Historic child sexual abuse claim - three insurers liable to indemnify school
Warning: This article contains details about sexual assault and abuse which may be upsetting for some readers. Reader discretion is advised.
The plaintiff was subjected to sexual abuse when she attended Helena College between 1986 – 1990. The plaintiff settled her claim against Helena College Council Inc (trading as Helena College). Helena College then proceeded with its third party claims against three separate insurers (QBE, IAG and Berkshire Hathaway Specialty Insurance) for indemnity for the settlement sum plus defence costs. The Court held that all third parties were liable to indemnify Helena College for the settlement sum paid to the plaintiff and defence costs.
- The issue at trial was whether the third parties should indemnify Helena College.
The plaintiff was a school student at Helena College from 1986 to 1990. During that period she was subjected to sexual abuse by a male school teacher, who was criminally convicted for sexually abusing children (including the plaintiff) in 2006. Helena College settled the plaintiff’s claim. Helena College then proceeded with its third party claims against three separate insurers (QBE, IAG and BHSI) for indemnity for the settlement sum plus defence costs. All of the third parties were, at certain times, Helena College’s insurers.
QBE was bound under an MLC Insurance Ltd liability policy for the period of 23 August 1987 to 1988. QBE denied any liability to Helena College under its MLC Policy because the plaintiff’s injuries were not the result of an ‘accident or happening’ within the meaning of the insuring clause in the MLC Policy. It argued that Helena College in any event failed to take reasonable precautions to prevent those injuries as required by the MLC Policy. QBE’s position was that the abuser was the relevant ‘responsible officer of the company’, and his assaults on the plaintiff could not be regarded as ‘accidents’. QBE alleged that ‘they were not “unexpected mishaps”, rather they were virtually inevitable’.
IAG was bound under a Commercial Union Assurance Company of Australia Limited policy for the period of 23 August 1988 to 1 February 1989. IAG asserted that it was liable for only half of the amount of Helena Colleges’ liability to pay damages and costs to the plaintiff, 'being its assessment of that proportion of Helena College’s liability incurred in the second third party's policy period'.
BHSI came on risk for the policy period commencing 31 October 2015 (and had policies commencing 31 October 2016, 31 October 2017 and 31 October 2018). The BHSI policies all had an extension of cover for child sexual molestation in which BHSI agreed to indemnify Helena College ‘as a result of a Claim first made against [the Council] and notified in writing to [BHSI] during the Period of Insurance by reason of Injury arising out of any actual, alleged or attempted sexual assault, sexual abuse or sexual molestation of any Child and/or Student by any person’.
The BHSI policies all contained an exclusion in respect of the Child Sexual Molestation Cover in which ‘the Insurer shall not be liable for circumstances that have been notified during a prior Period of Insurance or as a part or the renewal declaration process, and where a subsequent Claim arises out of such previously notified circumstances during the Period of Insurance. However, this clause (d) shall not apply where the Insurer was the Insurer during the Period of Insurance that such circumstance(s) first notified to the Insurer.’
BHSI relied on the prior notification exclusion to the policy and argued Helena College notified a prior insurer in 2001 and 2002 of the circumstances out of which a subsequent claim arose (but BHSI did not know which insurer was notified in 2001 or 2002 and did not have evidence about the notification). BHSI relied entirely on a school record that stated it did ‘notify an insurer’ in 2001.
The decision at trial
His Honour Sharp DCJ found that:
- The abuser’s assaults on the plaintiff were not ‘virtually inevitable’ as the acts were so removed from what he was employed by Helena College to do. His Honour concluded that the sexual assaults on the plaintiff were unintended and unexpected and were as a result of an ‘accident’. As against QBE, the steps taken by Helena College were sufficient to satisfy the Reasonable Precautions Condition and QBE was liable to indemnify the school.
- As against IAG, for the purposes of the insuring clause of its policy, the sexual assault injuries that happened during its policy period were an “Occurrence” and IAG was liable to indemnify the school.
- As against BHSI, the Prior Notification Exclusion did not apply and there was nothing before the court to show that the broker passed on any notification to an insurer. Even if it was found that a prior insurer had been “notified”, the court was unable to make any findings as to the content of that notification.
Implications for you
This decision helps clarify the position on coverage for historic child sexual abuse claims with multiple insurers. The decision is currently subject to an appeal.