Multiple Lawsuits Arising Out of Employee’s Alleged Sexual Abuse of Multiple Children are “Single Claim” Under Claims-Made Policy

The Illinois Court of Appeals, applying Illinois law, has held that multiple lawsuits filed against a school district arising out of an employee’s alleged sexual abuse of children constitute a “single Claim” first made before the claims-made liability policy incepted.  Freeburg Cmty. Consol. Sch. Dist. No. 70 v. Country Mut. Ins. Co., 2021 WL 1337333 (Ill. Ct. App. Apr. 8, 2021).  The court also held that the insurer was permitted to consider extrinsic evidence beyond the “eight corners” of the policy and the complaint in determining coverage.

Over the course of several years, four lawsuits were filed against the insured school district, each alleging that the same elementary school employee sexually abused a different minor child, and that the school district was aware of the abuse and failed to prevent it.  The school district was insured under a claims-made insurance policy for the period from July 1, 2013 to July 1, 2014.  The first three lawsuits were filed before the policy incepted, and the fourth lawsuit (filed on behalf of Doe 4) was filed during the policy period.  The insurer denied coverage for the Doe 4 lawsuit on the grounds that it and the prior three lawsuits constituted a single Claim deemed first made before the policy incepted.  In the coverage litigation that followed, the court denied the insurer’s motion to dismiss, finding the policy’s “related claims” provision to be “overly broad” and, thus, ambiguous.

On appeal, the court reversed.  First, the court held that, notwithstanding its breadth, the “related claims” provision (pursuant to which all claims “based on, arising out of, directly or indirectly resulting from, in consequence of, or in any way involving the same or related facts, circumstances, situations, transaction or events, or the same or related series of facts circumstances, situations, transactions or events” were deemed a single Claim) was not ambiguous.  Second, the court held that, although the lawsuits involved different allegations of abuse against different students over an eighteen-year period, they comprised  “related claims”  because they involved “the same, continuing course of misconduct by the same school officials that culminate[d] in the same type of harm from a common, identified sexual predator, while that predator was an employee of the . . . school district.”

The court also determined that it was proper to consider extrinsic evidence in evaluating the availability of coverage under the policy, so long as the pertinent facts could not undermine an issue crucial to the determination of the underlying claim.

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