It has become routine in the past ten years or so for liability insurance companies to deny insurance coverage for sexual abuse claims, often on the theory that sexual abuse is intentional in nature. Many liability insurance policies commonly adopt the definition of “occurrence” which requires that a claim must arise from an “accident.” Under these policies, whether allegations of sexual abuse are encompassed by the term “accident” will determine whether the abuse claims are covered.
Until recently, the law in New York and elsewhere appeared settled that sexual assault could never be an “accident.” The courts’ reasoning was that allegations of sexual assault involve intentional acts which cannot be deemed an “accident” for purposes of triggering occurrence-based coverage. Under this line of cases, injuries caused by an assault were not caused by a covered, triggering “occurrence.” See e.g., Green Chimneys School for Little Folk v. Nat’l Union Fire Ins. Co. of Pittsburgh, PA, 244 A.D.2d 386, 664 N.Y.S.2d 320 (1st Dep’t 1997); Public Mutual Ins. Co. v. Camp Raleigh, Inc. 233 A.D.2d 273, 650 N.Y.S.2d 136 (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, 425 N.E.2d 810, 442 N.Y.S.2d 422, (N.Y., 1981) (holding that “[w]hether [coverage for underlying sexual abuse] is permissible depends upon whether the insured, in committing his criminal act, intended to cause injury”).
In recent years, however, the New York Court of Appeals has called into question the holding in those cases. See RJC Realty Holding Corp. v. Republic Franklin Ins. Co., 2 N.Y.3d 158, 777 N.Y.S.2d 4 (2004) (“RJC”). In RJC, the insurer of a health spa was denied coverage for an action in which a customer of the spa alleged a sexual assault by a masseur. The policyholder in RJC sought insurance coverage for claims by the customer against the spa including, among others, negligent hiring, supervision and retention of the masseuse.
Considering the issue of “whether a liability insurer is obligated to defend and indemnify its insured . in an action brought against the insured based on an alleged sexual assault by the insured’s employee,” the court reversed the Second Department’s denial of coverage. The Court of Appeals reasoned that because, pursuant to its decision in Judith M. v. Sisters of Charity Hosp., 93 N.Y.2d 932, 693 N.Y.S.2d 67 (1999), the masseur’s alleged intentional assault could not be attributed to the spa on the basis of respondeat superior, the assault was an “accident”
from the spa’s standpoint.
The parties here agreed that the policy would cover only an “accident” and would not apply to certain acts “expected or intended” by RJC. When they did so, they could reasonably have anticipated that the rules of respondeat superior would govern the question of when a corporate entity is deemed to expect or intend its employee’s actions. Since the masseur’s actions here were not RJC’s actions for purposes of the respondeat superior doctrine, they were “unexpected, unusual or intended” by RJC. Accordingly, they were an “accident” within the coverage of the policy, and were not excluded by the “expected or intended” clause.
RJC, 2 N.Y.3d at 164-65.
Since the Court’s ruling in RJC, a number of New York courts have adopted the Court of Appeal’s reasoning as to coverage for claims arising from underlying acts of sexual abuse. See e.g., ACE Fire Underwriter’s Ins. Co. v. Orange Ulster Bd. Of Cooperative Educational Services, 8 A.D.3d 593, 779 N.Y.S.2d 545 (2d Dept. 2004); NYAT Operating Corp. v. Gan National Ins. Co., 8 Misc.3d 975, 977-79, 900 N.Y.S.2d 272 (N.Y. Sup. Ct. 2005) (“where an employee departs from his or her duties for solely personal motives unrelated to the furtherance of the business, the doctrine of respondeat superior does not apply.”); NWL Holdings, Inc. v. Discover Property & Cas. Ins. Co., 480 F.Supp.2d 655 (E.D.N.Y. March 20, 2007); see also Sweet Home Central School District v. Aetna Commercial Ins. Co., 263 A.D.2d 949, 951-52, 695 N.Y.S.2d 445 (4th Dept. 1999) (dissent) (arguing that “where the gravaman of the complaint against Sweet Home is negligence . . . “ the “expected or intended” exclusion for bodily injury damages does not apply “[b]ecause no evidence was presented that Sweet Home expected or intended the acts upon which the underlying complaint is based [sexual abuse]”).
These decisions are consistent with decisions by New York courts which have found the term “accident” in liability policies to be ambiguous. Citing multiple New York cases, the First Department in Tortoso v. MetLife Auto & Home Ins. Co., 21 A.D.3d 276, 799 N.Y.S.2d 506, (1st Dept. 2005) explained that when analyzing coverage for “accidents,” a greater degree of importance must be placed upon the expected or intended nature of the offense as opposed to blanket offense-specific exclusions.
The policy requires that Metropolitan provide a defense where there has been an occurrence, i.e., an accident that results in bodily injury. Exactly what constitutes an accident is not defined in the policy. However, an accident may be considered “an event which is unanticipated and the product of thoughtlessness rather than willfulness.” McGroarty v. Great Am. Ins. Co., 36 N.Y.2d 358, 363, 368 N.Y.S.2d 485, 329 N.E.2d 172 (N.Y. 1975). Indeed, “No all-inclusive definition of ‘accident’ is possible, nor any formulation of a test applicable in every case, for the word has been employed in a number of senses and given varying meanings depending upon the relevant context.” Matter of Croshier v. Levitt, 5 N.Y.2d 259, 262, 184 N.Y.S.2d 321, 157 N.E.2d 486 (N.Y. 1959).
An intentional act may, but need not necessarily, result in intended consequences. “Clearly more than a casual connection between the intentional act and the resultant harm is required to prove that the harm was intended.” Allstate Ins. Co. v. Mugavero, 79 N.Y.2d 153, 160, 581 N.Y.S.2d 142, 589 N.E.2d 365 (N.Y. 1992).
Tortoso, 21 A.D.3d at 278-279, 799 N.Y.S.2d at 509 (1st Dept. 2005).
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.” Don’t take no for an answer, push back.