News & Events

Tender of “abuse and molestation” limits fails to secure summary judgment for liability carrier.

The policy at issue (a commercial general liability policy) in United States Fire Ins. Co. v. Mother Earth School et al., in the U.S. District Court for Oregon, contained the following:

This insurance does not apply to “bodily injury”, “property damage” or “personal and advertising injury” arising out of the actual or threatened abuse or molestation by anyone of any person.

However, subject to all other terms of the policy, this exclusion does not apply to claims against an insured for failing to prevent or stop any abuse or molestation, provided the insured did not:

(1) participate in the abuse or molestation; or

(2) remain passive upon gaining actual or constructive knowledge of the abuse or molestation.

* * * * A claim that arises out of or is related to actual or threatened abuse or molestation that is not excluded under these terms is limited to $100,000 * * * *

When an insured was sued for what the carrier apparently regarded as “failing to prevent or stop any abuse or molestation,” the carrier filed its own suit against the insured, paid $100,000 into the registry of the court, and asked to be relieved of any further obligations.

The court rejected the carrier’s position.  It held, first, that “abuse and molestation” refers only to “intentional conduct.” Observing that the underlying suits contained allegations “that could include both intentional and nonintentional conduct,” for example, “bullying,” “harassment,” and “unduly rough play,”  the Court then held that “the intent of any alleged child perpetrators has not been established,” and would not be established until the underlying suits were resolved.  “[T]his question of fact,” the Court continued, “is unripe for determination. Only after evidence has been submitted at trial in the underlying liability case will the Court determine whether any resulting state court judgment was based on a claim covered by the abuse and molestation provision at issue.”

So much for summary judgment on the duty to indemnify.  What about summary judgment on the duty to defend? Here the Court observed that, per the language of the policy, the “right and duty to defend ends when [Plaintiff] ha[s] used up the applicable limit of insurance in the payment of judgments or settlements[.]”  Quite apart from the question of whether $100,000 would in fact be the carrier’s limit of liability, the Court held that payment into the registry of the Court did not constitute “payment of judgments or settlements.” “Thus,” the Court concluded, “Plaintiff’s duty to defend Defendant Mother Earth School remains active at this time.”

Every movant wants, of course, to win her motion, but even motions that are not granted sometimes advance the ball.  The carrier in Mother Earth did not achieve, with this particular motion, an immediate victory, but it may have caused the Court, the insured, and the underlying plaintiffs to give fresh and careful consideration to the precise contours of the available coverage.  If so, the motion was likely well worth filing.

Robert ("Bob") M. Frey