When a survivor of sexual abuse brings a claim against an alleged perpetrator as well as a claim of negligence against the alleged perpetrator’s employer, the employer’s liability insurance is often one of the primary sources of monetary relief, enabling the survivor to obtain a meaningful recovery. However, insurance companies will sometimes try to avoid paying claims by saying the employer “expected or intended” the alleged abuse to occur—a coverage defense that should not apply in most situations.
Various laws establish that the insurance company bears the burden of proof when attempting to deny coverage based on an exclusion for “expected or intended” harm. These exclusions often specify “this policy does not apply to bodily injury or property damage which is either expected or intended from the standpoint of the insured.” As the New York Court of Appeals ruled in Tonoga, Inc. v. New Hampshire Insurance Co. in 2022, an insurance company attempting to deny coverage on such grounds must establish that the exclusion, subject to no other reasonable interpretation, unambiguously applies to preclude coverage.
In the absence of an exclusion, some insurance companies argue that the policyholder has the burden to prove that it did not expect or intend an injury to occur. However, even without an express exclusion, the insurance company still bears the burden of establishing that the policyholder expected or intended the harm caused. As the Vermont Supreme Court ruled in 2001 in State v. CNA Insurance Companies, “if no evidence of intent to harm exists, then the policy is construed in the light most favorable to the insured.”
Insurance companies may argue that if the policyholder was generally aware of a systemic culture of abuse and concealment, then the policyholder expected or intended a specific instance of abuse to occur. This is another argument that will not work. Liability insurance companies must defend against claims of negligent hiring, retention or supervision in connection with allegations of sexual abuse, and conclusory allegations that the policyholder’s organization knew about the abuse and mishandled it are not enough to defeat coverage.
Instead, the insurance company retains the burden of proof. In 1989, the Second Circuit ruled in City of Johnstown, N.Y. v. Bankers Standard Insurance Co., “It is not enough that an insured was warned that damages might ensue from its actions or that, once warned, an insured decided to take a calculated risk and proceed as before. Recovery will be barred only if the insured intended the damages...or if it can be said that the damages were, in a broader sense, ‘intended’ by the insured because the insured knew that the damages would flow directly and immediately from its intentional act.”
Insurance companies may attempt to preclude coverage for negligence claims against the employer-policyholder where the “operative act” giving rise to liability is intentional sexual assault, even if by an employee. However, courts have held that a negligence claim against an employer based on an employee’s intentional act is a covered “occurrence” if the employer would not have been vicariously liable for the employee’s intentional act that was outside the scope of the employee’s job duties.
More broadly, courts analyzing insurance companies’ attempts to deny coverage based on an “expected or intended” exclusion have barred recovery only when the insured intended the damages. Allegations of negligent hiring, retention or supervision, which generally mean that the policyholder should have foreseen and prevented the harm, are insufficient to demonstrate that the policyholder intended to cause damage, thereby rendering the “expected or intended” exclusion inapplicable.
Whether the policyholder intended for the alleged abuse to occur is a fact-dependent issue that must consider, among other things, the standards and customary practices during the period in which the alleged abuse occurred. For example, if the policyholder has knowledge that an employee allegedly committed abuse, the policyholder might seek treatment deemed appropriate at the time for the employee, including alcohol abuse rehabilitation and psychological treatment. If the employer puts the employee back on the job following successful treatment, the insurance company has a high burden to prove that the policyholder intended any subsequent harm because the policyholder took reasonable precautions to prevent such harm.
Recently, many U.S. states have passed legislation extending or waiving the statute of limitations for victims of childhood sexual abuse, allowing them to sue alleged abusers and their employers decades after the alleged abuse. Sexual abuse survivors have filed tens of thousands of negligence-based lawsuits across the country against various organizations for their alleged negligent hiring, supervision and retention of alleged abusers. While some insurance companies have aggressively challenged coverage on the “expected or intended” exclusion, the insurance industry faces a very high burden to prove such a defense to coverage, and policyholders should firmly push back on such arguments and insist on the coverage to which they are entitled.