Sexual Molestation Exclusion Held to Preclude Coverage For Negligent Supervision Claims
Over the years, insurers and tort lawyers have engaged in a cold war over whether homeowner's policies should cover intentional or criminal acts. In the face of threshold contentions that such offenses were not "accidents" or "occurrences," plaintiffs learned to plead their claims under theories of neglligent hiring or supervision in the hopes of creating coverage. Enough courts have come to accept coverage for these "negligence" theories that insurers have added new exclusions specifically directed at certain types of offenses that give rise to them, notably assault and battery and sexual molestation.
In the latest skirmish over these new wordings, the Supreme Court of New Hampshire (which has been very busy lately on the coverage front) ruled last week in Philbrick v. Liberty Mutual Ins. Co. that a trial court erred in refusing to apply a homeowner's exclusion for "bodily injury...arising out of sexual molestation" to negligent supervision claims against the parents of a teenage baby-sitter who had molested the plaintiff's children. The court rejected the plaintiffs' argument that it was the parents' negligence that cause their injuries, holding instead that all of these claims clearly arose out of excluded molestation since, but for the molestation, there would not have been any claim of negligent supervision against the parents. Writing for the court, Justice Duggan declared that "where, as here, the language of the exclusion explicitly ties the exclusion to the nature of the injury, the analysis should be directed towards the injuries suffered rather than the causes of action in the complaint."
The tragic nature of the njuries in cases of this sort place great moral pressure on courts to contort insurance policies to provide funds where none may otherwise exist to compensate the victims of criminal acts. Increasingly, however, courts are resisting pressure to find coverage for "negligent" crimes and are looking beyond the headings in a plaintiff's complaint to determine whether the facts warrant coverage or not.
New York courts have taken the same view in determining whether to apply similarly worded exclusions, with the emphasis on the operative acts giving rise to the claim rather than the theories of liability asserted in the complaint. In Mount Vernon Fire Ins. Co. v. Creative Housing Ltd., 88 NY2d 347 (1996), the Court of Appeals explained:
"While an insured's negligence may have been a proximate cause of plaintiff's injuries, that only resolves its liability; it does not resolve the insured's right to coverage based on the language of the contract between him and the insurer. Merely because the insured might be found liable under some theory of negligence does not overcome the policy's exclusion for injury resulting from assault."
New York courts have not construed the exclusions as broadly, however, when to do so undermines the purpose of the coverage. In Watkins Glen CSD v. National Union Fire Ins. Co. of Pittsburgh, Pa., 286 AD2d 48 (2nd Dept. 2001), for example, an intermediate appellate court held that an E&O policy afforded coverage to a school district for neglgience claims asserted as a result of sex crimes comitted by a teacher. Though the policy excluded claims arising from assault, the court reasoned that giving effect to the exclusion would undermine the purpose of E&O coverage, which is to afford protection to members of a designated calling againt liability arising from mistakes inherent in the profession, in this case negligent hiring and supervision of a teacher.