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June 28, 2024

NYS Appellate Court Reverses and Holds Liability Insurer Owed Duty to Defend to Policyholder in Sexual Abuse Lawsuit

Under a liability insurance policy, the insurance company’s duty to defend its insured against claims by third parties is very broad, and the insurer is obligated to pay for the defense of an underlying lawsuit unless there is no reasonable possibility of the claim falling within the scope of coverage under the insurance policy. In addition, an insurer has a heavy burden of proving that a claim falls within an exclusion in the policy.

In Mscichowski v. MLMIC Ins. Co.,1 a pediatrician was sued by a patient who alleged sexual abuse. The pediatrician commenced a separate lawsuit against his medical malpractice liability insurer, seeking a declaration that he was entitled to coverage under the policy, including a defense of the underlying sexual abuse suit.

The pediatrician and insurer each moved for summary judgment, and the trial court ruled in favor of the insurer. The trial court found that the suit by the patient did not assert a claim that arose from a “medical incident” or “professional services,” as defined in the insurance policy, and also fell within a policy exclusion for sexual assault. Thus, the trial court held, the insurer owed no duty to defend or indemnify the pediatrician in the sexual abuse lawsuit.

The pediatrician appealed, and the Appellate Division, Fourth Department, reversed in his favor. The appellate court found that, although the underlying complaint primarily alleged sexual assault, the complaint also alleged that the plaintiff improperly diagnosed the former patient and did not provide her with proper care. Thus, the court reasoned, there was at least a possibility of the claim triggering coverage under the insurance policy. In addition, the court held, the insurer failed to meet its “heavy burden” to show that all of the claims asserted in the complaint fell within the sexual assault exclusion in the policy. As such, the insurer was obligated to honor its broad duty to defend the pediatrician in the underlying lawsuit.

This decision highlights several key principles of liability insurance. An insurer’s duty to defend an underlying claim is very broad, and insurers must examine allegations closely to determine if there is any possibility of coverage. In addition, an insurer cannot rely on a policy exclusion to deny coverage unless it can show that all of the underlying claims and allegations fall solely within the scope of the exclusion.

If you have any questions regarding the content of this alert, please contact Sanjeev Devabhakthuni, Professional Liability Practice Area co-chair, at; Tony Piazza or Mark Whitford, Insurance Coverage & Regulation Practice Area co-chairs, at and; or another member of the firm’s Insurance Coverage & Regulation Practice Area.

12024 N.Y. App. Div. LEXIS 2451* (4th Dept. May 3, 2024).  

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