Natasha Romagnoli, Steven J. Roman, Anna 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.
In Part 1 of this two-part series, we covered the implications of the ASA, preparing for ASA claims, and insurance coverage for sexual abuse claims.
This post (Part 2) gives practical guidance on how to prepare for and mitigate your risk under the ASA.
Locating Coverage Years—or Decades—After the Fact
Locating old insurance policy documents can be difficult, time consuming, and sometimes ultimately fruitless. Like some of the most famous texts of antiquity, we can today only catch glimpses of them in fragments or passages quoted and requoted in other texts down the centuries. The analogy serves as a reminder that the absence of coverage documents from the period in question does not signify an absence of coverage.
In sexual abuse cases, the state of New York encourages a generous interpretation of evidence of past insurance coverage, no matter how scant. In the courts, defendants can use secondary evidence such as policy renewal documents, supplementary policy documents from the period, letters and meeting minutes, and even certificates of insurance to establish the coverage in place at the time of the abuse. During the CVA revival window, the state’s Department of Financial Services asked insurers to go above and beyond and “act in good faith” in determining historical coverage, “so that victims will be compensated.”
Whether the same spirit will be brought to bear on ASA cases remains to be seen. While New York has been clear in its commitment to restorative justice for sexual abuse survivors, having the actual documents in hand allows targeted entities to develop a detailed defense strategy well in advance of the anticipated trial. Businesses and other organizations that believe they could be named as defendants under the ASA should begin the work of locating old policies now.
Liability Coverage and the Question of Occurrence
One of the most pressing questions before the courts in sexual abuse cases comes down to deciding whether compensation for a pattern of sexual abuse should be based on the pattern as a whole by a single perpetrator, or the number of occurrences within the pattern. In other words, should five acts of sexual abuse over the period of a year constitute five occurrences, or one?
In 2013, the Roman Catholic Diocese of Brooklyn sued its insurer, National Union Fire Insurance Company of Pittsburgh, for liability coverage under the policy in effect at the time of the abuse. Roman Catholic Diocese of Brooklyn v. National Union Fire Ins. Co., 21 N.Y.3d 139 (2013). New York’s appellate court ultimately determined that collapsing the pattern of abuse by a single perpetrator into one occurrence was insufficient to account for the victim’s experience, and ruled that each instance of abuse would need to be treated separately. The decision increased the amount of available coverage significantly by opening up additional policy years, which in turn increased the compensation available for the plaintiff.
In short, taking the position that there are multiple occurrences in a sexual abuse claim will often increase the amount of coverage available to settle claims. Needless to say, insurers for this reason prefer to group together all instances of sexual abuse into a single occurrence to limit their liability.[i]
Reasons for Declining Covering
The ASA will open the floodgates for hundreds, possibly thousands of previously time-barred sexual assault claims against a wide range of institutions. Settlements and damages awarded by juries, along with the costs of investigating and defending the claims, are expected to run into the hundreds of millions of dollars. Most of this money will come from insurers.
Insurers may be particularly reluctant to fulfill their coverage obligations given that they have already spent more than three years being asked to provide coverage for CVA claims on policies that they long believed carried no more risk, and may even be required to cover claims of the same institutions who previously sought millions of dollars of coverage under the CVA.
Further adding to the unpredictability of how many claims a policyholder (and its carriers) will face is the uncertainty of the treatment of these types of claims when the policyholder files for bankruptcy. A recent bankruptcy court decision demonstrates the emerging commitment by the courts, including the bankruptcy courts, to ensuring that victims of adult sexual abuse are not precluded from seeking redress under the ASA even from those organizations that are in the midst of bankruptcy. In the Diocese of Rockville Centre bankruptcy, the court had previously set a bar date for the filing of all sexual abuse claims, which expired in 2021. In August 2022, however, the court exercised its broad discretion to extend the bar date for the filing of ASA proofs of claim to allow victims of adult sexual abuse to seek redress from the Diocese under the ASA. In re Roman Catholic Diocese of Rockville Centre, Case No. 20-12345 (Bankr. S.D.N.Y.). While the court set a bar date that was earlier than the applicable statute of limitations, which may ultimately limit the total number of claims filed against the Diocese of Rockville Centre, its decision to reopen the bar date enabled ASA claimants to file claims against the Diocese of Rockville Centre where they would have otherwise been precluded from doing so. Also, bankruptcy courts could choose to extend bar dates for filing proofs of claims even beyond the applicable statute of limitations, thereby providing no protection to institutions in bankruptcy. Such actions by courts could increase the overall reach and impact of the ASA not only on defendants, but also on insurers, and heighten insurers’ motivations to raise coverage defenses in the hopes of limiting their liability for ASA claims.
