Policyholders Should Prepare Now to Demand Coverage for New York Adult Survivors Act Claims (Part 1)

Natasha Romagnoli, Steven J. RomanAnna K. Milunas, and Amit Roitman ●

New York’s Child Victims Act (“CVA”), which opened a one-year revival window extending the statute of limitations for claims of childhood sexual abuse, had a substantial impact on the state’s businesses and other institutions. The impact of New York’s Adult Survivors Act (“ASA”), signed into law this summer, will be even greater.

During the CVA’s revival window, survivors filed almost 11,000 lawsuits against schools, camps, healthcare providers, religious organizations, and other institutions regularly serving children. Not all of these entities had insurance coverage for sexual abuse claims, and several ended up in bankruptcy as a consequence. The influx of cases also affected state and federal courts, adding to the backlog caused by pandemic shutdowns and precautions. The CVA’s window closed in August 2021, but a year later very few CVA cases have made it to trial. It could be years before the majority of CVA cases are resolved.

The ASA’s impact on businesses, organizations, and courts is likely to dwarf the CVA’s. The ASA opens a one-year window on November 24 of this year, allowing sexual abuse survivors who were 18 years old or older when the abuse took place to file claims against their abusers, even if the statute of limitations is long expired. Like the CVA, the ASA allows claimants to name vicarious liability defendants as well as individual perpetrators. This means any organization involved in creating the conditions for the abuse is susceptible to ASA lawsuits.[i] Because so many more organizations serve, employ, and interact with adults than with children, the ASA’s reach—and the number of claimants involved—will be exponentially longer than the CVA’s.

Some organizations are more likely to see suits than others. Allegations of sexual abuse in the hospitality industry, for instance, with its late hours and often capricious hierarchies, aren’t uncommon, and will certainly increase under the ASA.[ii] The entertainment, retail, professional services, and healthcare industries can likewise expect to see an influx of claims, as well as the manufacturing and distribution sector.[iii] Because New York courts have become more tolerant of vicarious liability claims than in the past, allegations that an organization was negligent in maintaining the safety of its premises, providing adequate security, or screening personnel during the hiring process—allegations the courts were formerly inclined to dismiss—will probably become integral in a majority of cases.

Preparing for ASA Claims

Sexual abuse plaintiff lawyers have had a year under the CVA to refine their litigation strategies and focus their efforts. Organizations likely to be targeted under the ASA are behind the curve. They should begin preparations now for what is almost certain to be an onslaught. ASA cases may become trapped in the judicial backlog for months once they’re filed, but when trials do commence, they’re likely to move fast. Disorganization is easily exploited and can mean the difference between a manageable outcome and a devastating one.

All susceptible organizations, no matter how large and well-resourced, should begin a forensic review now of their insurance coverage and take care of any problems or discrepancies before they come up in court. This means locating policy documents from the period the abuse claims are likely to specify, clarifying the scope of coverage, resolving coverage disputes with the carrier, and plotting a settlement strategy consistent with the terms of the policy. The middle of a fast-moving, high-stakes trial is not the time for conflict between a defendant and their insurance carrier, or to discover historical lacunae in coverage.

If the CVA cases brought to trial so far are any indication, the costs of defending against a sexual abuse claim under the ASA are likely to be exorbitant—potentially hundreds of millions of dollars. Squaring away what can be a labyrinth of decades-old insurance coverage well before the first claim can streamline the process, lay the groundwork for developing strategy, and alleviate feelings of crisis throughout the organization.

Insurance Coverage for Sexual Abuse Claims

Earlier this year, the Seventh Circuit Court found that one of the insurers for USA Gymnastics, Liberty Insurance Underwriters, was responsible for defending the organization in lawsuits regarding widespread sexual abuse by coach Larry Nassar because the organization’s policy contained a Directors & Officers (“D&O”) clause specifically covering “wrongful acts” by its leadership. D&O policies are just one kind of coverage that might apply in the sexual abuse cases the ASA is expected to produce.

The type of insurance coverage most likely to respond to ASA claims are policies that were in place at the time of the abuse (as opposed to policies that respond to past allegations). The most common of these is commercial general liability insurance (“CGL”). These policies usually pay the damages awarded to plaintiffs in settlement or at trial, and cover the legal costs incurred in defending against the claim or negotiating the settlement. They’re particularly suited to claims that the entity was negligent when it hired the perpetrator of the abuse, or that it failed to provide adequate supervision and oversight of that individual.

One problem with CGL policies is that starting in the early 2000s, insurers began excluding sexual abuse from coverage plans. Defendants in ASA cases where the plaintiff claims abuse occurring in the 1990s or earlier should find that their insurance policies from the period provide them with coverage sufficient for investigating, defending, and settling claims or paying court-ordered damages. In cases dating from the last 20 years or so, however, the CGL may not apply.

An alternative to CGL are claims-made policies. These are not historical policies, in place when the alleged sexual abuse occurred. Instead, they’re specifically designed to respond to a variety of claims regardless of their historical provenance. USA Gymnastics’ D&O plan through Liberty was one such policy. Another is Employment Practices Liability (“EPL”), which provides coverage in instances where employees claim misconduct by superiors or co-workers.

Claims-made policies, too, may contain sexual abuse exclusions, as well as exclusions for bodily injury and intentional acts—though these exclusions can, in some cases, be countermanded by language elsewhere in the policy documents that can be used to respond to claims of sexual abuse.

Please read Part 2 of this series for practical steps to prepare for and mitigate your risk under the New York ASA.

[i] For example, see Andrew Denney, “Upstate NY Jury Awards $25M Verdict in Child Victims Act Suit,” New York Law Journal, March 31, 2022.

[ii] For an overview, see Stefanie K. Johnson and Juan M. Madera, “Sexual Harassment Is Pervasive in the Restaurant Industry. Here’s What Needs to Change,” Harvard Business Review, January 18, 2018.

[iii] Recent cases in these sectors include allegations of sexual assault at the Harvard Club of New York; high-profile accusations of sexual misconduct at CBS; and charges of sexual abuse against a gynecologist employed by Columbia University Irving Medical Center.

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