Risk Group Not Liable for Claims against Priest

Business Insurance
March 6, 1995

SACRAMENTO-A risk retention group that provides liability coverage to the Catholic Diocese of Sacramento doesn't have to pay a default judgment against a priest who engaged in sexual relations with a parishioner, a California appellate court has ruled.

The decision stemmed from a 1990 lawsuit filed against the diocese and Father Michael Dermody by a woman who claimed the priest persuaded her to have sexual relations with him during counseling sessions over a 20-year period.

The suit resulted in a default judgment against the priest when the diocese was dismissed from the case (BI, Jan. 3, 1994).

The plaintiff then sued the diocese's insurer, The Ordinary Mutual, A Risk Retention Group Corp. of Vermont, which provided $ 15 million in coverage for bodily injury and property damage.

Plaintiffs who obtain judgments against insured individuals are permitted under California law to file a third-party claim against the defendant's insurer, explained Barbara Goode, a partner with San Francisco-based Fisher & Hurst, who represented the diocese in the case.

However, the District Court in Sacramento found there was no coverage because Ordinary Mutual policies exclude coverage for sexual misconduct by priests. The plaintiff appealed, but the 3rd District Appellate Court affirmed the lower court decision.

Jane D. vs. Ordinary Mutual, No. C018198, California Court of Appeal, 3rd Appellate District., Feb. 3, 1995.


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