Institutions likely to find themselves defending against or negotiating settlements for sexual abuse cases under the ASA should be aware of arguments insurance carriers might put forward for denying coverage and prepare accordingly.
These include:
- Late Notice
A policyholder who learns of sexual abuse allegations prior to the opening of the revival window but neglects to deliver timely notice to the insurer may be denied coverage. To avoid losing coverage on these grounds, organizations should inform their insurance companies as soon as they learn of potential claims and preserve records of that communication.
- “Expected or Intended” Exclusions
Insurance companies can deny coverage for sexual abuse claims on the ground that the abuse constitutes an uninsurable intentional act because the policyholder either expected or intended the abuse to take place. Nearly all commercial general liability (“CGL”) policies contain a so-called “expected or intended” exclusion. In New York, courts have found that defendants neither expect nor intend sexual abuse when they hire employees subsequently accused of abusive acts.[ii]
- Lack of Cooperation
Organizations fail to cooperate with their insurance carriers when they withhold information about claims, provide misleading information about a claim, or otherwise interfere with an insurer’s ability to comprehend a claim for which they are liable.[iii] If the insured’s policy contains a non-cooperation provision, and the insurer believes the insured has failed to cooperate, the insurer may pursue denial of coverage in court. Policyholders may be able to refute the insurer’s allegations by demonstrating that the carrier has imposed unreasonable demands.
- Lack of Consent
Provisions requiring policyholders to obtain the consent of the insurer before paying any settlement monies to claimants or covering expenses related to the defense of a claim are a common feature of CGL policies. This is a reasonable expectation, and organizations involved in ASA litigation should maintain open and clear communication with their carriers from the inception of the process, including seeking the insurer’s input on any strategies that might result in considerable payouts or expenditures.[iv]
In addition to reviewing current and historical insurance policies, any business or organization responding to ASA claims should have an equally comprehensive knowledge of its internal policies for preventing and reporting sexual abuse, both past and present. Managers and human resources officers can be helpful resources in identifying areas of concern, which may guide defense strategy. The more work that institutions susceptible to ASA claims are able to do in advance of those claims, the better positioned they will be for developing a successful defense strategy and maximizing available insurance coverage early on.
[i] In Mt. McKinley Ins. Co. v. Corning Inc., 903 N.Y.S.2d 709 fn. 6 (N.Y. Sup. Ct. 2010), the insurer claimed that each asbestos claim constituted a separate occurrence under the insured’s policy. The court held that the insurer failed to establish that each of the underlying claims was a separate occurrence under the policy language because an issue of material fact existed as to whether the policy language evinced an intent to group the claims at issue in the underlying actions. Id. at 722.
[ii] In NYAT Operating Corp., GAN Nat. Ins. Co., 46 A.D.3d 287, 287 (N.Y. App. Div. 2007), the court found the policyholder’s fault was in negligent hiring and retention and that the policy’s “expected or intended” exclusion did not apply. Courts reached similar conclusions in Olin Corp. v. Lamorak Ins. Co., 332 F. Supp. 3d 818, 844 (S.D.N.Y. 2018) and Jubin v. St. Paul Fire & Marine Ins. Co., 236 A.D.2d 712, 713 (3d Dep’t 1997).
[iii] Litigation on the question of non-cooperation includes Liberty Mut. Ins. Co. v. Roland-Staine, 21 A.D.3d 771, 773 (N.Y. App. Div. 2005); Greater New York Mutual Insurance Company v. Utica First Insurance Company, 102 N.Y.S.3d 175, 177 (1st Dep’t 2019); and Utica Mut. Ins. Co. v. Gruzlewski, 217 A.D.2d 903, 630 N.Y.S.2d 826 (1995).
[iv] On the other hand, in Federal Ins. Co. v. Stechman, 192 A.D.2d 531, 531 (N.Y. App. Div. 1993), the court found the consent of the insurer was not required if there was no provision for consent in the policy.