Human behavior is complex and often irrational. It can be difficult to predict and the negative effects can wreak havoc on your organization and reputation. An allegation of sexual abuse, whether founded or unfounded, can have potentially disastrous consequences for an affected organization.
Since 2006, Beazley has been providing insurance to institutions that face risks relating to sexual molestation liability (SML). In 2014, we launched Safeguard, which combines advanced risk management and proactive crisis response services with effective insurance. Drawing on our well of experience in this risk space we’ve compiled some informative content to help debunk some of the common misconceptions regarding SML and the nature of the coverage available to address exposures.
There will be coverage under a general liability (GL) policy
Many assume that there will routinely be coverage for sexual abuse claims under a GL policy, but such an approach is increasingly risky. Many GL policies are silent on the existence or extent of SML coverage provided. In recent years, as allegations and litigation involving sexual abuse have increased significantly in the US, alongside increased legislative and regulatory activity, many GL insurers have moved from a position of silence to one of express exclusion, or of having a reduced sublimit, which may not provide sufficient comfort to insureds.
We have also seen a growing trend in the US for various organizations (including universities, school boards and municipalities) to mandate that any contractors undertaking work for them have standalone/affirmative coverage for SML, often with specified limits. Contractors will need to prove the existence and extent of such coverage during the tendering/contracting process.
It is only relevant for those with care responsibilities for minors and/or vulnerable adults
SML coverage is relevant for any third party liability. We have seen numerous risks and claims from taxi companies, driving schools, libraries and amusement facilities. It is important coverage to have, as sexual assault can foreseeably occur between two adults and a resulting negligent supervision claim can be made against the insured.
Underwriters will not write excess claims made over an occurrence wording
We often encounter a misconception that we will not consider writing an excess claims made policy over a primary occurrence wording. This is not the case. We prefer to take a primary position to be able to make our risk management and response services available, but we will sit excess of a claims made primary policy or of an occurrence wording and have done so for a significant number of risks. The excess policy in this instance is written on a non-follow basis and simply treats the underlying occurrence policy as an aggregated Self-Insured Retention.
There is no coverage for wrongful acts committed by third parties
We frequently come across an assumption that SML insurance only covers claims arising from acts committed by employees. This is incorrect. Our policy addresses exposures involving third parties. For example, we have seen claims where the alleged inappropriate conduct has been perpetrated by one school pupil against another, or by a patient upon another patient. Such situations will often give rise to allegations of negligent supervision, which our policy addresses.
There is no exposure for sexual abuse in virtual environments
We often encounter a belief that there is limited or no exposure to sexual abuse being perpetrated in a virtual environment. As the pandemic has demonstrated, there is considerable exposure to such behavior taking place in these settings. Abusers can rely on the remoteness and methods of direct communication/messaging many platforms offer to groom their victims and, where such abuse occurs within the context of, say, an educational setting, the provider is exposed to potential liability. Given the speed and extent with which the shift from in person to virtual settings took place, organizations may not have introduced or adapted policies and controls around virtual provision adequately.
A zero tolerance policy towards abuse mitigates the threat of litigation
A zero tolerance policy towards sexual abuse and inappropriate conduct should be the standard position taken by organizations. However, in and of itself, such an approach does not insulate an organization from liability or from the threat of litigation should abuse be alleged. While having robust and regularly reviewed written policies around abuse prevention and detection are highly advisable, organizations also need to ensure that such policies are implemented and appropriate action taken should suspicions or allegations of abuse emerge. Recent settlements and cases have demonstrated that the standard of care is increasing and organizations need to ensure that a culture of safety is embedded at all levels of their operations and that this is fully evidenced.