At 12:01am on Wednesday, August 14, the New York Child Victims Act came into effect, opening a one-year window for New Yorkers who claim they were molested or sexually abused as children to file claims and seek criminal and civil action against their alleged abusers. By 5:00am that same morning, 200 sexual abuse lawsuits had been filed, and by noon the number of claims had climbed to 385.
This flood of litigation, although it sounds dramatic, was expected ever since the New York State Legislature passed the Child Victims Act on Monday, January 28. As soon as institutions – like private schools, colleges and non-profit organizations – knew the statute was going to be enacted, they started reviewing their general liability insurance policies to see if they had coverage for potential claims.
Robin Cohen (pictured), head of McKool Smith’s insurance recovery litigation practice in New York, has been called upon by many institutions in the state to assist in this complex insurance process and mitigate any coverage disputes between policyholders and insurers over compensation for abuse victims. She told Insurance Business: “A lot of these sexual abuse claims date back to the 1960s and 1970s. They used to be barred by a statute of limitations, but because of the New York Child Victims Act, they’re no longer barred.
“The more recent general liability policies, starting in the 1980s, have a sexual abuse exclusion, so it could be complicated for litigators to get around that exclusion. But the policies that go back to the 1960s and 1970s do not have an exclusion. So, a lot of institutions have been trying to locate their old policies, and many have retained a lost policy specialist to help them do this. Another issue is that policies from the 1960s and 1970s usually have less per-occurrence limits, so I’ve been working closely with companies to work out how valuable their dated policies are.”
With sexual abuse claims under general liability policies, the trigger coincides with when the bodily injury occurred. If the sexual abuse began in the 1960s, that’s when the insurance policy would trigger because that’s when the bodily injury began. One of the big insurance questions surrounding the flood of litigation tied to the New York Child Victims Act is whether a policy triggered in the 1960s should continually trigger every year up to the present. If the courts decide victims can only get one year of coverage, and it turns out the limits on the 1960s policy were very low, then policyholders will only have limited coverage.
“The insurance carriers are looking at this from an institutional perspective and also from a broader perspective in terms of how it’s going to affect the industry as a whole,” said Cohen. “If they pay one claim, how is that going to impact another case? And so, a lot of carriers have been delaying these claims and coming up with all sort of excuses as to why they should have to pay them out.
“With respect to the later policies – those written in the 1980s – they’re referring to the specific sexual abuse exclusion. For the 1960s and 1970s policies, they’re saying the information that policyholders have is insufficient to prove up the coverage. Another thing they’re relying on is the occurrence definition in the standard general liability policies, which basically says they have to pay bodily injury unless it was expected or intended from the standpoint of the insured. And so, they’re arguing that the institution knew or should have known that the individuals, either teachers or professors, were sexually abusing the children and therefore, they’re not entitled to coverage.”
Clarity around all of these questions will depend on how evidence stands up in court and the decisions that are handed down. At the moment, insurance companies “cannot do anything proactively,” Cohen explained. And even when a decision is made, it’s likely to be factually intensive to the point that insurers will be able to build arguments around it. As Cohen pointed out, an insurer might say: ‘Even though we were obligated to pay on this claim because the policyholder didn’t know, on other claims we’re going to prove that they should have known.’
She added: “The insurers are also going to try and say that if there was sexual abuse, the policyholder only gets one year of coverage. There are lots of different ways that they’re going to either not pay or at least delay the payment for as long as possible. What’s interesting is, if the court finds the carrier obligated to pay, but they don’t, the carrier will be subject to New York’s 9% pre-judgment rate. That’s pretty high, so the carriers are going to have to make calls and see how strong their position is.”