Sexual Misconduct and Insurance Coverage

Insurance policies may not cover sexual misconduct by employees.

Church Law and Tax 1994-07-01 Recent Developments

Sexual Misconduct by Clergy and Church Workers

Key point: Church insurance policies may not provide a legal defense of lawsuits brought against pastors by victims of sexual seduction. Further, any money damages awarded by a court against a pastor may not be covered by the church’s policy.

An Illinois appeals court ruled that a liability insurance policy maintained by a counseling center did not necessarily exclude coverage for a counselor who sexually seduced a counselee. A psychotherapist who was employed by a secular counseling center initiated sexual contact with her. The two engaged in sexual intercourse on several occasions over a two-year period. The woman later sued her counselor, and the counseling center. She alleged that the counselor was guilty of breach of his fiduciary duties, assault and battery, and intentional infliction of emotional distress. She claimed that the counseling center was responsible for the counselor’s conduct on the basis of the legal doctrine of respondeat superior (under which an employer is liable for the negligent acts of its employees committed within the scope of their employment). The center was dismissed from the lawsuit on the ground that the counselor was not acting within the scope of his employment when he had sexual relations with the counselee. The center’s insurance company sent a letter to the center informing it that the insurance policy did not “afford coverage” for any of the claims against the counselor. It relied on the following language in the insurance policy:

We’ll pay amounts you or others protected under this agreement are legally required to pay as damages for covered professional liability claims …. Your employees are protected against covered claims while working for you within the scope of their duties.

The insurance company claimed that the center had been dismissed from the case on the ground that the counselor was not “working for the center within the scope of his duties” when he engaged in sexual contact with the counselee, and therefore the insurance policy provided no coverage for him. The insurance company asked a court for a “declaratory judgment” agreeing with its interpretation of the insurance policy. A court agreed with the insurance company’s interpretation. It noted that the sexual misconduct of a counselor in the course of a counseling relationship could be viewed as occurring within the scope of employment. It based this conclusion on the “transference phenomenon” which often occurs in the context of counseling. Counselees often develop a deep emotional dependence upon a counselor. The emotional dependence is called “transference” and is a typical reaction characterized by a counselee unconsciously attributing repressed feelings to the counselor. A counselor must be capable of properly responding to these feelings in order to avoid emotional involvement with the counselee and to assist the counselee in overcoming problems. The court observed that “[t]he mishandling of this phenomenon, which generally results in sexual relations or involvement between the psychiatrist or therapist and the patient, has uniformly been considered as malpractice or gross negligence ….” Since the transference phenomenon is so closely associated with the counseling relationship, the court noted that “the sexual misconduct of a therapist could be viewed as inside the scope of treatment under the guise of therapy.” However, it agreed with the insurance company that such a conclusion was not possible in this case since the lawsuit against the center had already been dismissed on the ground that the counselor’s acts did not occur within the scope of his employment. Accordingly, the counseling center’s insurance policy did not apply to the counselor’s acts, and he was not entitled to a legal defense or payment of any verdict or settlement against him.

The possible application of this case to churches and clergy is apparent. It suggests that church insurance policies may not cover clergy who engage in sexual relations with a counselee if the church is found to be free from responsibility on the ground that the minister’s acts were not within the scope of his or her employment. St. Paul Fire & Marine Insurance Company v. Downs, 617 N.E.2d 338 (Ill. App. 1 Dist. 1993). [PCL4K, PCL12A2, PCL12A4f]

See Also: Seduction of Counselees and Church Members | Negligent Selection | Liability Insurance

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