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Liability insurers have paid only a fraction of U.S. Catholic dioceses' costs in clergy abuse cases, and coverage disputes have mirrored those in other types of latent injury cases.
Insurers have argued, for example, that policies' “expected and intended” exclusions bar coverage where diocesan officials knew of abusive conduct — often for years — and did little to stop it. In an early ruling on the issue, the 8th U.S. Circuit Court of Appeals found in 1996 that Interstate Fire & Casualty Co. was not liable for claims against the Diocese of Winona, Minnesota, because of “overwhelming evidence that the diocese knew or should have known” of a priest's recurring abusive behavior.
Insurers won similar rulings from a Wisconsin appeals court against the Archdiocese of Milwaukee in 2010 and from an Illinois appeals court against a Chicago Jesuit society in 2013.
Legal wrangles have also arisen over the number of occurrences in clergy abuse cases and the allocation of losses among the decades of policies potentially involved.
“There's a real variance of law (between jurisdictions) on the number of occurrences,” said Scott N. Godes, a partner with Barnes & Thornburg L.L.P. in Washington.
Because liability policies before the mid-1980s typically contained no aggregate limit, primary insurers have maintained that each abuser — rather than each abuse victim — represents a separate occurrence, thus pushing a larger share of losses to excess insurers, observed Jim Dorion, Chicago-based global practice leader for complex liability and risk services with Marsh Risk Consulting, a unit of Marsh L.L.C.
The “general default” position in most cases, though, is that each victim represents a separate occurrence, Mr. Dorion said.
The fact that abuse cases can reach as far back as the 1950s also means that evidence of an organization's coverage can be lost. A federal bankruptcy judge ruled in 2009, for example, that the Diocese of Fairbanks, Alaska, couldn't recover losses from Continental Insurance Co. because it had no evidence of the terms of policies issued in the 1970s.
While insurers have won some legal battles, most have ultimately negotiated settlements of clergy abuse claims. The settlements have fallen far short of Catholic dioceses' actual losses, though. For the decade ending in 2003, dioceses paid a total of $2.35 billion in abuse cases but recovered only 34%, or about $800 million, from insurers, according to the U.S. Conference of Catholic Bishops.
A 2013 Minnesota law easing the state's statute of limitations on sexual abuse claims has led to a barrage of claims against a Minnesota Catholic archdiocese and renewed concerns among institutions nationwide about the potential effect of such laws.