claims based on numerous incidents of sexual abuse of a minor by a priest, which spanned several years and several policy periods. It is well established that “in determining a dispute over insurance coverage, the court first look to the language of the policy.” Consolidated Edison Co. of N.Y. v. Allstate Ins. Co., 98 N.Y.2d 208, 222, (2002) (citing Breed v. Insurance Co. of N. Am., 46 N.Y.2d 351, 354 (1978)). In doing so, a court must “construe the policy in a way that ‘affords a fair meaning to all of the language employed by the parties in the contract and leaves no provision without force and effect.’” Consolidated Edison, 98 N.Y.2d at 222 (quoting Hooper Assoc. v. AGS Computers, 549 N.Y.S.2d 365 (1989)).

The court adopted the “unfortunate event” test, specifically rejecting other approaches that would equate the number of occurrences with either “the sole proximate cause” or by the “number of persons damaged.” In Arthur A. Johnson Corp. v. Indemnity Ins. Co. of N. Am., 7 N.Y.2d 222, 227 (1959) the New York Court of Appeals addressed how to determine whether “there are one or more occurrences within the meaning of an insurance clause limiting coverage to a certain amount per occurrence.” In Appalachian Ins. Co. v. General Elec. Co., the court stated that absent policy language indicating an intent to aggregate separate incidents into a single occurrence, the unfortunate event test should be applied to determine how occurrences are categorized for insurance coverage purposes. 8 N.Y.3d 162, 173 (2007). The court determined that the unfortunate event test requires consideration of “whether there is a close temporal and spatial relationship between the incidents giving rise to injury or loss, and whether the incidents can be viewed as part of the same causal continuum, without intervening agents or factors.” The court has further observed that “this approach of determining simply whether there was one unfortunate event or occurrence seems to us to be the most practical of the three methods of construction which have been advanced because it corresponds most with what the average person anticipates when he or she buys insurance and reads the occurrence limitation in the policy.” Johnson, 7 N.Y.2d at 229-30.

In looking at the language of the policies and the definition of “occurrence,” the court determined that nothing evinces an intent to aggregate the incidents of sexual abuse into a single occurrence. Applying the unfortunate event test the court concluded that the incidents of sexual abuse within the underlying action constituted multiple occurrences. The court stated “clearly, incidents of sexual abuse that spanned a six-year period and transpired in multiple locations lack the requisite temporal and spatial closeness to join the incidents. See Johnson, 7 N.Y.2d at 230 (“(W)e conclude that the collapses of separate walls, of separate buildings at separate times, were in fact separate disastrous events, and, thus, two different accidents within the meaning of the policy”).”

The court explained that while the incidents shared an identity of actors, “it cannot be said that an instance of sexual abuse that took place in the rectory of the church in 1996 shares the same temporal and spatial characteristics as one that occurred in 2002 in, for example, the priest’s automobile.” Moreover, the court opined that the incidents are not part of a singular causal continuum. The causal continuum factor is best illustrated by the facts of Wesolowski, 33 N.Y.2d 169 (1973). In that case, this court held that a three-car collision amounted to a single occurrence “where the insured’s automobile struck one oncoming vehicle, ricocheted off and struck a second more than 100 feet away.” 33 N.Y.2d at 170. Under those facts, “the two collisions here occurred but an instant apart” and “the continuum between the two impacts was unbroken, with no intervening agent or operative factor.” Id. at 174. Thus, contrary to the Diocese’s and dissent’s view that the negligent supervision was the sole causal factor, and thus requires a finding of a single occurrence, the unfortunate event test requires us to focus on “the nature of the incidents giving rise to damages.” Appalachian, 8 N.Y.3d at 171; see also H.E. Butt Grocery Co. v. National Union Fire Ins. Co. of Pittsburgh, 150 F.3d 526, 531 (5th Cir. 1998); Interstate Fire & Cas. Co. v. Archdiocese of Portland in Oregon, 35 F.3d 1325, 1329-30 (9th Cir. 1994). As stated in Appalachian, “cause should not be conflated with the incident.” 8 N.Y.3d at 172. Accordingly, where, as here, each incident involved a distinct act of sexual abuse perpetrated in unique locations and interspersed over an extended period of time, it cannot be said, like the uninterrupted, instantaneous collisions in Wesolowski, that these incidents were precipitated by a single causal continuum and should be grouped into one occurrence.

In the court’s view, sexual abuse does not fit neatly into the policies’ definition of “continuous or repeated exposure” to “conditions.” This “sounds like language designed to deal with asbestos fibers in the air, or lead-based paint on the walls, rather than with priests and choirboys. A priest is not a ‘condition’ but a sentient being.” Lee v. Interstate Fire & Cas. Co., 86 F.3d 101, 104 (7th Cir. 1996); see also Champion Intl. Corp. v. Continental Cas. Co., 546 F2d 502, 507-08 (2d Cir. 1976) (Newman, J., dissenting) (noting that an “exposure to conditions” involves physical exposure to “phenomenon such as heat, moisture, or radiation”); ExxonMobil, 15 Misc.3d 144A, 2007 NY Slip Op 51138U, (“the purpose of a continuous exposure clause is to combine claims that occur ‘when people or property are physically exposed to some injurious phenomenon such as heat, moisture, or radiation’”).

