Written by Gary A. Reinhardt, Esq.
As news continues to swirl around allegations of persistent and pervasive sexual misconduct, ultimately lawsuits will result. In an effort to get around an intentional act exclusion and find coverage, plaintiffs will blame employers, parents or others with some sort of control or supervisory role for negligently handling or dealing with the perpetrator. Many policies now have exclusions for claims of sexual “molestation,” “physical abuse” or “sexual harassment.” The following language is typical:
EXCLUSIONS THAT APPLY TO LIABILITY COVERAGES
“We do not provide coverage for:
“Bodily injury” or “property damage” that arises out of sexual molestation.
“Bodily injury” or “property damage” that arises out of physical or mental abuse.
Both exclusions have been deemed valid. Importantly, neither limits the excluded conduct to conduct of an “insured.” The policy exclusions reference only the acts, “sexual molestation” and “physical or mental abuse” without referencing the perpetrator. “The policy refers to claims arising out of sexual molestation without reference to any limitation as to who committed the act of molestation. Thus, the policy appears to state that the exclusion is based on the nature of the act, not the identity of the actor.” Ristine v. Hartford Ins. Co., 195 Ore. App. 226, 97 P.3d 1206 (2004). Therefore, regardless of who commits the excluded act, “insured” or not, there is no coverage for any conduct falling into these categories of behavior. Even an “insured” accused of negligently supervising or controlling a perpetrator of “sexual molestation” or “physical or mental abuse” will not have coverage because the injury arises out of the excluded conduct.
In contrast, some policy exclusions still focus on the identity of the perpetrator:
SEXUAL MOLESTATION EXCLUSION
We do not cover bodily injury, property damage, or medical expense arising out of or resulting from the actual, alleged or threatened sexual molestation of a minor by:
- any insured;
- any employee of any insured; or
- any other person actually or apparently acting on behalf of any insured.
This particular exclusion also limits the exclusion to injury to a minor.
The difference between the two “sexual molestation” exclusions are greater than it may appear at first blush. The first exclusion “was written as a broad categorical exclusion of all claims ‘arising out of’ sexual molestation.” Bayes v. State Farm Gen. Ins. Co., 2017 U.S. Dist. LEXIS 170195, (Cal. Cen. Dist. Ct). The second exclusion “by contrast, is not worded to categorically exclude coverage, but rather specifically limits coverage based on the identity of the person who commits the sexual molestation.” Id. Under this second exclusion, the identity of the perpetrator impacts the coverage available. Under this exclusion, a parent may have coverage if accused of improper parenting or controlling a child accused of sexual molestation, provided that child qualified as an “insured.”
In examining both exclusions, we must keep in mind that “reasonable policy exclusions not in conflict with statute will be enforced; to be effective, the exclusionary language must clearly and unambiguously bring the particular act or omission within its scope.” Floyd v. Northern Neck Ins. Co., 427 S.E.2d 193, 196, 245 Va. 153, 158 (1993). Also, “insurance policies are to be construed according to their terms and provisions and are to be considered as a whole. Where there is doubt or uncertainty and where the language of a policy is susceptible of two constructions, it is to be construed liberally in favor of the insured and strictly against the insurer. Where two interpretations equally fair may be made, the one that permits a greater indemnity will prevail because indemnity is the ultimate object of insurance.” Central Surety & Ins. Corp. v. Elder, 204 Va. 192, 192, 129 S.E.2d 651 (1963).
Policies do not define every term. “Undefined contract terms are given ‘their ordinary meaning’ in light of ‘the contract as a whole.’” Bartolomucci v. Fed. Ins. Co., 289 Va. 361, 371, 770 S.E.2d 451, 456 (2015). While “sexual molestation” could be obvious in certain scenarios, a question may arise if the conduct is termed as “harassment.” This is addressed in some policies by the following exclusion:
EXCLUSIONS
We do not cover:
Sexual molestation, sexual harassment, corporal punishment, or physical or mental abuse by any insured.
Like the previous exclusion, it limits conduct to an “insured,” possibly excluding coverage for failing to supervise a neighbor’s child an “insured” babysits or an adult’s misconduct while visiting the home. However, the specific wording of this exclusion suggests that “molestation” and “harassment” are different conduct and need to be addressed by different policy language. In looking at dictionary definitions, an argument can be made that “molestation” and “harassment” are the same. Common usage of each word refutes that and a “fair” interpretation may require more specific exclusionary language such as this third exclusion.
As these claims come in, it is important to obtain the specific allegations by the claimant. These exclusions will be narrowly tailored to the conduct and will determine the path to take in determining coverage. While investigations will be complicated and often uncomfortable, thorough questioning will be a must to determine the status of the perpetrator as an “insured” and the classification of conduct.