Sexual abuse litigation is increasingly common, and an unfortunate wave of new lawsuits is coming. In her recent alert, Pillsbury's Joan Cotkin reviews how the insurance industry has responded to these risks with new liability insurance products designed to address such claims, what coverage defenses insurers are likely to assert, and how you can anticipate and respond to them to secure the benefit of your coverage.
The alert also reviews the common terms to expect in Sexual Abuse insurance, including its limitations and conditions. Such coverage generally applies only to vicarious liability, and the policy typically incorporates strict notice requirements. Cotkin also describes how insurers will likely respond to notices of claims or tender for a defense.
It's very important to tender notice with the right words: Explicitly ask for a defense. We've actually seen insurers refuse to assume the defense because the insured simply gave notice of the lawsuit without explicitly requesting that the insurer defend the claim (expecting the insurer to assign defense counsel, of course). Unfortunately for those insureds, their policies had an extraordinary provision indicating that, unless the insureds expressly asked for a defense, they would have to find their own counsel. This left them with the costly problem of fighting with their insurance company over reimbursement for defense costs, living with long delays in payment, and having to secure the insurer's consent for the selected counsel in the first place, for any fees to be reimbursed.
More commonly, we've seen an array of excuses insurers use to avoid providing a defense altogether, including late or insufficient notice, prior notice under another policy, and lack of bodily injury during the policy period. Each of these excuses can be met head on, as the case law generally provides that a defense must be provided wherever a potential for coverage exists under the policy.
The alert highlights the following best practices respecting coverage for sexual abuse claims, both at placement and when presenting claims for defense:
- Purchase insurance that is carefully focused on the risks your company may expect to face.
- When faced with claims, and especially when a lawsuit is served, immediately notify all liability insurance carriers whose policies might potentially apply.
- Anticipate common coverage defenses, and don't take "no" for an answer.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.