Paragraph A (Exclusion)

Paragraph B (Coverage)

Paragraph C  Supplementary Payments

Paragraph D Exclusions

Paragraph E Who Is An Insured

Paragraph F Limits of Insurance

Paragraph G Conditions

Paragraph H Extended Reporting Periods

Retroactive Date

Paragraphs I and J Definitions

CG 04 16 09 22 Sexual Abuse or Sexual Molestation Liability Coverage (Claims-Made)

Introduction:

Several parts of this endorsement are identical to clauses found in the CGL CG 00 01 form. For discussions of those clauses, refer to this article General Provisions of the CGL.

This endorsement is similar to endorsement CG 04 14; however, this endorsement provides claims-made liability coverage for sexual abuse or sexual molestation at a scheduled limit for each act, subject to the scheduled aggregate limit. The schedule contains a deductible that applies to each act. Also a space is allocated to show the retroactive date of coverage.

Paragraph A. (Exclusion)

A. The following exclusion is added to Paragraph 2. Exclusions of Section I – Coverage A – Bodily Injury And Property Damage Liability and Section I – Coverage B – Personal And Advertising Injury Liability:

This insurance does not apply to damages arising out of:

1. The actual, alleged or threatened sexual abuse or sexual molestation of any person committed by anyone; or

2. The negligent:

1. Employment;
2. Investigation;
3. Supervision;
4. Reporting to the proper authorities, or failure to so report; or
5. Retention;

of a person for whom any insured is or ever was legally responsible and whose conduct would be excluded by Paragraph 1. above.

Analysis:

Paragraph A of the endorsement adds an exclusion to Coverage B for personal and advertising injury liability arising out of sexual abuse or sexual molestation of any person committed by anyone, including any associated negligence of anyone related to employment practices. For example, if a business knowingly hires an employee with a history of sexual abuse, and that employee then molests someone in the course of his employment, there is no coverage for the business or the employee.

Paragraph B. (Coverage)

B. The following is added to Section I – Coverages:

Insuring Agreement – Sexual Abuse Or Sexual Molestation Liability

1. We will pay those sums that the insured becomes legally obligated to pay as damages because of "injury" to which this insurance applies. We will have the right and duty to defend the insured against any "suit" seeking those damages. However, we will have no duty to defend the insured against any "suit" seeking damages for "injury" to which this insurance does not apply. We may, at our discretion, investigate any report or allegation of an "act of sexual abuse or sexual molestation" or "interrelated acts" and settle any claim or "suit" that may result. But:

1. The amount we will pay for damages is limited as described in Paragraph F. of this endorsement; and
2. Our right and duty to defend ends when:

(1) We have used up the applicable Limit Of Insurance shown in the Schedule of this endorsement in the payment of judgments or settlements; or

(2) The insured:

(a) Admits to perpetrating or taking part in an "act of sexual abuse or sexual molestation" or "interrelated acts" which caused the "injury"; or

(b) Is found guilty of, or pleads guilty or no contest to, in a legal proceeding, an "act of sexual abuse or sexual molestation" which caused the "injury".

However, with respect to this Paragraph (2), our right and duty to defend ends only for the insured that admits to perpetrating or taking part in an "act of sexual abuse or sexual molestation" or "interrelated acts", or is found guilty of, or pleads guilty or no contest to, in a legal proceeding, an "act of sexual abuse or sexual molestation" which caused the "injury".

For the purposes of this Paragraph (2), a legal proceeding includes, but is not limited to, a proceeding that results in a criminal conviction, a judgment, decree, ruling or order pronounced or entered by any court of competent jurisdiction or an order or ruling pronounced or entered by any administrative agency.

No other obligation or liability to pay sums or perform acts or services is covered unless explicitly provided for under Paragraph C. of this endorsement.

Analysis:

This paragraph 1. of the insuring agreement provides the insured with a scheduled amount of coverage for legal damages and defense coverage arising out of sexual abuse or sexual molestation injury until or unless the insured admits, or is found guilty of, or pleads guilty or no contest to, an act of sexual abuse or sexual molestation. The insurer's duty to defend ends only for that particular insured who admits, or is found guilty of, or pleads guilty or no contest to, an act of sexual abuse or sexual molestation, and remains intact for other insureds who might be included in the suit. The nature of this clause seems to encourage the insured to lie in order to obtain a defense from the company, since once the insured admits guilt, the insurer no longer has the duty to defend. 

A legal proceeding for purposes of this coverage is broad and includes virtually any type of court determination or order, or administrative order or ruling by an administrative agency.

