No Coverage for Spouse of Alleged Abuser (NJ)

Generally, when an insured is subject to a claim of sexual abuse, the claim is excluded from coverage under the insured’s homeowners’ insurance policy.  However, the law has been historically less clear on whether the spouse of an alleged sexual predator is entitled to coverage.  The Superior Court of New Jersey, Appellate Division, has recently issued a decision providing further clarity for insurers faced with this dilemma in State Farm Fire and Cas. Co. v. Gregory.

State Farm Fire and Casualty Company commenced a declaratory judgment to determine its rights when the insured-wife and husband were both named as defendants in a lawsuit by a minor claiming that she was sexually abused by the husband.  State Farm had disclaimed coverage to the insured-wife based on claims that she knew or should have known that the husband was sexually abusing the minor and she had a duty to warn the minor or her parents.

The trial court, citing to High Point Ins. Co.v. J.M., decided that the insured-wife was not entitled to coverage under the homeowners’ policy, finding that public policy precluded any coverage for the insured-wife, and the appellate court firmed.  Namely, the public policy was designed to have a spouse “remain vigilant for the protection of a child victim,” and there was no “reasonable expectations” that the insurance would provide coverage for the spouse of an abuser.

The court further ruled that the claim was excluded because the homeowners’ policy excludes bodily injury or damage that is expected or intended by “the insured.”  The court was not persuaded by the insured-wife’s argument that she did not intend the injury because it found that the term “insured” unambiguously included the insured-husband.  The court further noted that the insured-wife’s knowledge (or lack thereof) of her husband’s propensity for child abuse was irrelevant to the coverage analysis.

Thanks to Steve Kaye for his contribution to this post.  If you would like further information, please write to mbono@wcmlaw.com.