School Insurer Not Obligated to Cover Sex Abuse Claim Under Claims-Made Policy

In Freeburg Community Consolidated School District No. 70 v. Country Mutual Insurance Company; RSUI Indemnity Company, and John Doe 4, Freeburg School District 70 sued its policy carrier, RSUI Indemnity Company, because it denied coverage for a lawsuit. Ultimately, the appellate court held that the insurance carrier properly denied coverage for the suit, and thus the carrier won.

The underlying lawsuit, which was filed on June 11, 2014, named the school district as a defendant and included sexual abuse allegations against a former superintendent, which allegedly occurred from 2007 to 2009. At least three other federal lawsuits were filed against the school district between 2010 and 2012 regarding the same superintendent sexually abusing students while he was a teacher in the district. In 2013, the district acquired a “claims-made” policy from RSUI. A claims-made policy covers claims that are made while the policy is in effect, regardless of when the events giving rise to the claim occurred. RSUI was aware that the former staff member had allegedly sexual assaulted students but issued the policy nevertheless. After the 2014 lawsuit was filed, the school district submitted a claim to RSUI but was denied coverage because the conduct at issue occurred prior to the RSUI policy taking effect. The school district sued RSUI for denying coverage. RSUI filed a motion to dismiss the lawsuit against it on grounds that all of the former students claimed substantially the same theories, and those claims were outside of the scope of the policy because the claims constituted a single claim first made against the school district prior to the coverage period (i.e., before 2013) and thus were excluded from coverage.

Although the school district initially prevailed before the trial court, the appellate court agreed with RSUI and held that the policy did not cover the school district’s claim. The appellate court determined that the former students’ actions, collectively, fell within the policy’s definition of a single claim because the June 11, 2014 lawsuit directly resulted from the same or related series of facts, circumstances, situations, transactions, or events as the prior lawsuits in 2010-2012. In reviewing the communications between the school district and RSUI as well as the policy, the court held that the parties never intended, nor was it the policy’s purpose, to provide coverage for a claim such as that brought on June 11, 2014.

Contact Jason Manning or Pam Simaga if you have questions about a denial of coverage by a school district insurance carrier.

Source: Freeburg Community Consolidated School District No. 70 v. Country Mutual Insurance Company, et al., 2021 IL App (5th) 190098