Although intentional acts are typically excluded from coverage under a commercial general or professional liability policy, an employer is still entitled to coverage in a claim for failure to supervise according to the Second Circuit Court of Appeals in Pacific Employers Insurance Co. v. Saint Frances Care Inc.

For thirty years, from 1963 until 1993 when he retired in a cloud of suspicion, Dr. George Reardon sexually abused children in his care as an endocrinologist at St. Francis Hospital.  The details and scale of his horrific actions came to light when, following his death in 1998, his home was purchased and the new home owners found a secret room housing pornographic materials and logs of his actions.  Approximately 160 individuals sued the hospital for, among other things, corporate negligence, breach of fiduciary or confidential relationship, and breach of the special duty of care owed to children.  The excess insurer of the hospital argued sexual assault falls outside the purview of coverage, and also raised concurrency and priority issues.

The District of Connecticut rejected the excess insurer’s arguments, and the Second Circuit affirmed in a summary order.  With respect to coverage for the sexual assault, the Second Circuit stated coverage is triggered under either the commercial general or professional liability at the primary level of coverage for the claims of failure to supervise.

In reviewing claims, it can be difficult to separate the character of an action from the specific nature of a claim.  In New York, the duty to defend arises when at least one claim fails within the scope of coverage.  Here, it is incumbent to assess the nature of the claims against the actual insured, the hospital, to determine coverage.  This matter sounds in negligent supervision, and negligence is typically covered.  An important exception is when the character of an intentional act cannot be separated from the alleged negligence.  We see this in cases where an assailant may not have intended injury, so the victim sues under an intentional tort and negligence (e.g., reckless disregard).  As both causes of action pertain to the intentional act of an assault, coverage would be excluded even for the negligence action.  By contrast, here, the intentional act is separate and apart from the hospital’s alleged negligence in failing to supervise the doctor.  Thus, when analyzing claims arising from an intentional act, it is important to focus on two things:  the character of the act itself, and whether the claim itself is removed from the act.

Thanks to Christopher Soverow for his contribution to this post.