As with the previous long-tail risks such as those associated with environmental and asbestos-based injuries, the insurance industry has been impacted significantly by the growth of claims based on historic sex abuse. Though there are similarities to other long-tail claims, historic sex abuse claims present a unique mix of factual and insurance-related challenges. In particular, the growing passage of state “reviver window statutes” has presented both emerging opportunities and difficulties for those seeking to rely on or benefit from historic insurance assets.
Similarly to other efforts to expand liabilities for which insurance may be liable, insurance carriers have argued vociferously against coverage for such claims based on a variety of policy-based defenses as well as equitable arguments about fairness and the unreasonable imposition of otherwise time-barred claims on carriers. On the other hand, victims’ advocates, abuse-claim defendants and even the states passing such laws have argued that insurance assets are a critical piece to allow victims to obtain some measure of just compensation. The insurance implications will continue to grow as states enact first time windows that either revive or permanently abridge application of the statute of limitations (e.g., Arkansas and Vermont) (see Ark. Code Ann. § 16-118-118; 12 Ver. Stat.Ann. § 522), resurrect look-back periods multiple times (e.g. California) (California enacted reviver windows three separate times, in 2002, 2020 and 2022), or add additional categories of victims whose claims will be subject to reviver windows (e.g. New York) (see Adult Survivors Act (S.66A/A.648A), which created a reviver window for victims who suffered abuse as adults similar to a 2019 statute which revived a statute for victims of child sex abuse). Acknowledging that reviver windows and historic abuse allegations will inevitably implicate numerous insurance coverage considerations, this article focuses on why the most critical coverage challenge in this emerging field may involve the preliminary efforts to identify and prove the existence of responsive historic insurance policies.
It is an obvious truism that an insured must first identify insurance potentially responsive to a claim before coverage obligations or potential carrier defenses can be considered. This often-overlooked starting point is especially critical in the context of historic abuse claims. Compared to putative asbestos or environmental defendants, sex abuse claims frequently are alleged against governmental subdivisions, non-profits or other community organizations rather than manufacturing or industrial defendants. Even with large industrial organizations, which may have anticipated the need to retain documents related to insurance, it is often difficult or impossible to find historical insurance policies that are responsive to claims involving environmental or asbestos injury. This challenge is all the more profound for local government or non-profit defendants that were often short-staffed or operated on a shoestring budget. Such organizations may not have perceived a need to maintain insurance documents for years (or decades) after policy expiration. Furthermore, many such entities were and are affiliated with large national or regional organizations with byzantine insurance relationships that evolved over the years.
The bankruptcy case involving the Boy Scouts of America (BSA) is a noteworthy example that highlights many of these challenges. The BSA was a national non-profit organization comprised of a national board, some 250 local councils and tens of thousands of chartered organizations that worked with the local councils. See In Re. Boy Scouts of America and Delaware BSA, LLC, Case No. 20-10343 (LSS) (Jointly Administered), 642 B.R. 504, 518-24 (Bankr. D. Del. 2022). BSA’s national organization maintained its own liability insurance program since 1935. The national insurance program was relatively capable of reconstruction. Id. at 526.
By contrast, the insurance coverage applicable to the local councils and chartered organizations was convoluted and records were spotty or non-existent. The evidence reflected that prior to 1971, local councils were not covered under any of the BSA national insurance policies. Id. at 527. Beginning in 1971 through 1974, local councils had the ability to pay a premium to become an additional insured under BSA's policies but many continued to procure their own insurance. Subsequently, all local councils were added as additional insureds and then named insureds under the BSA policies. Chartered organizations were not included on the BSA program until 1976. Id. at 528. Thus prior to that time, all insurance for chartered organizations would have been purchased separately or through local councils.
In a remarkable effort, the BSA retained insurance archaeologists to investigate this lengthy and complex 80-year insurance history in light of the over 80,000 claims asserted against the BSA, its local councils and chartered organizations. Despite these herculean efforts, only a small portion of the insurance likely issued to the local councils and chartered organizations was located. (The BSA’s insurance archaeologist primarily found evidence for a portion of the local council programs that existed between 1965 and 1972. No independent efforts were undertaken to locate insurance issued to the thousands of chartered organizations). And yet, even though substantial amounts of potentially applicable coverage were never located, insurer concerns tied to state reviver statutes were surely substantiated given that billions of dollars worth of insurance was located and such coverage was a major contributor to the ultimately approved $2.46 Billion reorganization plan. See Dietrich Knauth, Boy Scouts set to exit bankruptcy after $2.46 bln U.S. sex abuse settlement approved, Reuters, (Sep. 8, 2022), /. In sum, though insurers should benefit from the difficulty of locating policy information in many cases, victims’ advocates and defendant organizations have cause for optimism that insurance assets may well be a significant resource in resolving such claims if coverage documentation can be found.
As in the asbestos and environmental context, litigants on both sides of the insured/insurer divide are likely to find that historic abuse claims will also frequently involve challenges associated with defunct and/or dissolved organizations. In a typical claim, an individual victim or a group of victims is likely to bring claims against an organization alleging some form of negligent hiring or supervision or more severe allegations involving organizational cover up. Given the many decades of coverage relationships potentially implicated by reviver statutes and the frequency of nonprofit bankruptcies and dissolutions over the years, it is reasonable to anticipate numerous abuse claims will involve efforts to proceed directly against insurers where the relevant defendant organization no longer exists. Indeed, according to at least one commentator, approximately 30 percent of nonprofits fail to exist after 10 years. See Tracy Ebarb, Nonprofits Fail – Here’s Seven Reasons Why, National Association of Non-Profit Organizations & Executives, (Sept. 7, 2019), citing the National Center on Charitable Statistics. As a result, it should be expected that many historic abuse cases will turn on the application of state direct-action law.
Direct-action statutes provide an opportunity for injured third parties to sue directly the primary tortfeasor’s insurer. The various states differ widely on the existence, process and circumstances wherein direct action is permitted. See generally Mark Mese et al., Direct Action Statutes, 2003 CGL Reporter (15) §520. The full scope and the breakdown of direct-action jurisprudence by state is beyond the scope of this article. Suffice to say, it may increasingly become the province of attorneys representing victims—rather than the insured defendants themselves—to uncover evidence of relevant historical insurance and to consider the plausible chance of success in pursuing coverage directly against an insurer. While it is likely that courts will be sympathetic to efforts to obtain coverage for abuse victims, plaintiffs’ attorneys are likely to face substantial hurdles in locating primary and secondary evidence of insurance policies without easy access to the defunct insured’s internal documentation and employees. Such first-order challenges do not even consider the intricacies and difficulties involved in proceeding directly against an insurer where the culpable defendant no longer exists. As a result, the ability of plaintiff attorneys or their hired agents to locate coverage information (whether in public repositories, government filings, or old lawsuits) and state law jurisprudential developments on the application of insurer direct action may become two of the fundamental dispositional considerations in claims involving historic abuse.
Though traditional coverage considerations such as the expected/intended exclusion, the number of occurrences and/or the application of multiyear policies will surely impact this growing area of litigation, it may be the ability to locate and prove coverage that is the most frequent and critical insurance consideration involved in historic abuse claims. If an insured (or an abuse victim’s attorney) cannot find policy information, it cannot provide notice and the insurer’s duty to indemnify and/or defend will not arise. Relatedly, courts applying direct action statutes and jurisprudence to abuse claims may become a critical battlefield in the years ahead for practitioners, victims’ rights advocates and insurer organizations alike.