The Diocese analogized this case to State Farm Fire & Cas. Co. v. Elizabeth N., 9 Cal. App. 4th 1232, 1235 (1992), in which two children attending a day care center “had been sexually molested over a period of a month or more.” There, the U.S. Court of Appeals for the First District, Division 3, of California held that the multiple instances of sexual molestation constituted a single occurrence for insurance coverage purposes. The New York Court of Appeals declined to follow that holding because of what they believed to be “materially distinguishable differences.” The policy in Elizabeth N. expressly provided that “all bodily injury and property damage resulting from any one accident or from continuous or repeated exposure to substantially the same general conditions shall be considered to be the result of one occurrence.” Id. at 1236. There is no language within National Union’s policies indicating an intent to aggregate the sexual abuse into a single occurrence. Second, and more significantly, the parties in Elizabeth N. “agreed that the number of occurrences depends on the cause of injury rather than the number of injurious effects.” Id. at 1236-37. The California Court of Appeal reasoned that the negligent failure of the day care owner to adequately care for, and supervise the children, subjected them to repeated molestation by the perpetrator. See 9 Cal. App. 4th at 1238. New York, however, typically applied the unfortunate event test, an inquiry primarily focused on “the nature of the incidents giving rise to damages.” Wesolowski, 33 N.Y.2d at 170.

This Diocese decision could have a significant impact on future insurance coverage disputes. This is the first time that New York’s highest court addressed whether an insurer can waive its right to assert an argument based upon the number of occurrences or whether a particular allocation method should be employed. Because these issues often arise in coverage disputes, this prong of the court’s decision has implications beyond the CGL context. Had the Court of Appeals adopted the Diocese’s waiver argument, carriers could have faced enormous pressure to assert their positions on this defense in the initial coverage positions they communicate to their insureds or risk waiving them.

This decision is also the first in which the New York Court of Appeals addressed the number of occurrences and allocation issues in the context of conduct-based offenses such as sexual assault and misconduct. Accordingly, the court’s holding will likely have implications to similar coverage disputes arising under New York law. Nationwide, case law is less developed and courts in other jurisdictions may look to these New York court holdings for guidance on policy interpretation and application.

Most significantly, for other jurisdictions, is the finding that the “continuous or repeated exposure” language in the CGL policies’ definition of “occurrence” did not allow the Diocese to aggregate multiple acts of sexual abuse into a single occurrence, something that the court held to be more appropriate in asbestos exposure and lead poisoning cases. Unlike New York State, many state courts do hold that claims involving multiple injuries or acts nonetheless constitute a single occurrence under CGL policy wording if the injuries/acts can be traced back to a single cause. In reaching that conclusion, these courts sometimes rely upon the same definition of “occurrence” contained in the Diocese CGL policies, which includes “continuous or repeated exposure to the same general harmful conditions.” Thus, the Court of Appeals ruling on the “number-of-occurrences” issue may influence how other jurisdictions which employ the “sole cause” test determine the issue.

It has become routine over the past 10 years or so for liability insurance companies to deny coverage for sexual assault claims, often on the theory that the act alleged is intentional in nature and not an “occurrence” which can trigger coverage. See, e.g., Green Chimneys School for Little Folk v. Nat’l Union Fire Ins. Co. of Pittsburgh, PA, 244 A.D.2d 386, (1st Dep’t 1997); Public Mutual Ins. Co. v. Camp Raleigh, 233 A.D.2d 273 (1st Dept. 1996) (“the inclusion in the underlying complaint of causes of action sounding in negligent hiring and supervision does not alter the fact that “the operative acts giving rise to any recover are the intentional sexual assaults.’”); but see Public Service Mut. Ins. Co. v. Goldfarb, 53 N.Y.2d 392, 399, (N.Y., 1981) (holding that “whether coverage for underlying sexual abuse is permissible depends upon whether the insured, in committing his criminal act, intended to cause injury”). Many policies adopt the definition of “occurrence” which requires that a claim arise from an “accident.” Whether allegations of sexually-based offenses are encompassed by the term “accident” under these policies, then, will determine whether there is coverage.

Until recently, the law in New York and elsewhere seemed settled that sexual assault can never be an “accident.” The New York Court of Appeals, however, has called the holdings in those cases into question. Thus, it is possible that coverage may exist for sexual abuse and other intentional torts even when a policy’s definition of “occurrence” requires an “accident.”

Florina Altshiler is the lead attorney for the Buffalo office of Russo & Toner, specializing in litigation. Josh H. Kardisch is of counsel in the firm’s New York City office.