Court Denies Reinsurer’s Motion for Judgment on the Pleadings Where Complaint Alleged Retaliatory Conduct During Applicable Policy Period

Applying Washington state law, the United States District Court for the Western District of Washington has denied a reinsurer’s motion for judgment on the pleadings where, although alleged sexual assaults occurred before its reinsurance contracts and the reinsured direct policies incepted, the underlying complaint alleged subsequent related retaliatory conduct that occurred during the reinsured policy periods. Wash. Schs. Risk Mgmt. Pool v. Am. Re-Ins. Co., 2024 WL 4335678 (W.D. Wash. Sept. 26, 2024).

In June 2005, parents of a student sued a school district and one of its teachers for alleged sexual abuse. The last incident of sexual abuse allegedly occurred in June 2004. However, the student’s parents also alleged related retaliatory actions arising out of such abuse, the last of which allegedly occurred around December 1, 2005. A settlement was reached in December 2006.

During the relevant time period, the school district had entered into annual coverage agreements with an interlocal cooperative of which it was a member. The coverage agreements provided that “[a]ll claims based on or arising out of sexual abuse by an employee . . . will be considered as arising out of one wrongful act and shall be deemed to have been committed at the time of the last of such acts or alleged acts.” The cooperative, in turn, entered into reinsurance agreements during the relevant time period. The reinsurer for the September 1, 2004, to September 1, 2005, and September 1, 2005, to September 1, 2006, coverage agreements denied reinsurance coverage on the grounds that the last act of sexual abuse allegedly occurred in June 2004—that is, before these coverage agreements incepted. The cooperative initiated coverage litigation.

The court denied the reinsurer’s motion for judgment on the pleadings, holding that the language of the reinsured coverage agreements’ “aggregation provision covers all claims ‘based on or arising out of sexual abuse by an employee’—including those claims that are not themselves allegations of sexual abuse.” Because the underlying complaint alleged retaliatory actions arising out of the alleged sexual abuse within the 2004-2005 and 2005-2006 policy periods, the court denied the reinsurer’s motion for judgment on the pleadings.