This coverage does not reduce or limit the supplemental coverages provided for in Part C. Supplementary Payments. 

2. This insurance applies to "injury" only if:

1. The "injury" is caused by an "act of sexual abuse or sexual molestation" or "interrelated acts" that was committed in the "coverage territory";
2. The "injury" is caused by an "act of sexual abuse or sexual molestation" or "interrelated acts" that was committed on the premise(s) or arises out of the project(s), contract(s) or agreement(s) shown in the Schedule of this endorsement.

However, this Paragraph 2.b. applies only if a description of premise(s), project(s), contract(s) or agreement(s) is shown in the Schedule of this endorsement.

c.  A claim for damages, with respect to the "injury", is first made against any insured, in accordance with Paragraph 3. below, during the policy period or an Extended Reporting Period we provide in accordance with Paragraph H. of this endorsement.

3. A claim seeking damages will be deemed to have been made at the earlier of the following times:

1. When notice of such claim is received and recorded by any insured or by us, whichever comes first; or
2. When we make settlement in accordance with Paragraph a. Above.

4. All claims made by the same person and arising out of the same "act of sexual abuse or sexual molestation" or "interrelated acts", including damages claimed by any person or organization for care, loss of services, or death resulting at any time from the "injury", will be deemed to have been made at the time the first of those claims is made against any insured.
5.  "Injury" caused by an "act of sexual abuse or sexual molestation" or "interrelated acts" includes any continuation, change or resumption of that "injury" after the end of the policy period.

Analysis:

Paragraphs 2. through 5. describe the triggers for coverage under this endorsement. The definitions of "act of sexual abuse or sexual molestation", "injury", and "interrelated acts" are the same throughout all of the 09 22 editions of the sexual abuse or sexual molestation endorsements, and are defined in Paragraph I. discussed below. The definition of "coverage territory" is in the CGL form.

The injury itself must be caused by an act or acts of sexual abuse or molestation that were committed in the coverage territory. The parameters require that the injury arise out of act(s) committed on the insured premises, or arising out of the project(s), contract(s), or agreement(s) shown in the endorsement Schedule. The act(s) must have not been committed before the retroactive date shown on the schedule, or after the end of the policy period.

With respect to the injury, the claim will be deemed to have been made at the earlier of either when the insured or the insurer receive that record the claim notice, or when the insurer settles in accordance with that claim notice.

A claim will be deemed to have been made against any insured at the time the first claim is made by the same person and arising out of the same act(s) that led to the injury, in accordance with the definitions of "act of sexual abuse or sexual molestation", "interrelated acts", and "injury". Injury caused by an act or interrelated acts of sexual abuse or sexual molestation includes any continuation, change or resumption of that injury that goes past the policy period, ensuring that all of the interrelated acts that caused the injury will fall under the first claim date regardless of how long the acts continue to be committed.

So the policy will pay claims for sexual molestation or abuse, and will defend an employee until the employee admits guilt, pleads guilty or is found guilty of sexual molestation or abuse. However this is not as broad as it seems due to exclusions later in the policy.

Paragraph C. Supplementary Payments

Paragraph C. Supplementary Payments

With respect to the coverage provided by this endorsement, we will pay, with respect to any claim we investigate or settle or any "suit" against an insured we defend:

1. All expenses we incur.
2. The cost of bonds to release attachments, but only for bond amounts within the applicable Limit Of Insurance shown in the Schedule of this endorsement. We do not have to furnish these bonds.
3. All reasonable expenses incurred by the insured at our request to assist us in the investigation or defense of the claim or "suit", including actual loss of earnings up to $250 a day because of time off from work.
4. All court costs taxed against the insured in the "suit". However, these payments do not include attorneys' fees or attorneys' expenses taxed against the insured.
5. Prejudgment interest awarded against the insured on that part of the judgment we pay. If we make an offer to pay the applicable Limit Of Insurance shown in the Schedule of this endorsement, we will not pay any prejudgment interest based on that period of time after the offer.
6. All interest on the full amount of the judgment that accrues after entry of the judgment and before we have paid, offered to pay, or deposited in court the part of the judgment that is within the applicable Limit Of Insurance shown in the Schedule of this endorsement.

These payments will not reduce the limits of insurance.

Analysis:

The supplementary payments provided in the endorsement are identical to those in CG 00 01, paragraph 1, except there is no reference to vehicle  bonds as those are inapplicable in this coverage. Further, unlike the CGL, there is no supplementary defense available to an indemnitee. The supplementary payments are provided in addition to the Limit of Insurance.

