Seventeen states and Washington, D.C. have laws taking effect in 2019 that either abolish or extend statutes of limitations for victims of child sexual abuse to sue or seek criminal charges against their abusers. A recent A.M. Best report compares child sexual-abuse claims to asbestos liability because the claims can affect decades-old insurance policies and the settlement amounts can be hard to predict.
In a recent blog post, Carey Quigley, a Gen Re treaty account underwriter, discusses what the new laws mean for underwriters that handle commercial “child custodial care” risks. These risks encompass schools, churches, sports, camps, day care and any other organized activities involving minors.
Quigley notes that unless their policies were written on a claims-made basis, the liability of these organizations for the past conduct of employees and volunteers does not typically affect their exposure under current insurance policies. Nevertheless, he recommends that underwriters take the following three steps in reviewing guidelines and policy forms:
Build a hazard scale: The degree of risk increases with the length of the activity, so a boarding school would be on the far end of the spectrum. Since parents are now more involved with their children’s activities, local groups and gatherings would present a lower risk.
Review insurance forms: Most general commercial writers may have a local dance school or a small church in their portfolio. For these types of policyholders insurers have developed Sexual Abuse and Molestation (SAM) endorsements offering critical but not unlimited protection.
Quigley recommends that insurers include language in their SAM endorsement to: Move all coverage into the policy when the abuse first began; treat all abuse by a single perpetrator as a single claim; treat all related or interrelated abuse as a single claim, without further qualification; and provide coverage on a claims-made basis.
Decide exclusions and check wording: When writing exclusions it’s important to determine whether they will extend to all types of physical abuse, or only sexual abuse. Often these terms are defined to prevent overlap with the GL policy and stacked limits from the endorsement and base policy. If a lawsuit alleges sexual abuse with false imprisonment or battery for instance, the insurer probably intends that all such allegations trigger only the SAM endorsement.
In conclusion Quigley says that underwriters should monitor court decisions to learn how policy language is interpreted by courts and check forms filed by other insurers to see how they address stacking issues.