Bill Cosby Scores Victory for Insureds Interpreting “Arising Out Of” Exclusions
AIG unsuccessfully sought to disengage itself from Bill Cosby by seeking a declaration that it had no duty to defend or indemnify Cosby in three underlying suits. The decision is of interest to insurance practitioners because of how the Massachusetts federal district court interpreted the oft-used term “arising out of” in an exclusion.
The homeowner policy AIG issued to Cosby excluded coverage, including defense costs, for “any actual, alleged, or threatened by any person: (a) sexual molestation, misconduct or harassment . . . or (c) sexual, physical or mental abuse.” The excess policy excluded coverage liability “arising out of any actual, threatened or alleged sexual misconduct.”
The three cases against Cosby allege that the he defamed the women he was accused of sexually assaulting years ago. The claims in the lawsuit were that Cosby called his alleged victims liars after they came forward and described the past incidents of sexual misconduct by Cosby.
The court in the coverage case found that the policy covered defamation claims, but found the insurer’s sexual misconduct exclusions ambiguous. It ruled that a reasonable insured would not understand them to exclude defamation claims. In holding that AIG must defend Cosby, the court concluded that, while the sexual misconduct “preceded” and “set the context for” the defamation, the two torts (sexual misconduct and defamation) were “separate and distinct” events and the insurer, therefore, must defend.
The issue of how far to extend the scope of an exclusion using “arising out of” language has long vexed coverage lawyers. This case provides some additional guidance.
In language that will likely be repeated frequently in future briefs, the court opined:
If AIG wanted to exclude from coverage, all expense merely “involving” or “indirectly arising out of” sexual misconduct, it could have used that language in the sexual misconduct exclusion.
The court also suggested any decision on the duty to indemnify was not ripe, because the underlying claims against Cosby were still pending.
Photo credit: Michael Coté
Posted In: Duty to Defend