Coverage and Liability Issues in Sexual Misconduct Claims

Part II.(2) The negligent:(a) Employment;(b) Investigation;(c) Supervision;(d) Reporting to the proper authorities or failure to report; or(e) RetentionOf any insured, an employee of the insured, or any other person for whose acts theinsured may be held liable for the actual or threatened sexual abuse, molestationor harassment of any person.The following are types of conduct or losses that are often excluded in sexual misconduct coverageforms:• Coverage for perpetrators• Loss from violations of any penal or criminal statute• Loss arising out of employment discrimination• Punitive damages• Loss arising from HIV or AIDS• Coverage for claims involving specific perpetrators or when there is a subsequent claiminvolving a previously identified perpetrator.Many policies offering sexual misconduct coverage have an aggregate limit. For example, one policyprovides for an “each claim limit” that applies:“regardless of the number of acts of sexual misconduct, the period of time over which such acts occur,or number of persons acted upon, all injury arising out of all acts of sexual misconduct by the sameperson, or by two or more persons acting together, will be considered one claim, subject to the eachclaim limit of insurance in force at the time the first act covered by this or any other policy issued byus occurred.”Another policy uses a limiting provision that provides:“incidents related to or arising out of sexual molestation, whether committed by one or more individuals,and irrespective of the number of incidents or injuries, or the time period or area over which incidentsor injuries occur, shall be treated as a separate occurrence for each victim”.Available coverage forms vary greatly and coverage for any particular claim must be evaluated based onthe applicable policy language and the particular facts of that claim. Most insureds have several optionsavailable to them to suit their business and insurance needs.– iii –