Paragraph D. (Exclusions)

D. With respect to the coverage provided by this endorsement, Paragraph 2. Exclusions of Section I – Coverage A – Bodily Injury And Property Damage Liability and Section I – Coverage B – Personal And Advertising Injury Liability are replaced by the following:

Analysis:

Note that the exclusions in this endorsement replace the Coverage A and B exclusions in the CGL, but only with respect to the provisions of this endorsement.

2. Exclusions

This insurance does not apply to:

a. Expected Or Intended Injury

"Injury" expected or intended from the standpoint of the insured.

b. Perpetrated By The Insured

Damages attributable to the insured who admits to perpetrating or taking part in an "act of sexual abuse or sexual molestation" or "interrelated acts", or is found guilty of, or pleads guilty or no contest to, in a legal proceeding, an "act of sexual abuse or sexual molestation" or "interrelated acts" which caused the "injury".

For the purposes of this exclusion, a legal proceeding includes, but is not limited to, a proceeding that results in a criminal conviction, a judgment, decree, ruling or order pronounced or entered by any court of competent jurisdiction or an order or ruling pronounced or entered by any administrative agency.

c. Injury Or Damage Under Coverage A Or Coverage B

"Injury" or damage, including but not limited to "bodily injury", "property damage" or "personal and advertising injury", to which Coverage A or Coverage B applies.

d. Contractual Liability

"Injury" for which the insured is obligated to pay damages by reason of the assumption of liability in a contract or agreement. This exclusion does not apply:

(1) To liability for damages that the insured would have in the absence of the contract or agreement; or (2) To assumption of tort liability in any contract or agreement shown in the Schedule of this endorsement, to the extent the assumption of tort liability is permitted by law.

e. Workers' Compensation And Similar Laws

Any obligation of the insured under a workers' compensation, disability benefits or unemployment compensation law or any similar law.

f. Employer's Liability

"Injury" to:

(1) An "employee" of the insured arising out of and in the course of:

(a) Employment by the insured; or

(b) Performing duties related to the conduct of the insured's business; or

(2) The spouse, child, parent, brother or sister of that "employee" as a consequence of Paragraph (1) above.

This exclusion applies:

(a) Whether the insured may be liable as an employer or in any other capacity; and

(b) To any obligation to share damages with or repay someone else who must pay damages because of the "injury".

g. Employment-related Practices

"Injury" to:

(1) A person arising out of any:

(a) Refusal to employ that person;

(b) Termination of that person's employment; or

(c) Employment-related practices, policies, acts or omissions, such as coercion, demotion, evaluation, reassignment, discipline, defamation, harassment, humiliation, discrimination or malicious prosecution directed at that person; or

(2) The spouse, child, parent, brother or sister of that person as a consequence of "injury" to that person at whom any of the employment-related practices described in Paragraph (1)(a), (b) or (c) above is directed.

This exclusion applies:

(a) Whether the "injury"-causing event described in Paragraph (1)(a), (b) or (c) above occurs before employment, during employment or after employment of that person;

(b) Whether the insured may be liable as an employer or in any other capacity; and

(c) To any obligation to share damages with or repay someone else who must pay damages because of the "injury".

Analysis:

The exclusions are largely self-explanatory. The insurer will not pay for any injury that is intentional on the part of the insured, as that would be an illegal act not recoverable by insurance. Therefore accidental, or unintentional, sexual molestation or sexual abuse injury is covered while injury arising out of intentional sexual molestation or sexual abuse is excluded.

The insurance does not apply to any wrongdoing on the part of the insured and defense provided for an alleged act or acts of sexual abuse or sexual molestation will only be for the benefit of an innocent insured. Again, the coverage is not designed to provide coverage for an illegal act.

The endorsement does not provide duplicate coverage; therefore coverage for injury or damage provided by the CGL will not be covered by this endorsement.

The contractual liability exclusion serves to eliminate coverage for any liability an insured might agree to within a contract or agreement. There are two instances where this exclusion would not apply:

1) when an insured would be obligated legally irregardless of any contract or agreement; and

2) for any tort contract or agreement that is specifically scheduled in this endorsement, as long as such liability is legally assumable. For example, an insured contracts to conduct yoga instruction at various churches. If the yoga contractual agreement is scheduled on the endorsement, then the insured will be covered for liability and defense in allegations of sexual abuse or sexual molestation, in accordance with the terms of the policy and this endorsement.

Employer's liability is a standard exclusion in all liability policies, as this should be covered by a separate employer's liability policy.

