Sexual abuse by the same priest over a six-year period did not amount to a single occurrence under a general liability policy, according to New York’s highest court, triggering a deductible payment for each act of abuse. The policyholder was essentially left uninsured.

The Roman Catholic Diocese of Brooklyn was sued by a minor who was sexually abused by the same priest for several years. The underlying suit settled for $2 million and the Diocese demanded reimbursement from National Union Fire Insurance Co., which provided primary insurance during three of the years abuse was alleged. The policies had a liability limitation of $750,000 and a $250,000 self-insured retention per occurrence.

National Union argued that the abuse, which took place during multiple policy periods and in different locations, constituted multiple occurrences under the relevant policies. National Union contended that the $2 million settlement must be pro-rated over each policy year. For its part, the Diocese pointed to the fact that the abuse involved the same priest and victim, which supported its position that it was a single occurrence. The Diocese also alleged that even though multiple policy years applied, it could target one year and pay only one year’s deductible.

Under the exact same characterization of fact, state jurisdictions are split as to whether those types of facts could constitute a single or multiple occurrence and whether damages must be pro-rated over multiple policy periods. Thus, the determination of the applicable state law meant the difference between the payment or non-payment of a claim that was otherwise covered.

As a result of the court’s holding, each act of abuse triggered a separate occurrence requiring its own separate deductible. The court also declined to apply joint and several liability among the insurers involved in the case, ruling that a pro rata allocation was consistent with the language of the policies at issue.

As pointed out in the concurring opinion and a partial concurrence and partial dissent, other potentially applicable states’ laws could reach a different result and their reasoning very well could have been applied here.

To read the order in Roman Catholic Diocese of Brooklyn v. National Union Fire Ins. Co. click here.

Why it matters: Insurance coverage is a phenomenon of state law. A policyholder cannot take for granted that a coverage dispute will be resolved consistently from state to state. It is essential to analyze the policy to determine whether the interpretation of certain provisions vary from state to state. Here, it was dispositive that the court determined that each act constituted a separate occurrence invoking a new deductible for each act of abuse. Coverage was effectively nullified. Other potentially applicable states’ laws may have looked at factors relating to the cause that would have evoked a single occurrence producing substantial coverage.