Hartford Roman Catholic Diocesan Corp. v. Interstate Fire & Cas. Co.
905 F.3d 84
2d Cir.2018Background
- Archdiocese purchased second-layer excess liability policies from Interstate (1978–1985); Lloyds and others provided first-layer excess; Interstate followed-form to Lloyds. Several underlying claims for priest sexual abuse exceeded earlier layers and sought reimbursement from Interstate.
- Four relevant claimants (JA, KS, Richard Mallory, Matthew Doe) alleged historic sexual abuse by priests; Archdiocese settled the underlying claims and sought indemnity from Interstate but received no reimbursement and sued in 2012 for breach of contract, breach of good faith, CUIPA and CUTPA violations.
- Interstate denied coverage citing (1) an assault-and-battery exclusion in the Lloyds policy, and (2) the policies’ occurrence definition requiring injury to be unexpected and unintended; Interstate also reserved rights and delayed coverage decisions while investigating.
- District court (bench trial) found Interstate breached its indemnity obligation on the four claims but rejected CUIPA/CUTPA and bad-faith claims; appeals by both parties followed.
- Key factual dispute centered on notice: for three claimants Archdiocese had no notice the priest was a risk before the abuse (so abuse was an "occurrence"); for Matthew Doe the Archdiocese had prior knowledge of Fr. Ferguson’s proclivities, but relied on psychiatric treatment assurances and monitored him.
- The court evaluated: (a) whether the assault-and-battery exclusion barred coverage for the Archdiocese when a priest-assailant is an insured; (b) whether the molestations were "occurrences" (subjective vs. objective test); and (c) whether Interstate’s investigation/delays established a CUIPA "general business practice."
Issues
| Issue | Plaintiff's Argument (Archdiocese) | Defendant's Argument (Interstate) | Held |
|---|---|---|---|
| Assault-and-battery exclusion: does an assailant priest’s conduct bar coverage for other insureds? | Exclusion applies only to the assured who "committed or directed" the assault ("such Assured"); does not strip coverage from blameless insureds. | "Such Assured" refers back to "any Assured," barring coverage for all insureds if any insured committed the assault. | Held for Archdiocese: "such Assured" limits the exclusion to the assailant (or those who directed it); insurer fails to carry exclusionary burden. |
| Occurrence definition: is abuse an "occurrence" when insurer had prior notice of priest’s risk? | For claims where Archdiocese lacked subjective knowledge the abuse was an occurrence; even where prior notice existed (Doe), coverage depends on whether Archdiocese subjectively expected or intended the injury. | No occurrence if the event itself was intended/expected; apply an objective "should have known" test—Archdiocese’s recklessness negates occurrence. | Held for Archdiocese: occurrence clause focuses on whether resulting injury was unexpected; apply a subjective standard (insured’s perspective); Matthew Doe claim remains an occurrence under that standard. |
| Collateral estoppel from state tort recklessness finding (Jacob Doe) | Jacob Doe’s finding of recklessness does not preclude a different, subjective occurrence analysis here. | Recklessness finding should be given preclusive effect to bar coverage for Matthew Doe. | Held for Archdiocese: collateral estoppel does not apply because issues are not identical (recklessness vs. subjective expectation). |
| CUIPA "general business practice": did Interstate’s delays and claim-handling practices violate CUIPA? | Sample of Interstate files (57 claims) showed a nontrivial percentage of mishandling and admissions that Interstate often did not affirm/deny coverage—sufficient to show a general business practice. | Delays reflect legitimate investigation of complex clergy-misconduct coverage questions; sampled misconduct (9–11%) does not show a prevalent/widespread practice; no categorical admissions of blanket denials. | Held for Interstate on CUIPA: the sample’s misconduct rate and record do not show the "prevalent, usual, or widespread" practice required to establish a CUIPA violation. |
Key Cases Cited
- Roberts v. Royal Atl. Corp., 542 F.3d 363 (2d Cir. 2008) (standard of review for bench trial findings)
- Flint v. Universal Mach. Co., 238 Conn. 637 (Conn. 1996) (insurance policy interpretation is a question of law)
- W. World Ins. Co. v. Stack Oil, Inc., 922 F.2d 118 (2d Cir.) (insurance contract construction principles)
- Heyman Assocs. No. 1 v. Ins. Co. of State of Pa., 231 Conn. 756 (Conn. 1995) (intent of parties governs coverage expectations)
- Buell Indus., Inc. v. Greater N.Y. Mut. Ins. Co., 259 Conn. 527 (Conn. 2002) (every term of an insurance policy should be given operative effect)
- Jacob Doe v. Hartford Roman Catholic Diocesan Corp., 317 Conn. 357 (Conn. 2015) (state-court tort finding of diocesan recklessness; discussed but not given preclusive effect here)
- Capstone Bldg. Corp. v. Am. Motorists Ins. Co., 308 Conn. 760 (Conn. 2013) ("accident" and fortuity principles)
- Lees v. Middlesex Ins. Co., 229 Conn. 842 (Conn. 1994) (dictionary-based approach to "general business practice" under CUIPA)
- Diocese of Winona v. Interstate Fire & Cas. Co., 89 F.3d 1386 (8th Cir. 1996) (applied objective test and denied occurrence; contrasted with this decision)
- Interstate Fire & Cas. Co. v. Roman Catholic Church of Phoenix, 761 F.3d 953 (9th Cir. 2014) (interpreted "such Assured" to preclude coverage for all insureds; distinguished and not followed)