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.

Documenting 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 revival window of the CVA, 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, or the number of occurrences within the pattern. 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 broader liability coverage under the CGL in effect at the time of the abuse. New York’s appellate court ultimately determined that the pattern of abuse as such 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 coverage significantly, which in turn increased the compensation available for the plaintiff.

The higher the number of occurrences in sexual abuse claims, the greater the potential limits of an insurance policy’s liability—an increase reflected in amount of coverage available. Needless to say, insurers for this reason prefer to treat claims for multiple acts of sexual abuse as comprehensive, accounting for all of the acts as a single occurrence.[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 compensatory damages awarded by courts, 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.

Efforts by the state of New York to facilitate the reconstruction of historic CGL policies notwithstanding, insurers may be reluctant to fulfill their coverage obligations. 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. The insurer should have as much information about the claim as the defendant, including all letters, statements, reports, or depositions on the matter.

• “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 CGL policies contain an “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 CGLs. 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 policies for preventing and reporting sexual abuse, past and present. Managers and human resources officers can identify areas of concern, which may guide defense strategy. The more work institutions susceptible to ASA claims are able to do in advance of those claims, the better positioned they’ll be for developing a successful strategy for defense.

[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 the claimant’s repeated exposure to asbestos over time constituted a single occurrence.

[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.