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Insurance Claim – Coverage

7th Circuit Court of Appeals

Case Name: The Netherlands Insurance Company, et al., v. Macomb Community Unit School District No. 185, et al.,

Case No.: 20-3510

Officials: EASTERBROOK, BRENNAN, and SCUDDER, Circuit Judges.

Focus: Insurance Claim – Coverage

Two female students brought claims under state law plus Title IX of the Education Amendments Act of 1972, 20 U.S.C. §§ 1681–88, against the Macomb School District, Assistant Principal Ed Fulkerson, and Principal John Rumley (collectively the School District). The students alleged that the School District had failed to prevent and inappropriately responded to sexual misconduct by a male student. The students’ complaint, filed on February 16, 2018, alleged that the sexual misconduct and the School District’s responses took place during the spring of 2014 and the fall of 2016. The School District’s insurers received notice of the lawsuit on February 22, 2018.

From December 8, 2017, through December 8, 2018, the School District had two insurance policies: a basic policy from the Netherlands Insurance Company and an umbrella policy from Consolidated Insurance Company. The umbrella policy provides coverage only if the basic policy applies. The basic policy has two relevant provisions. It covers (a) liability for sexual misconduct and molestation, and (b) liability for school leaders’ errors and omissions. After the School District settled the students’ suit for $1.5 million, the insurers brought this suit seeking a declaration of their rights and obligations.

When the School District purchased insurance, it bought a basic policy covering sexual misconduct occurring from December 8, 2017, through December 8, 2018. The School District concedes that its occurrence-based coverage for sexual misconduct cannot apply because the student-on-student sexual misconduct, and the School District’s response to it, occurred outside of the policy period. The provision that the School District contends applies, the coverage for school leaders’ errors and omissions, contains a sexual-misconduct exclusion. That exclusion ensures that the basic policy’s coverage for errors and omissions and coverage for sexual misconduct fit together as parts of a cohesive insurance package. The School District cannot avoid that provision’s sexual-misconduct exclusion or the structure of the basic policy. To put this differently, the judiciary will not read the exclusion to the errors-and-omissions coverage to turn the sexual-misconduct clause from occurrence coverage to claims-made coverage.


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Derek A Hawkins is Corporate Counsel, at Salesforce.

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