In Roman Catholic Diocese of Brooklyn v. National Union Fire Insurance Company of Pittsburg, PA, the New York Court of Appeals decided an insurance coverage dispute arising out of a civil action charging a priest with the sexual molestation of a minor female. The issue was whether the molestation of a minor, which took place in multiple locations over a six year period, was a single occurrence. Its resolution had significant financial consequences for the Diocese because there was a self-insured retention for each occurrence for each policy period spanning from August 31, 1995 to August 31, 1998.
After a $2 million settlement in the civil action, the Diocese argued that the alleged molestation constituted a single occurrence and its contribution limited to a single self-insured retention of $250,000 (“SIR”). Not surprisingly, the insurer argued that the molestation involved multiple occurrences such that the self-insured retention of $250,000 would have to be exhausted for each separate occurrence. New York’s highest court found that the molestation constituted multiple occurrences, thus requiring liability to be apportioned under all the insurance policies, pro rata, with the Diocese paying its SIR for each occurrence.
The Court of Appeals applied the “unfortunate event” test articulated previously in Appalachian Ins. Co. v. General Elec. Co., 8 N.Y.3d 162 (2007), to determine whether the incidents constituted one or multiple occurrences. The “unfortunate event” test considers the temporal and spatial relationship between the incidents giving rise to the injury or loss. It specifically rejects any analysis of the term “occurrence” based on either the “sole proximate cause” or the number of person damaged. The court cautioned that the “unfortunate event” test should be used only where the policy language itself fails to indicate an intent to aggregate separate incidents into a single occurrence.
In considering the molestation here, which occurred over a span of time at various locations, the court found that the incidents lacked such a temporal and spatial closeness that they constituted one occurrence. (“It cannot be said that an instance of sexual abuse in the rectory of a church in 1995 shares the same temporal and spatial characteristics as one that occurred in 2002 in, for example the priest’s automobile [despite the unity of actors.]”)
This decision provides valuable guidance on the interpretation of the term “occurrence” with the context of sexual abuse. Where self-insured retentions exist “per occurrence”, insurers can demand that an insured contribute its self-insured retention/deductible for every policy year in which the abuse allegedly took place.