Extrinsic Evidence Properly Considered In Coverage Denial For Sexual Molestation
by Don R. Sampen
The evidence on which an insurer may rely in making a decision whether to defend an insured constitutes a frequent issue in liability coverage matters. Some jurisdictions subscribe to the “eight corners” rule, meaning that the insurer must confine its attention to the “four corners” of the underlying complaint and the “four corners” of the policy. Other jurisdictions require and/or allow an insurer to look to “extrinsic” evidence, for purposes of finding, or negating, or both, a defense obligation. Illinois follows the latter approach, at least under certain circumstances, as evidenced by Freeburg Community Consolidated School District No. 70 v. Country Mutual Insurance Co., 2021 IL App (5th) 190098.
In that case, the Fifth District Appellate Court, reversing the trial court, held that a liability insurer had no duty to defend or indemnify an insured school district with respect to a claim for sexual abuse of a student by a school administrator.
A former teacher, coach and superintendent for the Freeburg Community Consolidated School District, Robin Hawkins, was sued by a former student, “John Doe 4,” in 2014. The former student claimed he had been sexually molested by Hawkins while in sixth, seventh and eighth grades during the period 2007 to the spring of 2009.
Hawkins had been the target of three prior lawsuits by students. These prior claims were brought to the attention of an insurance broker in 2010 when the school district sought to join a state insurance cooperative comprised of 134 public schools. Hence, when the cooperative acquired claims-made coverage for the school district in 2013 through RSUI, various provisions, limitations and exclusions on coverage were added to the policy.
Among them was a retroactive date of July 1, 2009. Another was a “single claim” provision stating that all claims based on the “same or related series of facts, circumstances [etc.] . . . shall be deemed to be a single claim . . . and shall be deemed first made when the earliest of such claims is first made.”
Following the filing of the John Doe 4 claim, the school district tendered to RSUI, which denied or reserved coverage on a variety of policy provisions. The school district then filed the current declaratory action against RSUI and others seeking a determination of coverage. In late 2014, RSUI filed a section 2-619 motion to dismiss, asking the court to find a duty neither to defend nor indemnify. The motion relied in part on extrinsic evidence outside the underlying complaint’s allegations.
The trial court denied that motion about a year later. In August of 2017 the trial court entered partial summary judgment in favor of the school district, finding that RSUI had a duty to defend. After denying RSUI the opportunity for an interlocutory appeal, the court further held in October of 2018 that RSUI also had a duty to indemnify. RSUI took this appeal.
In an opinion by Justice John B. Barberis, the Fifth District reversed. The Court initially considered whether RSUI could rely on extrinsic evidence in denying coverage and, correspondingly, whether the trial court could properly consider such evidence in support of RSUI’s motion to dismiss.
Generally, the duty to defend should be decided based on the “eight corners” rule, i.e., a comparison of the four corners of the underlying tort complaint to the four corners of the insurance policy. That rule, however, under Pekin Insurance Co. v. Wilson, 237 Ill. 2d 446 (2010), does not bar an insurer from making use of extrinsic evidence unless the evidence tends to determine an issue crucial to the determination of the underlying lawsuit.
In this case, the Appellate Court said there was no concern that RSUI’s extrinsic evidence, in the form of the complaints in the three prior lawsuits against Hawkins, would interfere with any factual determinations in the action brought by John Doe 4. The fact that a monetary judgment had been entered against the school district prior to this appeal was all the more reason why consideration of the extrinsic evidence was permissible.
Hence, the Court wrote, nothing was inappropriate in RSUI’s consideration of the extrinsic evidence in denying coverage. Nor would it have been inappropriate for the trial court to have considered such evidence in connection with RSUI’s motion to dismiss, nor for the appellate court to consider such evidence in connection with the instant appeal.
Single Claims Provision
Although several provisions in the RSUI policy appear from the Court’s opinion to provide justification for RSUI to have denied coverage, the Fifth District focused on just the single claim provision.
As earlier noted, that provision deemed claims arising from the same or related series of facts as a single claim first made when the earliest of such claims was made. RSUI thus took the position that the John Doe 4 claim should be deemed as one and the same as the three earlier claims involving Hawkins’ alleged sexual molestation, and being part of the same claim, it should be deemed to have been asserted prior to the inception of the RSUI policy issued in 2013.
The school district and the trial court, however, attacked the provision as being ambiguous and overly broad with respect to the degree of connection required to trigger its application to a particular set of claims.
The Court disagreed that the provision was ambiguous. It found that a plain and ordinary reading of the provision would lead a reasonable person to conclude that the John Doe 4 action resulted from the same or related facts, in that it involved the same continuing course of misconduct, by the same school official, resulting in the same type of harm, and neglect by the same school district officials.
Based on that determination, the Appellate Court concluded that the trial court erred in finding that the single claim provision was ambiguous, and further erred in denying RSUI’s motion to dismiss.
The Court therefore reversed in favor of RSUI.
(a) An insurer may reasonably rely on evidence extrinsic to the “eight corners” of the underlying complaint and policy in denying coverage, so long as the evidence does not determine an issue crucial to the determination of the underlying lawsuit.
(b) In determining whether a policy provision is ambiguous, the court will consider only reasonable interpretations of the policy language and will not strain to find an ambiguity where none exists.