Insurer Let off the Hook on Priestly Abuse Payout
By Marlene Kennedy
Courthouse News Service
May 14, 2013
ALBANY, N.Y. (CN) - A priest's six-year sexual abuse of a Queens girl counts as multiple injuries under the diocese's insurance policy, New York's highest court ruled.
St. Kevin Church in Flushing, N.Y., suspended the Rev. James Smith in 2002 amid allegations of sexual abuse.
In a 2003 lawsuit, a woman claimed that Smith had been molesting her daughter, identified as Alexandra L., since 1996.
The mother worked as a cook at the St. Kevin rectory and allegedly brought Alexandra there after school on most weekdays and sometimes on the weekends.
She said Smith assaulted Alexandra during every visit, and sometimes on multiple occasions in the same day.
In 2007, the Roman Catholic Diocese of Brooklyn settled the negligent hiring and supervision claims for $2 million and "additional consideration." When National Union Fire Insurance Co. of Pittsburgh disclaimed coverage, the diocese filed a 2009 breach of contract complaint in Kings County Supreme Court.
For each occurrence of bodily injury during a policy period, National Union was supposed to be liable for covered damages after the first $250,000 - the "self-insured retention," or deductible - up to a cap of $750,000.
The trial court agreed with the diocese that National Union failed to timely disclaim coverage as required by state insurance law. It also decided that the incidents of sexual abuse covered by the settlement constituted a single occurrence of injury but that the language of the insurance policies required exhaustion of the deductible for each affected policy.
An appellate panel reversed in 2011, however, finding that the acts of sexual abuse alleged in the personal-injury case constituted multiple occurrences; that the $2 million settlement and any "additional consideration" should be allocated on a pro-rata basis over seven policy periods; and that the diocese must exhaust a $250,000 deductible for each insurance policy affected.
A plurality of New York's highest court, the Court of Appeals, affirmed on May 7. After apportioning liability pro rata among the various National Union policies in effect over the six years of abuse, the diocese has not exhausted all deductibles to be eligible for reimbursement, according to the ruling.
"This is the first time we address the meaning of 'occurrence' in the context of claims based on numerous incidents of sexual abuse of a minor by a priest, which spanned several years and several policy periods," according to the lead opinion written by Judge Jenny Rivera.
The plurality decided to apply the "unfortunate event" test, which the court has used before in insurance cases. This test requires a look at the "temporal and spatial relationship" between injury-causing incidents to determine "whether the incidents can be viewed as part of the same causal continuum, without intervening agents or factors."
It is especially useful when an insurance policy lacks language indicating that separate incidents are to be aggregated into a single occurrence, the judges said.
"Applying the unfortunate event test, we conclude that the incidents of sexual abuse within the underlying action constituted multiple occurrences," Rivera wrote. "Clearly, incidents of sexual abuse that spanned a six-year period and transpired in multiple locations lack the requisite temporal and spatial closeness to join the incidents."
Unlike a three-car collision that can be viewed as a single injury-causing occurrence, "the incidents are not part of a singular causal continuum," the judges added.
A pro-rata allocation of liability is also consistent with the language of the insurance policies and with the multiyear nature of the abuse, where specific injuries in specific policy periods cannot be determined, according to the ruling.
Judges Susan Read and Eugene Pigott joined Rivera's opinion. Chief Judge Jonathan Lippman took no part in the decision.
Judge Robert Smith concurred in result in a separate opinion, agreeing on the pro-rata allocation but disagreeing that the sexual abuse should be viewed as multiple occurrences.
Judge Victoria Graffeo concurred in part and dissented in part, also in a separate opinion.
She agreed that pro-rata allocation of the liability was appropriate. "But because I do not believe that application of the 'unfortunate event' test results in a finding that the continuous course of sexual abuse of a single child by the same negligently hired and supervised priest amounted to multiple occurrences, I respectfully dissent from that part of the plurality decision," Graffeo wrote.
National Union's definition of occurrence - "an accident including continuous or repeated exposure to substantially the same general harmful conditions" - was similar to the language of a policy in another case that the court decided differently, she noted.
In that case, which involved personal-injury claims of asbestos exposure, the court used the unfortunate event test to decide that General Electric Co. could not aggregate the claims on an annual basis because they shared few commonalities.
"Although the abuse incidents continued for more than six years, there were no substantial periods of intervening time when there was no abuse," Graffeo wrote.
"Thus, there is no question that the sexual abuse incidents were sufficiently frequent and connected (i.e., temporally close to one another) to meet the requirements of the unfortunate event test," she added (parentheses in original).
Barbara Michaelides of Bates Carey Nicolaides in Chicago represented National Union. David Hamm of Herzfeld & Rubin in Manhattan argued for the diocese.
After Smith's suspension in 2002, the Queens-based Times Ledger reported that the then-71-year-old priest had previously served three other parishes in the borough. He started out in 1965 at Holy Trinity Roman Catholic Church in Whitestone, then moved to Our Lady of Hope in Middle Village and Our Lady of Mt. Carmel Church in Astoria. He reportedly moved to St. Kevin in 1989.