The coverage under this endorsement does not provide coverage for employment practices liability and that coverage likewise should be provided by a specific policy available for this liability coverage. As such, for any allegations of sexual abuse or sexual molestation in connection with an employer-employee arrangement, this endorsement will not provide any coverage or defense for those allegations, even if the employment relationship has since ended.

Paragraph E. (Who Is An Insured)

E. For the purposes of the coverage provided by this endorsement, the following paragraph is added to Section II – Who Is An Insured:

Any person or organization added to this coverage part as an additional insured will automatically be an insured under the insurance provided by this endorsement, but only if the insurance provided by this endorsement is required by:

1. The described contract(s) or agreement(s) shown in the Schedule of this endorsement; or
2. A written contract or agreement, if no described contract(s) or agreement(s) are shown in the Schedule of this endorsement;to be provided to such additional insured.

However, the insurance afforded to such additional insured:

(1) Only applies to the extent permitted by law; and

(2) Will not be broader than that which you are required by the contract or agreement to provide for such additional insured.

Analysis:

Some state laws have contractual requirements that extend to showing proof of sexual abuse or sexual molestation insurance coverage. As such, if the insured enters into a contract in a state that has such requirements and the contracting party requires being added as an additional insured to the insured's policy. The provisions of paragraph E provides an automatic additional insured provision, as long as there is a written contract or agreement between the parties where such coverage is required and is in accordance with law. Each such additional insured must be listed in the endorsement schedule, or be in written format, and the coverage will only be extended to such as is required by the insured and in accordance with the terms of the contract or agreement.

Paragraph F. (Limits of Insurance)

F. With respect to the coverage provided by this endorsement, the following provisions are added to Section III – Limits Of Insurance:

1. Subject to Paragraph 2. of Section III – Limits Of Insurance, the Sexual Abuse Or Sexual Molestation Liability Aggregate Limit shown in the Schedule of this endorsement is the most we will pay for the sum of all damages because of all "injury" arising out of all "acts of sexual abuse or sexual molestation" or "interrelated acts", including any continuation, change or resumption of such "injury" after the end of the policy period.
2. Subject to Paragraph F.1. above, the Sexual Abuse Or Sexual Molestation Liability Each Act Limit shown in the Schedule of this endorsement is the most we will pay for the sum of all damages because of all "injury" arising out of any one "act of sexual abuse or sexual molestation" or "interrelated acts", including any continuation, change or resumption of such "injury" after the end of the policy period.

With respect to "interrelated acts" that occur over more than one policy period under any policy issued by us, only the Sexual Abuse Or Sexual Molestation Liability Each Act Limit applicable to the first policy period:

a. That provides the coverage provided by this endorsement; and

b. In which the "interrelated acts" were committed;

will apply to all damages because of all "injury" for such "interrelated acts".

Analysis:

Separate limits of insurance apply to the coverage provided by this endorsement, as shown in the endorsement's schedule. The limit of insurance for this coverage is an aggregate limit, which is the most the insurer will pay for all damages for all injuries arising out of all acts covered by the endorsement for which the insured is legally responsible. In addition, the endorsement has a scheduled limit that is the most that will be paid for all damages because of injury(ies) arising out of each act covered by the endorsement.

If an interrelated act(s) occurs over more than one policy issued by the insurer, for purposes of the limit of insurance, the each act limit that applies to the first policy period will trigger the limit that applies to all damages because of injury for these interrelated acts. For example, if it is discovered that an act of sexual abuse took place from 12/30/20 until 6/15/22 with all policies being renewed with the same carrier, then the applicable limit of insurance will be the limit that applies to the policy in effect on 12/30/20. If the policy is not a renewal of the current insurer, then for purposes of the limit of insurance, the each act limit will be the limit shown for the policy in effect on 6/15/22, the date of discovery.

3. With respect to the insurance afforded to additional insureds described in Paragraph E. of this endorsement, the most we will pay on behalf of the additional insured is the amount of insurance:

1. Required by the contract or agreement you have entered into with the additional insured; or
2. Available under the applicable Limits of Insurance shown in the Schedule of this endorsement;

whichever is less.

4. Deductible

If a Sexual Abuse Or Sexual Molestation Liability Each Act Deductible is shown in the Schedule of this endorsement, the following provision applies:

a.  Our obligation under this endorsement to pay damages on behalf of the insured applies only to the amount of damages in excess of the deductible amount shown in the Schedule of this endorsement as Sexual Abuse Or Sexual Molestation Liability Each Act Deductible. The limits of insurance shall not be reduced by the amount of this deductible.

b. The terms of this insurance, including those with respect to:

(1) Our right and duty to defend any "suits" seeking those damages; and

(2) Your duties, and the duties of any other involved insured, in the event of an "act of sexual abuse or sexual molestation", "interrelated acts", claim or "suit";

apply irrespective of the application of the deductible amount.

c. We may pay any part or all of the deductible amount to effect settlement of any claim or "suit" and, upon notification of the action taken, you shall promptly reimburse us for such part of the deductible amount as has been paid by us.

