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Availability of Coverage Under a CGL Policy For Historical Sexual Abuse
Are payments offered through a conciliation process designed to make moral amends covered by commercial general liability (CGL) insurance? Such was the novel issue considered by the New Brunswick Court of Queen’s Bench in L’Évêque Catholique Romain de Bathurst v. Aviva Insurance Company of Canada and Co-Operators General Insurance Company (intervenor), 2016 NBQB 174.
The parties were seeking a determination whether Aviva was responsible to reimburse the Diocese for moneys paid to victims of sexual abuse at the hands of its priests during the sixties and seventies. During that period, a series of policies of insurance for general commercial liability had been issued to the Diocese by Aviva’s predecessor companies.
When a number of claims of sexual abuse by its priests surfaced and the Diocese realised it would be called to indemnify their victims, the Diocese contacted Aviva to determine if the claims were covered. Aviva’s position was that they were not.
Recognising that it may not have the ability to defend and pay all claims, and in order to atone for the harm caused, the Diocese decided to launch an independent, non-adversarial and confidential conciliation process. Payments totalling $2,879,179.00 were made to victims of sexual abuse pursuant to the process. As a means of fairness and compassion toward the victims, the process did not have the characteristics of a judicial inquiry. The Diocese presumed its vicarious liability for all of the claims, and the claimants were given the benefit of the doubt regarding their allegations, save for obvious contradictions. The claims were not analyzed in reference to a particular standard of proof, nor were they subjected to the analysis whether they were prescribed. The nature of the process also encouraged the participation of victims who would not have made their claims known in the context of any litigation. The Diocese however did advance an inquiry into contributory factors, such as whether the claimants were also abused by persons other than the offending priests.
The court recognized this approach was commendable, but it ultimately concluded that the payments were voluntary and did not fall within the coverage agreements of the CGL policies, which required that the payments be made pursuant to a legal obligation to pay.
The outcome is even more remarkable when one considers that the conciliation process was devised after the denial of coverage by Aviva for the sexual abuse, a conclusion which ultimately proved to be incorrect.
The Court concluded that there was indeed coverage under the CGL policy for the Diocese’s potential liability for the sexual abuse. Aviva had argued that the Diocese, through its Bishops, enabled some of the abuse by failing to take appropriate steps to protect its parishioners, relying on reprimands and transfers of the priests who were abusing children. Regardless, the Court found that the Diocese’s failure to inform its insurer that there was a known abuser of children within its ranks did not operate to void the policy for failure to disclose a material risk, since at the time there were no claims being advanced for sexual abuse and it was not a risk of which insurers were aware until well into the eighties. The Court also declined to apply the intentional acts exclusion. It concluded that it was foreseeable to the Diocese that children would continue to be harmed by their practice of moving an abuser from parish to parish but proposed that while the analysis might predictably differ if the Aviva policy were to have covered the priests personally, from the Diocese’s perspective the loss was not intentionally caused.
Despite the quirks of this particular case, such as the unavailability of some policy wording and the careful use by the Diocese’s Bishops of imprecise words in the historical records to avoid documenting the scandal, the Court appears to have been sufficiently able to discern the facts of the case to rule on the merits. Many facets of the Court’s careful analysis regarding coverage, exclusions and material risk are useful in determining whether there is insurance coverage for sexual abuse under a CGL policy.