Prior Knowledge Exclusion Bars Coverage For Lawsuit Premised On School Officials' Knowledge Of Abuse - Insurance Laws and Products - United States

[Gunnar Larson]

https://www.mondaq.com/unitedstates/insurance-laws-and-products/1435978/prior-knowledge-exclusion-bars-coverage-for-lawsuit-premised-on-school-officials-knowledge-of-abuse-


An Arkansas federal court, applying Arkansas law, has held that a prior
knowledge exclusion in an employment practices liability policy issued to a
school barred coverage for a lawsuit alleging that the assistant principal
engaged in longstanding sexual abuse that had been reported numerous times.
Berkley Assur. Co. v. Springdale Pub. Schs., 2024 WL 666500 (W.D. Ark. Feb.
17, 2024).

In the underlying lawsuit, a former student alleged that the school's
assistant principal groomed, stalked, and repeatedly sexually assaulted her
over a period lasting more than three years. During that time, according to
the underlying complaint, at least eight school employees and the former
student's grandfather reported their suspicions or observations of abuse to
the school's principal. Moreover, the assistant principal had pled guilty
to a criminal sexual assault charge involving three minor female victims.
The former student alleged that, despite receiving repeated notice, neither
the principal nor the school district did anything to stop the abuse.

The school's employment practices liability insurer denied coverage based
on the policy's prior knowledge exclusion and filed a declaratory judgment
action to confirm that it owed no coverage to the assistant principal,
principal, or school district. The prior knowledge exclusion barred
coverage for any claim "[a]rising from any circumstance(s) or incident(s)
which might reasonably be expected to give rise to a Claim hereunder, which
is either known or reasonably should have been known to the Insured prior
to the Inception of this policy and not disclosed to the Company prior to
inception."

The court granted summary judgment in favor of the insurer, holding that
the prior knowledge exclusion barred coverage entirely because each cause
of action asserted was predicated on prior knowledge. The court found that,
because abuse involves intentional acts, an abuser necessarily has prior
knowledge of his own misconduct. As to the principal and school district,
each cause of action lodged against them involved facts that necessarily
implicated their prior knowledge. The court noted that its conclusion did
not require presupposing the underlying allegations to be true but instead
rested on whether coverage was even possibly owed based on the facts
alleged.
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