Minnesota Bankruptcy Court Applies Injury-in-Fact Trigger to Obligate Multiple Policies to Provide Coverage for Sexual Molestation Claims
In Diocese of Duluth v. Liberty Mutual Group, et al., case no. 16-05012 (Mar. 30, 2017), the Bankruptcy Court for the District Court for Minnesota was faced with determining trigger and the number of “occurrences” related to negligence claims asserted against the Diocese of Duluth by victims of priest sexual abuse. These negligence claims drove the Diocese to file for bankruptcy, and as part of that Bankruptcy proceeding, the Diocese filed an adversary proceeding seeking coverage from five of its insurers. These insurers had issued policies covering several decades. The Court ruled in favor of the Diocese, finding that multiple years of coverage could be triggered and that multiple “occurrences” could be found in each policy year as each victim was a separate “occurrence.”
The Diocese successfully argued that each alleged act of abuse constituted a separate “occurrence” under all insurer’s policies, while conceding that the “occurrence” language in the policies (“arising out of continuous or repeated exposure to substantially the same general conditions shall be considered as arising out of one occurrence”) consolidated multiple instances of abuse of the same victim by the same priest in the same year into one “occurrence” for that year.
Most of the insurers argued for the interpretation that there was only one “occurrence” – the ongoing act of negligent supervision by the Diocese in allowing the continuous and repeated exposure of the victims to the abusive priests – regardless of the number of victims or perpetrators involved. The Continental Insurance Company also argued for one occurrence, or at most, one occurrence per priest or per bishop abuser because all the injuries arose from the Diocese’s decision to allow the abusers access to the children.
The policies provided coverage for damages for personal injury caused by an “occurrence” and included similar definitions of “occurrence.” The Court noted that “the word ‘occurrence’ in occurrence based insurance policies ‘is one of the least understood and most misunderstood word in today’s insurance language[.]”
The Court’s decision focused on Minnesota’s use of the actual injury or injury-in-fact trigger rule, which provides that an “occurrence” take place at the time the complaining party as actually injured, not when the wrongful act was committed. Minnesota courts have also held that “an injury can occur even though the injury is not ‘diagnosable,’ ‘compensable’ or manifest during the policy period as long as it can be determined, even retroactively, that some injury did occur during the policy period.”
Considering these precedents, the Court noted that the underlying facts of the cases were not in dispute – numerous victims were abused by several different priests. As the sexual abuse was what caused the victims damage, “under the actual-injury rule, the occurrence is the time when the victims were sexually abused by the priests. “ The Court further determined that the number of occurrences could be both per victim and per priest – “There are separate occurrences for each separate sexual abuse for each victim and each priest. The victims each suffered separate abuse and it is this occurrence that triggers an insurance policy that is at risk at that time.” The Court also clarified if a victim was injured by two priests during one policy period, that would be two occurrences, although if injured repeatedly by the same priest during one policy period, that would be one occurrence.
It’s not evident from the decision what impact the Court’s decision had on each insurer’s coverage obligations, but certainly determining that multiple policies might be triggered and that there might be multiple occurrences in each year broadened the obligation significantly from what the insurers were arguing for.
A Pennsylvania court also recently faced this issue in connection with the Sandusky scandal at Penn State University, but came to the opposite conclusion while discussing many of the same concerns. Pennsylvania utilizes the “manifestation” trigger outside of the asbestos context, and while this trigger led to a similar conclusion as to when the bodily injury first occurred, the court did not permit Penn State to trigger multiple policy periods for subsequent acts of abuse against the same victim. In Pa. State Univ. v. Pa. Manufacturers’ Ass’n Ins. Co., 2016 Phila. Ct. Com. Pl. LEXIS 158 (Pa. Ct. Com. Pl. May 4, 2016), the court noted that:
Unlike environmental pollution or asbestos damage, which can remain hidden for many years before it manifests, the physical violation (bodily injury) arising from child sexual abuse is experienced immediately by the victim, although the harm often continues to be felt long thereafter. To the extent that PSU’s negligence enabled Sandusky to abuse his victims, such bodily injury manifested when the first abuse of each victim occurred.
The court also followed prior Pennsylvania Superior Court authority which held that each victim constitutes only one occurrence, no matter how many separate instances of sexual abuse took place. General Accident Ins. Co. v. Allen, 708 A.2d 828, 834-835 (Pa. Super. 1998) (one occurrence for each child where three children were sexually abused from 1986 to 1988). Pennsylvania does not appear to have addressed a situation with multiple abusers.
Unfortunately this will likely continue to be an area to watch as courts around the country continue to grapple with trigger and number of occurrences in these sexual abuse cases.