• Key point 10-16.7. A liability insurance policy provides a church with a legal defense to lawsuits claiming that the church is responsible for an injury, and it will pay any adverse settlement or judgment up to the limit specified in the policy. Liability insurance policies exclude a number of claims. For example, some policies exclude injuries based on criminal or intentional acts and claims for punitive damages. A church has an obligation to promptly notify its insurer of any potential claim, and to cooperate with the insurer in its investigation of claims.
Negligence as a Basis for Liability
* A federal appeals court ruled that a camp’s general liability insurance policy did not apply to sexual misconduct claims because these claims were specifically excluded by the policy. An adult male (the “plaintiff”) sued a camp facility claiming he was subjected to sexual acts by a co-camper when he was ten years old and attending a one-week summer camp for mentally or physically disabled youth. He claimed that the camp was negligent in supervising and training camp counselors, supervising the young campers, and failing to disclose to his parents what had occurred. He asserted that “as a result of these incidents and the fact that they went untreated, he suffered extreme emotional harm, humiliation and bodily injury.”
The camp turned the lawsuit over to its insurance company. The insurance company informed the camp that the policy excluded sexual misconduct claims and therefore the camp would be solely responsible for hiring legal counsel to defend the lawsuit and pay any settlement or verdict. The camp asked a court to rule on the issue of whether the insurance policy excluded sexual misconduct claims. It stressed that it was not guilty of, or being sued for, sexual misconduct. Rather, it was being sued for negligence, and this was a covered claim under the insurance policy.
The court noted that the policy’s exclusion of sexual misconduct claims was worded broadly: “This insurance does not apply to bodily injury, personal injury or medical payments arising out of … the actual or threatened abuse or molestation by anyone of any person while in the care, custody or control of any insured.” The court added that “the parties to an insurance contract, like any other contract, are free to incorporate whatever lawful terms they desire, and the courts are not at liberty to rewrite the policy under the guise of judicial construction.”
The court concluded that the plaintiff’s injuries “clearly originated from, grew out of or flowed from the alleged abuse and molestation. The exclusion at issue unambiguously excludes coverage for all types of negligent conduct arising out of the abuse or molestation by anyone of any person while in the care, custody or control of any insured. To conclude otherwise would torture the plain language of the parties’ agreement.”
The court rejected the camp’s argument that the insurance policy provided coverage because it was being sued for negligence and not sexual misconduct. It observed, “It is impossible for [the insurance company] to anticipate every claim that creative counsel will craft in order to draft a complaint that will trigger coverage …. Here, the abuse or molestation clause makes it crystal clear that no coverage is provided to employers for their negligence relating to any abuse or molestation …. Moreover, even assuming that the camp’s actions resulted in additional injury to the plaintiff, the exclusionary language is broadly written and the underlying complaint itself links the plaintiff’s injuries to the abuse.”
Application. This case suggests that sexual misconduct exclusions in church insurance policies may apply even though a church is being sued for negligence. Other courts have disagreed with this conclusion, as noted in previous articles in this newsletter. Still, church leaders should examine their insurance policies to see if a sexual misconduct exclusion exists. If so, do not assume that it will be inapplicable so long as the church is sued for negligence. Nautilis Insurance Company v. Our Camp, Inc., 136 Fed.Appx. 134 (10th Cir. 2005).
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