Coverage and Liability Issues in Sexual Misconduct Claims

ILLINOISCoverage Trigger & Number ofOccurrencesIntentional Acts ExclusionsPerpetrator:Non-perpetrator:Sexual Misconduct ExclusionsIn a case alleging that insured diocese negligently retained andsupervised a priest causing a minor female to be sexually abusedduring more than one policy period, the court found negligentsupervision constituted an “occurrence” in each policy period in whichabuse took place. The loss was allocated between policy periodsbased on the number of months of abuse within each period divided bythe total number of months where there was sexual abuse. The courtalso found that a separate retention and policy limit were potentiallyavailable to cover the loss. Roman Catholic Diocese of Joliet v.Interstate Fire Ins. Co., 685 N.E.2d 932 (Ill. App. Ct. 1997).Courts upheld exclusions for bodily injury expected and intended bythe insured where the insured was the perpetrator because the intentto harm was inferred by the conduct. See Hartford Ins. Co. of Ill. v.Kelly, 723 N.E.2d 288 (Ill. App. Ct. 1999); State Farm Fire & CasualtyCo. v. Watters, 644 N.E.2d 492 (Ill. App. Ct. 1994); Western StatesIns. v. Bobo, 644 N.E.2d 486 (Ill. App. Ct. 1994); Scudder v. HanoverIns. Co., 559 N.E.2d 559 (Ill. App. Ct. 1990). Intent to harm will not beinferred where the perpetrator is a minor. Country Mutual Ins. Co. v.Hagan, 698 N.E.2d 271 (Ill. App. Ct. 1998).The Illinois courts look to the allegations in the complaint to determinewhether non-perpetrator’s actions are intentional and thus excludedfrom coverage. See Westfield National Ins. Co. v. ContinentalCommunity Bank, 804 N.E. 2d 601 (Ill. App. Ct. 2003) (Claims thataunt was aware of her husband’s prior criminal involvement withminors and inappropriate physical encounters with minor claimantsnot covered because aunt reasonably should have anticipated or“expected” the injuries); Cf. American Family Mut. Ins. Co. v. Enright,781 N.E. 2d 394 (Ill. App. Ct. 2002) (Held insurer that issued businessowners package policy had duty to defend insured whose employeesexually assaulted a patient because the complaint sought to holdinsured liable for its own negligent conduct); United States Fidelity &Guaranty Co. v. Open Sesame Child Care Center, 819 F. Supp. 756(N.D. Ill. 1993) (Intent to harm may be imputed to the perpetrator’semployer with respect to respondeat superior claims, but not to claimsof negligent hiring.)The Illinois courts have upheld sexual misconduct exclusions todeny coverage for the perpetrator of the abuse. See Illinois StateMedical Ins. Services v. Chichon, 629 N.E.2d 822 (Ill. App. Ct.1994); American Home Assurance Co. v. Stone, 864 F. Supp. 767(N.D. Ill. 1994), aff’d., 61 F.3d 1321 (7th Cir. 1995). However, theAppellate Court of Illinois found an insurer had a duty to defenda claim of negligent hiring against an employer whose employeesexually molested a claimant where the policy excluded coverage for“intentional injury arising out of sexual molestation inflicted upon anyperson by or at the direction of an insured.” American Family Mut. Ins.Co. v. Enright, 781 N.E. 2d 394 (Ill. App. Ct. 2002).– 20 –