Analysis:

The limits of insurance apply in the same manner as other claims-made policies with limit that is applicable to each claim, except that the limit in this endorsement applies to each act of sexual abuse or sexual molestation, subject to a maximum aggregate limit for all covered acts, regardless of the number of acts or the sum of injuries or damages. The Sexual Abuse or Sexual Molestation Aggregate is also subject to the CGL General Aggregate Limit.

An anti-stacking provision is added applicable to interrelated acts that take place over more than one policy period under any policy issued by the insurer. Regardless of how many policy periods are affected by the acts, for purpose of the limit of insurance, the limit of insurance under the first policy in which the act(s) were committed will be the applicable limit of insurance. So for example, if a perpetrator is alleged to commit sexual molestation acts over a period of three years, the policy in effect in the first year will be the coverage and limits policy affected, if all policies were issued by the same insurer. Coverage will extend to cover the interrelated acts throughout all three years; however coverage will cease once the limit of insurance on the first year's policy has been exhausted. For example each policy has a limit of $300,000; covered acts occur over three policy periods. Culminating the three year policy period there is $900,000 in limits. However, since the acts are interrelated, only the limits for the first policy year, the first $300,000, are available for the acts that span over those three years.

This endorsement provides for a deductible applicable to each act of sexual abuse or sexual molestation. However, the limits of insurance will not be reduced by that deductible payment of the insured. The deductible provision requires that the insurer only pay in excess of the deductible amount shown in the schedule. For example the policy limit is $300,000 and the deductible is $5,000. The loss is $200,000. Therefore the insurer will pay $195,000, the amount over the $5,000 deductible.

Paragraph G. (Conditions)

G. With respect to the coverage provided by this endorsement, Paragraphs 2. and 4. of Section IV – Commercial General Liability Conditions are replaced by the following:

2. Duties In The Event Of An Act Of Sexual Abuse Or Sexual Molestation, Claim Or Suit

a. You must see to it that we are notified as soon as practicable of an "act of sexual abuse or sexual molestation" or a circumstance which may result in a claim. To the extent possible, notice should include:

(1) How, when and where the "act of sexual abuse or sexual molestation" or "interrelated acts" took place;

(2) The specific circumstances surrounding the "act of sexual abuse or sexual molestation" or "interrelated acts";

(3) The names and addresses of any injured persons and witnesses; and

(4) The nature and location of any "injury" arising out of the "act of sexual abuse or sexual molestation" or "interrelated acts".

b. If a claim is made or "suit" is brought against any insured, you must:

(1) Immediately record the specifics of the claim or "suit" and the date received; and

(2) Notify us as soon as practicable.

You must see to it that we receive written notice of the claim or "suit" as soon as practicable.

c. You and any other involved insured must:

(1) Immediately send us copies of any demands, notices, summonses or legal papers received in connection with the claim or "suit";

(2) Authorize us to obtain records and other information;

(3) Cooperate with us in the investigation or settlement of the claim or defense against the "suit"; and

(4) Assist us, upon our request, in the enforcement of any right against any person or organization which may be liable to the insured because of "injury" to which this insurance may also apply.

d. No insured will, except at that insured's own cost, voluntarily make a payment, assume any obligation or incur any expense without our consent.

4. Other Insurance

If other valid and collectible insurance is available to the insured for a loss we cover under this endorsement, our obligations are limited as follows:

a. Primary Insurance

This insurance is primary except when Paragraph b. below applies. If this insurance is primary, our obligations are not affected unless any of the other insurance is also primary. Then, we will share with all that other insurance by the method described in Paragraph c. below.

b. Excess Insurance

(1) This insurance is excess over any of the other insurance, whether primary, excess, contingent or on any other basis that is liability insurance applicable to an "act of sexual abuse or sexual molestation" or "interrelated acts".

(2) When this insurance is excess, we will have no duty to defend the insured against any "suit" if any other insurer has a duty to defend the insured against that "suit". If no other insurer defends, we will undertake to do so, but we will be entitled to the insured's rights against all those other insurers.

