New York Employers Must Take Action to Secure Insurance Coverage for the Coming Wave of Sexual Abuse Claims Under the Adult Survivors Act
Kelley Drye Client Advisory
On November 24, 2022, New York will open a one-year “lookback” window that will revive older sexual abuse claims that were previously barred by applicable statues of limitations and allow victims to file suit against responsible parties regardless of when the abuse occurred. The lookback window is the result of the recently-enacted Adult Survivors Act (“ASA”). The ASA is an analogue to New York’s Child Victims Act (“CVA”) of 2019. The CVA revived the claims of victims who were under eighteen at the time of abuse. In contrast, the ASA applies to victims who were eighteen or older when the abuse occurred.
Like the CVA, the ASA revives otherwise time-barred claims based on both intentional and negligence theories of relief. This means that companies that formerly employed abusers may be sued and held liable under vicarious liability theories – such as negligent hiring, training and retention – even where the employer had no direct knowledge or involvement in the abuse.
Nearly 11,000 lawsuits were filed under the CVA during its revival window, originally set for one year, and later extended to two. A large percentage of those lawsuits were against organizations that had extensive involvement with children, such as churches, youth organizations and foster care agencies. Even aside from the substantive damages arising from such suits, the financial impact of merely defending against these lawsuits has been staggering, and many organizations have been driven into bankruptcy.
The ASA promises to have an equally broad impact on a much wider range of organizations and industries, such as entertainment, hospitality, healthcare, or any other industry involving extensive interactions with adults. As the #MeToo movement has shown, many women who were previously reluctant to speak of their abuse are now willing to come forward. Such claims – which may have been barred by statutes of limitations – will become actionable on November 24.
The impact of the ASA cannot be overstated: a whole variety of long-dead claims based on alleged harassment or other abuse are now actionable, and employers should anticipate a flood of new claims based on old conduct. It is therefore critical that New York employers understand the far-reaching effect of this law and take action now to prepare for claims enabled by the ASA.
Insurance May Cover Revised Abuse ClaimsInsurance may provide coverage for revived abuse claims, but policyholders likely will have to look to older policies that were in effect at the time the alleged abuse occurred. This is because the policies most likely to cover sexual abuse claims are general liability (or CGL) insurance policies, which typically cover injuries that occurred during a one-year “policy period” starting on the date the policy was issued. Thus, a lawsuit alleging that an employee sexually assaulted a customer in 1979 could be covered by the CGL policy the employer purchased that year.
In addition, coverage is more likely for significantly older claims, dating to the 1980s or earlier. Starting in the mid-1980’s, sexual abuse exclusions became commonplace in CGL policies. Prior to that time, CGL policies generally did not have such exclusions. It is well-established under New York law that the standard CGL policy language from that era generally covers vicarious liability claims against employers based on sexual abuse.
In contrast occurrence-based CGL policies, “claims made” policies – such as directors and officers (“D&O”) or employment practices liability insurance (“EPLI”) apply to new claims that are made (or lawsuits that are filed) during the policy period, regardless of when the conduct occurred. Thus, if coverage is available under these policies, it will be under the policies that are currently in effect, or that will be in effect during the one-year ASA revival window.
Although modern CGL and claims-made policies are much more likely to contain sexual abuse exclusions than older CGL policies, the possibility of coverage should not be discounted until the policy has been carefully reviewed and compared against the lawsuit’s allegations.
The Challenges of Locating Historic Insurance PoliciesEmployers should take immediate action to identify and locate their older insurance policies which may respond to new ASA claims alleging abuse in the distant past. All insurance policies require the policyholder to notify the insurer of new claims in a timely manner. Late notice can be grounds for the insurer to deny coverage altogether. When a new lawsuit alleges abuse that occurred decades earlier, the policyholder cannot provide notice if it does not know which carrier was insuring it at the time in question. In the CVA context, many insurers have refused to excuse delays in notice even where the policyholder has promptly undertaken a search to identify the correct insurer.
Locating historic insurance policies may be challenging. Old policies may be stuffed away in storage closets or off-site records facilities in poorly organized file systems. In many cases, a time-consuming manual review of old files may be necessary to determine what evidence of coverage is available. Often, policies have been lost or destroyed. Some companies have a records retention policy of only six years. When policies are missing, there are a number of steps that policyholders can take to locate evidence of historic coverage. Policyholders can contact the insurance brokers who sold their insurance over the years. Brokers often maintain records of policies dating back many years or decades. In addition, organizations may have been required to provide proof of insurance to municipalities in the past, and those records may be discoverable through Freedom of Information Law (“FOIL”) requests. In some cases, court records from previous personal injury lawsuits against an employer may identify the name of an insurer covering the loss. Even where a complete copy of the insurance policy cannot be located, it is still possible for policyholder to establish the existence of coverage through the use of extrinsic evidence.
Coverage IssuesJust as employers will be scrambling to secure coverage for the flood of ASA claims that previously were barred by the statute of limitations, insurers will seek to limit their own exposure by pushing back on claims and raising defenses to coverage wherever possible.
Employers should not accept denials of coverage at face value. Insurance policies must be closely examined to determine the scope of coverage. A threshold question will be to determine whether the policies cover sexual abuse claims at all, or whether such claims are excluded. In the CVA context, insurers have raised many other defenses to coverage, even where the policy does not expressly exclude sexual abuse.
Even where the insurer agrees to provide coverage for a lawsuit, many questions can arise as to the scope of that coverage, particularly where the claim involves multiple instances of alleged abuse, or when the allegations span multiple years and/or multiple policies. In that situation, policyholders should engage competent coverage counsel to navigate these complicated issues.