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Absent policy language indicating an intent to aggregate separate incidents into a single occurrence, the unfortunate event test should be applied to determine how occurrences are categorized for insurance coverage purposes. The unfortunate event test requires consideration of whether there is a close temporal and spatial relationship between the incidents giving rise to injury or loss, and whether the incidents can be viewed as part of the same causal continuum, without intervening agents or factors. This approach of determining whether there was one unfortunate event or occurrence seems to be the most practical of the three methods of construction which have been advanced because it corresponds most with what the average person anticipates when he or she buys insurance and reads the occurrence limitation in the policy.
A minor, through her mother and natural guardian, commenced a civil action against the Diocese and one of its priests, alleging that the priest sexually abused the minor on several occasions. The Diocese settled the action for $ 2 million and "additional consideration." Subsequently, the diocese sued the respondent insurer, seeking a declaration that the insurer was required to indemnify the diocese for the settlement. The policies at issue provided coverage for each occurrence in the policy period after the first $ 250,000 (in excess of the self-insured retention), with a liability cap. The trial court denied the insurer's motion for partial summary judgment and granted the diocese's cross-motion. The Supreme Court of New York, Appellate Division, Second Department, reversed, declaring that the alleged acts of sexual abuse constituted multiple occurrences, and that the settlement amount should be allocated on a pro rata basis over the seven policy periods, requiring the concomitant satisfaction of the SIR attendant to each implicated policy. The diocese appealed.
Did the alleged acts of sexual abuse constitute multiple occurrences, thereby requiring that the settlement amount be allocated on a pro rata basis over the seven policy periods?
The appellate court held initially that the policies' SIR was not subject to the notice requirements of Insurance Law § 3420(d) because they did not bar coverage or implicate policy exclusions. Further, nothing in the language of the policies, nor the definition of "occurrence," evinced an intent to aggregate the incidents of sexual abuse into a single occurrence. Applying the unfortunate event test, the incidents within the underlying action constituted multiple occurrences. Incidents of sexual abuse that spanned a six-year period and transpired in multiple locations lacked the requisite temporal and spatial closeness to join the incidents. Moreover, the incidents were not part of a singular causal continuum. The diocese was required to exhaust the SIR for each occurrence that transpired within each policy from which it sought coverage. The decision was affirmed.