The United Nations (UN) has recently taken the position that childhood sexual abuse should be considered torture. Classifying childhood sexual abuse as torture may eliminate statutes of limitations that dictate when victims can file civil suits. Any institution acting in an official capacity found to have caused pain or suffering through sexual abuse could be exposed to additional litigation.
In her article “Seeking justice: Insurance and sexual misconduct,” Milliman’s Christine Fleming provides perspective on insurance coverage issues that could be triggered if the UN’s initiative comes to fruition. Here is an excerpt:
Are old CGL (commercial general liability) policies still exposed today?
In cases of childhood sexual misconduct, the abuse often occurred many years before the lawsuit was brought or the claim was reported. This long report lag exists because states set the statute of limitations within which a plaintiff can bring a suit as the time when that person reaches the age of majority. In addition, some states have extended the statute of limitations specifically for childhood sexual abuse claims. The legislatures in these states reason that there are unusual psychological barriers impeding the victim’s ability to report these incidents, and lengthening the statute of limitations achieves a higher social purpose and promotes a just outcome. Several states allow five to 10 years after reaching the age of majority in which to file a suit, or longer. Two states have no time limitation for filing childhood sexual abuse lawsuits. Many states also have an alternate trigger allowing the plaintiff to file within a certain number of years after discovering their injuries were related to the sexual abuse. This is frequently not a clearly identifiable date.
Because of this long reporting lag, older CGL policies can and do get triggered for claims related to childhood sexual misconduct.
For abuse or injuries that occurred over a long period of time, how do we determine which policy responds?
If the abuse occurred over a long period of time, and/or there is a long lag before the claim is reported, then the insured may have several CGL policies in place, any or all of which could provide coverage for the occurrence. The relevant date for determining which policies are triggered is the date the damage occurred, not the date of the conduct that led to the damage. In the case of sexual misconduct, it is the date the injury occurred, not the date of the negligent hiring or supervision, that determines the policies triggered.
However, because of the repeated and continuous nature of many sexual abuse cases, it is difficult to determine the date on which the injury actually occurred. Therefore, most courts have held that all policies in effect during the period of actual abuse are triggered. This theory is known as the “exposure” trigger of coverage. Some courts, however, have held that the injury progresses even after the abuse ends—specifically, until the date the plaintiff discovers his or her abuse-related injury (i.e., when the injury becomes “manifest”). In these jurisdictions, all policies in effect during the period of actual abuse and thereafter until the date the injuries are discovered are triggered. This theory is known as the “continuous” trigger of coverage.
The fact that many policies may be triggered does not mean that all triggered policies will pay the same amount of indemnity or defense. Generally, there are two methods courts use to allocate damages among the triggered policies: pro rata and all sums.
Under the pro rata approach, losses are divided among all triggered policies. The courts applying pro rata allocation reason that this approach is consistent with the CGL policy; namely, that a policy pays only for damages occurring during that policy period. Of course, in cases of injuries sustained as a result of continuous or repeated sexual molestation, it is impossible to determine what quantity of the damage occurred during each policy period. Therefore, courts usually allocate pro rata based upon an insurer’s share of the time on the risk or some variant thereof (e.g., some states allocate pro rata based upon a combination of time and limits on the risk). In most cases, the insured’s own self-insured retentions in triggered years are also allocated a share of the exposure.
The all sums method also finds support in the CGL policy language; namely, that the insurer is required to pay “all sums” the insured is legally obligated to pay as damages resulting from an occurrence. Under the all sums approach, all losses are allocated to one policy period and losses are paid off of those policies up to the coverage limits. In short, insurers are jointly and severally liable for the entire amount of the claim. The insurers within that policy period may then pursue other carriers for contribution. In many cases, the insured’s self-insured retentions in years other than the allocated policy period do not contribute to the losses. In some cases, the insured can select the policy period within which losses will be allocated.