Insurance for Sexual Abuse Claims

Asexual abuse lawsuit can challenge the very survival of an institution. Insurance coverage is a very important issue to everyone involved in such lawsuits — the absence of which may mean a deserving victim has no compensation. Most institutions purchase commercial general liability (CGL) policies which might respond to such claims, even those involving abuse many decades ago. There are many complicated insurance issues arising in these cases, but one of the first issues which must be considered is which insurance policies are obliged to respond, based on the so called “trigger of coverage” issue.

Insuring agreement

Sexual abusers cannot obtain insurance coverage for lawsuits brought by their victims. However, the institutions they work for may be entitled to coverage for vicarious liability or independent negligence contributing to the abuse (i. e. the failure to warn others, negligent hiring or the failure to supervise).

A typical CGL policy defends and then reimburses the institution for sums it is legally obligated to pay as compensatory damages to victims who sustained accidental bodily injury during a particular policy period.

To obtain coverage under a particular policy, the institution’s first burden is to demonstrate the “trigger of coverage.” There are two elements to the trigger: It is necessary to determine (1) what caused the injury; and (2) when the injury occurred. If sexual abuse took place over an extended period of time, it is necessary to determine if more than one insurance policy is required to respond.

Cause of injury — Was it accidental?

The bodily injury must be caused by an “occurrence.” An “occurrence” is typically defined as an “accident.” The term is entirely subjective. An act of sexual abuse is, according to the Supreme Court of Canada, never accidental from the point of view of the perpetrator. An institution can be responsible, however, for acts of abuse caused by its negligent or accidental conduct. Vicarious liability for the acts of an abuser is, from the institution’s perspective, accidental. Accordingly, when an institution seeks insurance coverage, bodily injury arising from abuse is likely to be considered caused by an “occurrence.” This aspect of the trigger of coverage will be satisfied in most cases.

When did injury occur?

The more troubling issue is making a determination of when the bodily injury is sustained. Many sexual abuse victims cannot recall exact dates on which abuse occurred. Rather than refuse coverage when dates are uncertain, courts must develop techniques for analysing the trigger of coverage in sexual abuse cases.

American courts have adopted two principle ways to determine the trigger of coverage in sexual abuse cases. The first approach relies on the concept of “occurrence” and links the trigger of coverage to the cause of the abuse. This “causal approach” focuses on the source of the institution’s liability. A single cause triggers only a single policy, even if abuse took place over the course of many years. For example, negligent hiring practices may be considered a single occurrence because the decision to hire took place at a single point in time. Even though several children are abused over an extended period of time, the “cause” of the abuse remains the same and courts adopting this approach state all injury flows from the single cause.

The consequences of this causal approach are: there is only a single occurrence; multiple acts of abuse occurring over multiple policy years are attributed to the single occurrence; only the policy on risk at the time the negligent act first took place must respond; only a single limit of liability will be available to satisfy a judgment; and only a single deductible will apply. This means that an institution can obtain coverage only from a single policy — the one on risk at the time the negligent act (e. g. hiring) took place.

There are a number of serious problems with this approach as it will be unduly influenced by the manner in which an institution is alleged to be responsible for abuse. For example, if an institution is alleged to have improperly hired an employee who later commits an act of abuse, the employer’s liability is derived from a single occurrence, since an employee is hired only once. In contrast, if the claim alleges negligent supervision there could be multiple occurrences since it is possible to have several independent acts of negligent supervision.

The “causal approach” advocated by certain U. S. courts is not satisfactory as it ignores the second and more important element of the trigger of coverage: The bodily injury itself must take place during the policy period. A CGL policy covers the damages caused by occurrences. While the cause of the loss must be accidental, it is not the cause which determines when the injury is sustained. Injury can be sustained long after an occurrence, as happens in most construction defect cases.

The “causal approach” also ignores the reality of a sexual abuse claim. Every single act of abuse results in a new and distinct harm to the victim. It is unreasonable to suggest a subsequent and repeated act of abuse is merely a continuation of the first. Each new act of abuse imposes a new trauma on a victim.

A more acceptable approach is adopted in other U. S. decisions. These cases hold that each separate act of abuse constitutes a new bodily injury; each new injury triggers coverage under the policy on risk on that day; and repeated acts of abuse will trigger successive policies of insurance. From an institution’s perspective the cause of the abuse may remain the same (e. g. negligent supervision). However, every new act of abuse triggers the policy in force during that year. This approach is more reasonable, in that it accepts that an act of sexual abuse results in an immediate bodily injury and that each act of abuse results in a new and distinct injury to the victim.

Although not yet explicitly considered by the Canadian courts, it is likely the second approach will be adopted. The Ontario Court of Appeal has considered trigger of coverage issues in Alie v. Bertrand & Frere5, when it was asked to determine the insurance coverage for lawsuits involving defective concrete foundation. The Court of Appeal noted a CGL policy is triggered if the date of the injury can conclusively be determined to fall within the policy period. This is known as the “injury in fact” theory and, according to the court, is the theory best representing the language of the policy. In the sexual abuse context, if the date of an act of abuse is known with certainty the policy on risk on that day will be required to respond.

The more difficult, and the more common, case arises when the victim cannot recall the exact dates of abuse. Their best recollection may be “when I was five” or “between ages eight to 11.” In most cases, victims of childhood sexual abuse will not be able to provide the certainty necessary to discover when the “injury in fact” took place. Courts will refuse to allow this uncertainty to prevent an institution and a victim from obtaining the maximum amount of insurance coverage.

Instead, the Court of Appeal in Alie recognized that the so-called “continuous trigger theory” provides an equitable method of relieving the plaintiff of an impossible burden of proof. Where the abuse is known to have taken place over a certain period of time, the court will require each insurer on risk during that time to respond. The court makes an assumption that at least one act of abuse occurred in each policy period, thus triggering each policy. Proof that abuse did not occur in a particular policy period may ultimately relieve one or more of the insurers of an indemnity obligation. But each of the insurers will be required to defend.

Many other coverage issues are relevant for institutions seeking insurance coverage for abuse claims. Careful and profession al analysis is required in each and every case.

Colin Empke is a partner in the insurance coverage counsel group at Blaney McMurtry LLP. He provides insurance companies with coverage advice related to a broad range of policies and writes extensively on coverage issues.

1 Non-Marine Underwriters, Lloyd’s of London v. Scalera [2000] 1 S. C. R. 551.

2 A leading U. S. case on this issue is Washoe County v. Transcontinental Insurance Co. 878 P. 2d 306 (Nev. 1994).

3 This scenario is discussed in Lee v. Interstate Fire & Cas. Co., 86 F. 3d 101 (7th Cir. 1996). 4 See Interstate Fire & Cas. Co. v. Portland Archdiocese, 35 F. 3d 1325 (9th Cir. 1994). 5 (2002), 62 O. R. (3d) 245 (C. A.).