(3) When this insurance is excess over other insurance, we will pay only our share of the amount of the loss, if any, that exceeds the sum of:

(a) The total amount that all such other insurance would pay for the loss in the absence of this insurance; and

(b) The total of all deductible and selfinsured amounts under all that other insurance.

(4) We will share the remaining loss, if any, with any other insurance that is not described in this Excess Insurance provision and was not bought specifically to apply in excess of the Limits Of Insurance shown in the Schedule of this endorsement.

c. Method Of Sharing

If all of the other insurance permits contribution by equal shares, we will follow this method also. Under this approach, each insurer contributes equal amounts until it has paid its applicable limit of insurance or none of the loss remains, whichever comes first. If any of the other insurance does not permit contribution by equal shares, we will contribute by limits. Under this method, each insurer's share is based on the ratio of its applicable limit of insurance to the total applicable limits of insurance of all insurers.

Analysis:

The additional conditions added are specific to the coverage provided by the endorsement. Otherwise, they are similar to those in the CGL with respect to reporting and notice requirements and how other insurance will be allocated. In this claims-made policy however, the coverage is triggered not when the injury occurred, but when the acts or the circumstances that could reasonably constitute a claim were reported to the insurer. That being said, simply notifying the insurer of such an act is not giving notice of a claim. For example, let's say that a female vendor complains to an insured manager that every time she comes into contact with a certain employee, that employee always makes her feel uncomfortable by greeting her with a hug and kiss on the cheek. The vendor stated that she had tried to ward off these interactions by first extending her hand in greeting for a handshake but the employee continued to overstep his bounds and enter her personal space with these overtures. At this point the manager has become aware of circumstances which could lead to a claim, even though the vendor has not made a formal complaint. As such, based on the coverage conditions, he should obtain locations, dates, places and specific details of the circumstances of all such acts described by the vendor, as well as any injury to the vendor, and report all of this information to the insurer. If the vendor then later pursues a claim against the company, the insurer will have all of the information needed to support the claim and the insured must then cooperate with the insurer in any needed additional information and in the investigation and handling of the claim. In no event should the insured however admit to any liability without the insurer's consent, nor make any payment or assume any obligation in relation to the vendor, not even an act as simple as taking her to lunch.

The Other Insurance condition states that coverage will be primary unless there is other insurance available to cover the same loss; in that event the insurer will contribute proportionately in equal shares, or equal limits, whichever applies. Each insurer's share is based on the ratio of its applicable limit of insurance to the total applicable limits of all insurers.

A claims made policy can pose some difficulties in the application of other insurance that do not exist in an occurrence policy, due to the Retroactive Date provision.

Coverage applies with respect to injury caused by an act of sexual abuse or sexual molestation or interrelated acts committed on or after the Retroactive Date, if any, shown in the Schedule of the endorsement, but not after the end of the policy period. As such, if act(s) of sexual abuse or sexual molestation were first committed in a policy period that continued after the Retroactive Date of this endorsement (or if there is no Retroactive Date), then the first policy period will be primary for coverage according to the Excess Insurance parameters of the Other Insurance condition.

Retroactive Date

The retroactive date may be set at any date before, or on the same as, the effective date of the policy. Any injury caused by an act of sexual abuse or sexual molestation or interrelated acts committed prior to the scheduled Retroactive Date is not covered, even if a claim for such injury is first made during the policy period or any applicable Extended Reporting Period. If there is no retroactive date, then a claim for injury must be made during the policy period.

Once a retroactive date is set, it can only be advanced with the written consent of the first Named Insured, and then only for the following reasons:

(1) A change in carrier;

(2) There is a substantial change in the insured's operations that increases the loss exposure;

(3) The insured fails to provide the insurer with certain information:

(a) material misrepresentation – the insured knew, or should have known, about the nature of the risk insured, which would have been material to the insurer's acceptance of the risk; or

(b) information that the insurer requested.

(4)  At the insured's request.

Before any retroactive date can be advanced under any of the above conditions, the insurer must first obtain a written statement from the first Named Insured, acknowledging that the first Named Insured has been advised of the right to purchase a Supplemental Extended Reporting Period Endorsement.

Paragraph H. (Extended Reporting Periods)

H. With respect to the coverage provided by this endorsement, the following section is added:

Extended Reporting Periods

1. We will provide one or more Extended Reporting Periods, as described below, if:

1.  This endorsement is cancelled or not renewed; or
2.  We renew or replace this endorsement with insurance that:

(1) Has a Retroactive Date later than the date shown in the Schedule of this endorsement; or

(2) Does not apply to "injury" caused by an "act of sexual abuse or sexual molestation" or "interrelated acts" on a claims-made basis.

