The Archdiocese of New York v. The 32 Insurance Companies and Groups That Issued Policies to the Archdiocese from September 1956 Through December 2000

Litigation over insurance coverage for CVA-revived (Child Victims Act) lawsuits apparently began even before the CVA went into effort on August 14, 2019.  On July 1, 2019, the New York Daily News reported:

The New York Archdiocese has sued its insurance companies to demand legal protection and coverage as it braces for exposure it will face once sex abuse victims begin filing lawsuits next month under New York’s Child Victims Act. 

The complaint by the archdiocese, filed last week in Manhattan Supreme Court, lists more than two dozen insurers as defendants, and claims "the insurers ... intend to dispute, limit and/or deny coverage for claims and lawsuits alleging sexual abuse and physical abuse.” Several of the defendants listed in the complaint are members of the Chubb Group of Insurance Companies.

Thirty-two insurance companies and groups are named as defendants in that New York County, Supreme Court declaratory judgment action, which seeks:

On Count I, the Archdiocese requests that this Court enter a declaratory judgment in favor of the Archdiocese against each of the Insurers;

On Count II, the Archdiocese requests that this Court enter a judgment awarding the payment of damages in an amount equal to the amount owed under the INA Insurance Policies, to be proven at trial, as well as pre- and post-judgment interest; [and]

On Count III, the Archdiocese requests that this Court enter a judgment awarding its attorneys’ fees, costs, and disbursements in connection with INA’s bad faith refusal to defend the Archdiocese against the Norman Suit, in an amount to be proven at trial, as well as pre- and post-judgment interest[.]

The predicate "justiciable controversy" for the Archdiocese's action relates to Chubb Insurance's declination of coverage for "the Norman Suit", which was commenced on April 18, 2019 against the Archdiocese and other religious corporations (a church, a school, and the Catholic School Region of Staten Island).  By letter dated May 14, 2019, Chubb had denied liability coverage under the INA policies to the Archdiocese for the Norman Suit based on (1) lack of an alleged "occurrence"; and (2) punitive damages not being covered.  Chubb also reserved its right to deny coverage based on: (1) possible late notice; and (2) the possible time-barred nature of the Norman Suit:

The INA Policies provide coverage where the insured shall become legally obligated to pay as damages because of "bodily injury" or "personal injury" to which this insurance applies caused by an "occurrence" as those terms are defined by the policies. The INA Policies generally define "occurrence" as an accident, including injurious exposure to conditions, which results, during the policy period, in bodily injury or property damage "neither expected nor intended" from the standpoint of the insured. 

In the Norman Action, Plaintiff alleges that the Archdiocese "knew and/or reasonably should have known, and/or knowingly condoned, and/or covered up, the inappropriate and unlawful sexual activities of Father Fernando and Monsignor Brennan[.)" Plaintiff alleges that "[a)t about the time" such alleged misconduct was occurring, the Archdiocese and other Defendants "were notified that Father Fernando was engaging in sexually inappropriate conduct with minor children parishioners[.)" Plaintiff further alleges that Defendants "were put on notice of Father Fernando and Monsignor Brennan's improper and inappropriate actions with minors" and that, "[a]t all times material hereto, Defendants[')...actions were willful, wanton, malicious, reckless, and outrageous in their disregard for the rights and safety of Plaintiff, which amount to conduct equivalent to criminality." 

Based on the foregoing, Plaintiff does not allege an "occurrence" under the INA Policies. Rather, Plaintiff alleges that the Archdiocese acted willfully, wantonly, maliciously, recklessly, outrageously and criminally with respect to the alleged abuse perpetrated against Plaintiff, a minor, by Fr. Fernando and Msgr. Brennan. Thus, Plaintiff alleges to have sustained injury that was expected and/or intended from the standpoint of the Archdiocese. These allegations do not give rise to an "occurrence" under the INA Policies. Therefore, Chubb has no defense and indemnification obligations in connection with the Norman Action and denies coverage accordingly. 

Similarly, Plaintiff seeks punitive damages for Defendants' alleged misconduct. Amounts that are punitive in nature do not constitute damages under the INA Policies. Furthermore, in New York, punitive damages are uninsurable as a matter of law. Accordingly, Chubb denies coverage under the INA Policies in connection with Plaintiff's claim for punitive damages in the Norman Action. 

With regard to the Archdiocese notice obligations under the INA Policies, the INA Primary Policies are amended via endorsement to provide that, in the event of an occurrence, written notice shall be given by or on behalf of the insured as soon as practicable after such notice is received by the "Archdiocesan Service Corporation." Plaintiff's complaint alleges that the Archdiocese had knowledge of the alleged abuse by Fr. Fernando, but does not allege or discuss whether such information was ever received by the Archdiocesan Service Corporation. Similarly, Plaintiff alleges that the Archdiocese knew or should have known of the alleged abuse by Msgr. Brennan, but Plaintiff's complaint contains no allegation that such information was ever given to or received by the Archdiocesan Service Corporation. The INA Excess Policies require notice thereunder when the Archdiocese became aware that those policies might be implicated, but Chubb does not currently possess that information. As a result, Chubb is not in a position at this time to assess whether the Archdiocese complied with the notice provisions under the INA Policies. Therefore, Chubb reserves the right to deny coverage if and when Chubb obtains information that demonstrates that the Archdiocese breached the notice provisions of the INA Policies in this matter. 

Finally, it is not apparent from Plaintiff's complaint whether Plaintiff's action may be barred by the current statute of limitations. As noted above, the INA Policies only provide coverage in connection with the insured's legal obligation to pay damages in circumstances specifically defined by the policies. To the extent that an insured settles a claim for which it has no legal liability, no indemnification would be provided under the INA Policies. Chubb reserves its rights accordingly.

The INA policies at issue spanned the period 1971 to 1974, and careful readers will notice that no policy exclusions are cited in Chubb's declination letter as grounds for denying coverage.  Coverage geeks will know the reason Chubb's declination letter did not cite the expected or intended injury exclusion:  it didn't exist in commercial liability policies in the 1970s.  Pre-1986 ISO CGL policies instead incorporated the "expected or intended" aspect into the policies' definition of "occurrence":

“Occurrence” means an accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured.

According to Frederick J. Hunt, Jr.'s paper, Homeowners Insurance -- The First Decade, presented at the smoke-filled May 1962 meeting of the Casualty Actuarial Society,

The first true "Homeowners Policy," in the sense that the words are used today, was developed by the Insurance Company of North America. This policy was formally filed with the Insurance Department of Pennsylvania on August 11, 1950 and approved effective September 11, 1950. 

This policy, which was called "Homeowners Policy Multiple Form," was a true multiple line contract providing coverage previously available only under separate policies and described as Fire, Extended Coverage, Theft, Personal Liability, and Medical Payments. Since this was the first real answer to the problem of taking advantage of multiple line opportunities and at the same time coming up with a saleable product, the filing letter submitted with this policy represents a valuable document in any consideration of Homeowners rating.

If anyone has one of those INA policies lying around, please send it to me.  I'll pay the postage (and maybe a reasonable price).  I'm trying to nail down when multi-line homeowners policies began using the expected or intended harm exclusion.

Regardless, interested readers and coverage geeks like me can follow the progress of this DJ action at this NYSCEF docket.  I've set that e-docket to re-open in a Chrome tab one month for now.

09.17.19 Update ~~ Nothing new on the e-docket.  Rolling ahead another month.