2.  Extended Reporting Periods do not extend the policy period or change the scope of coverage provided. They apply only to claims for "injury" caused by an "act of sexual abuse or sexual molestation" or "interrelated acts" which was committed before the end of the policy period, but not before the Retroactive Date, if any, shown in the Schedule of this endorsement.

Once in effect, Extended Reporting Periods may not be cancelled.

3.  A Basic Extended Reporting Period is automatically provided without additional charge. This period starts with the end of the policy period and lasts for 60 days with respect to claims for "injury" caused by an "act of sexual abuse or sexual molestation" or "interrelated acts" not previously reported to us.

The Basic Extended Reporting Period does not apply to claims that are covered under any subsequent insurance you purchase, or that would be covered but for exhaustion of the amount of insurance applicable to such claims.

4.  The Basic Extended Reporting Period does not reinstate or increase the limits of insurance.

5.  A Supplemental Extended Reporting Period of five years is available, but only by an endorsement and for an extra charge. This Supplemental Extended Reporting Period starts when the Basic Extended Reporting Period, set forth in Paragraph 3. above, ends.

You must notify us in writing of your intent to purchase the Supplemental Extended Reporting Period Endorsement within 60 days after the end of the policy period or the date of termination of the Policy or this endorsement, whichever comes first. The Supplemental Extended Reporting Period will not go into effect unless you pay the additional premium promptly when due.

We will determine the additional premium in accordance with our rules and rates. In doing so, we may take into account the following:

1. The exposures insured;
2. Previous types and amounts of insurance;
3. Limits of insurance available under this endorsement for future payment of damages; and
4. Other related factors.

The additional premium will not exceed 200% of the annual premium for this endorsement. The Supplemental Extended Reporting Period Endorsement shall set forth the terms, not inconsistent with this section, applicable to the Supplemental Extended Reporting Period, including a provision to the effect that the insurance afforded for claims first received during such period is excess over any other valid and collectible insurance available under policies in force after the Supplemental Extended Reporting Period starts.

6. When the Supplemental Extended Reporting Period Endorsement is in effect, we will provide a Supplemental Extended Reporting Period Aggregate Limit for any claim first made during the Supplemental Extended Reporting Period.

The Supplemental Extended Reporting Period Aggregate Limit will be equal to the dollar amount shown as the Sexual Abuse Or Sexual Molestation Aggregate Limit in the Schedule of this endorsement.

Paragraph F.1. of this endorsement will be amended accordingly. The Sexual Abuse Or Sexual Molestation Liability Each Act Limit will then continue to apply as set forth in Paragraph F.2. of this endorsement.

Analysis:

The purpose of the extended reporting period (ERP), also known as "tail" coverage, is to provide coverage under an expired claims-made policy for claims first made after the policy has expired. The extended reporting periods provision provides an automatic extended reporting period of limited duration for claims made after the policy period, and it enables the insured to buy an optional extended period of unlimited duration for such claims.

When coverage is canceled or nonrenewed, or renewed or replaced with insurance that has a later retroactive date or with coverage that is not claims-made, one or more Extended Reporting Periods are provided. The extended reporting periods do not extend the policy period however; as they only allow the insured an additional period of time to report claims for injury caused by an act of sexual abuse or sexual molestation committed before the end of the policy period, but not before the retroactive date.

The automatic basic extended reporting period is provided without an additional premium charge. The optional supplemental extended reporting period requires an additional premium. The basic ERP and the option to purchase the supplemental ERP are provided if the policy is canceled or not renewed—by either the insured or the insurer. They are also provided if the insurer renews or replaces the policy with one that either has a later retroactive date or applies on an other than claims-made basis.

The basic ERP does not apply to claims that are covered under subsequent insurance purchased by the named insured. Further, the basic extended reporting period does not reinstate or increase the limits of insurance.

The supplemental ERP is provided by endorsement ( CG 27 55 09 22) for an additional premium. Unlike the basic ERP, the supplemental ERP endorsement will reinstate the Sexual Abuse or Sexual Molestation Aggregate limit shown in the schedule of the endorsement. However, the supplemental ERP may only be provided if requested by the insured in writing within 60 days after the end of the policy period, or the date of termination of the policy or endorsement, whichever comes first. If the insured does not exercise its option within 60 days after the end of the policy period, the insurer will have no obligation to sell the insured the supplemental extended reporting period endorsement. Therefore, any insured that might need the supplemental ERP should make a final determination before the 60 day period expires.

The extended reporting periods provision in the endorsement allows the insurer to determine the additional premium in accordance with the insurer's rules and rates. The insurer may take into account the exposures insured, the previous types and amounts of insurance, the limits of insurance available for future payment of damages, and other related factors. Note also that the supplemental extended reporting period will not go into effect unless the premium is paid promptly when due. The premium for the endorsement may not exceed 200% of the annual premium for the endorsement. The premium for the extended reporting period endorsement is fully earned upon the endorsement's effective date and the endorsement cannot be canceled by the insurer if the premium has been paid.

If the Supplemental Extended Reporting Period is in effect, a Supplemental Extended Reporting Period Aggregate Limit will be provided but only for claims first received and reported during the Supplemental Extended Reporting Period.

Paragraphs I and J (Definitions)

I. With respect to the coverage provided by this endorsement, the following definitions are dded to the Definitions section:

1. "Act of sexual abuse or sexual molestation" means:

1. The actual, alleged or threatened sexual abuse or sexual molestation of any person committed by anyone; or
2. The negligent:

(1) Employment;

(2) Investigation;

(3) Supervision; or

(4) Retention;

of a person for whom any insured is or ever was legally responsible and whose conduct would be described by Paragraph a. above.

2.  "Injury" means bodily injury, sickness or disease sustained by a person, including death resulting from any of these at any time. "Injury" includes mental anguish or other mental injury sustained by any person, whether or not resulting from injury to the body, sickness, disease or death of any person.

3.  "Interrelated acts" means a series of interrelated, causally connected or continuous acts of actual, alleged or threatened sexual abuse or sexual molestation of any person or persons committed, or allegedly committed, by one person or two or more persons acting together, which are the subject of or the basis for any claim or "suit".

Such series of interrelated, causally connected or continuous acts shall be considered to be one "act of sexual abuse or sexual molestation", deemed to be committed at the time of the first such act regardless of:

1.  The period of time over which the "acts of sexual abuse or sexual molestation" takes place;
2.  The number of persons injured or who are alleging "acts of sexual abuse or sexual molestation";
3.  The number of persons who committed or allegedly committed "acts of sexual abuse or sexual molestation";
4.  The types of "acts of sexual abuse or sexual molestation" involved or alleged; or
5.  The number of times the "acts of sexual abuse or sexual molestation" took place.

J. With respect to the coverage provided by this endorsement, the following definitions in the Definitions section are replaced by the following:

"Coverage territory" means the United States of America (including its territories and possessions), Puerto Rico and Canada.

"Suit" means a civil proceeding in which damages because of "injury" to which this insurance applies are alleged. "Suit" includes:

1.  An arbitration proceeding in which such damages are claimed and to which the insured must submit or does submit with our consent; or
2.  Any other alternative dispute resolution proceeding in which such damages are claimed and to which the insured submits with our consent.

Analysis:

Several definitions are added to the endorsement to define coverage under the endorsement. If a term is not defined, it will carry its broadest, standard definition as found in a standard desk reference.

By its definition, "an act of sexual abuse or sexual molestation" excludes the actual, alleged or threatened sexual abuse or sexual molestation of any person committed by anyone. In Paragraph A., the form excludes the actual alleged or threatened sexual abuse or sexual molestation (undefined) of any person committed by anyone. Then, if you read the defined term, it is defined to mean the same exact thing. Therefore, defined or undefined, our analysis is that the coverage here boils down to defense coverage only. If the person is found innocent, or the case dismissed, then their defense costs would be covered, but otherwise anything else would be illegal and as such not covered. Regardless if the person claims that they did not intend to commit the action that caused the injury – it was still actual, threatened or alleged.

By adding a definition of "interrelated acts" this makes it clear that an act of sexual abuse or sexual molestation may be perpetrated by one person or many, that there may be one act or a number of casually related alleged or actual acts, acts may take place over any length of time, and acts may be done in any manner or form. The key is that the act, alleged or actual, will be triggered at the time it was first committed by anyone.

"Injury" is not limited to bodily injury, sickness, disease or death, but also includes mental anguish or mental injury. The mental injury does not have to be accompanied by or result in bodily injury, sickness, disease or death. For example, if a person has recurring nightmares or is afraid to be around other people as a result of alleged acts of sexual molestation by a perpetrator, this would be a type of mental anguish or mental injury.

Unlike the definition of "coverage territory" in the CGL, this endorsement restricts the coverage territory to the entirety of the United States, Puerto Rico, and Canada.

The definition of "suit" includes the same types of proceedings as in the CGL, but is applicable to suits for alleged "injury" instead of for Coverage A & B damages.

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