None of the church's individual settlements with Jensen's victims met the retained limit on its own. However, the total of the settlements exceeded the retained limit. The church argued that its negligence was one occurrence, and the insurers argued that it was multiple.

If each individual victim were considered a separate occurrence, then the insurer would not have to pay anything. If all the victims were considered one occurrence, then the retained limit would be met, and the insurer would be obligated to pay.

The district court sided with the insurers, finding that the policy language unambiguously meant that "a separate occurrence arose every time Mr. Jensen abused separate children at separate times and in separate places." The court granted summary judgment to the insurers, and the church appealed.

What is an Occurrence?

The case was brought before a United States appellate court. The court first stated that under Utah law, when there is ambiguity or uncertainty in an insurance policy, it must be resolved in favor of coverage. To determine if the policy is ambiguous, the court reviewed the policy language.

National Union's policy defined "occurrence" as:
"An accident, including continuous or repeated exposure to substantially the same general harmful conditions. All such exposure to substantially the same general harmful conditions will be deemed to arise out of one Occurrence."

ACE's policy was nearly identical, adding that such exposure is considered part of the same occurrence "regardless of the frequency or repetition thereof, or the number of claimants."
Under Utah law, a policy is ambiguous when it "is capable of more than one reasonable interpretation." The district court did not find the definitions of occurrence to be ambiguous. The church argued that a reasonable interpretation is that its failure to prevent Jensen's repeated abuses count as one occurrence.

Citing the policy, an occurrence is "an accident, including...repeated exposure to substantially the same general harmful conditions." The church interpreted "general harmful conditions" to include the dangerous environment created by failing to prevent Jensen's abuses.

The appellate court agreed that the church's interpretation was reasonable, stating, "so even though the victims were separate children abused at separate times in separate places, the church plausibly reads the policy to count those 'repeated exposures' as 'one Occurrence.'"

Since both the church's interpretation and the insurers' interpretation were reasonable, the court held that the provision was ambiguous as a matter of law. The court did not need to determine that the church's interpretation was more reasonable; just that it was plausible.

The court noted that in other cases, there has been no consensus on how to interpret "occurrence," but three different approaches. Some courts held an institution's negligence toward repeated abuse as a single occurrence; others held that abuses of separate victims at separate times were multiple occurrences; and others found the language ambiguous and awarded coverage. The conflicting approaches further solidified the appellate court's finding of ambiguity.

The lower court relied on Lee v. Interstate Fire & Cas. Co., where the court determined that a single event could produce multiple occurrences when the injuries were independent. The appellate court disagreed because Lee was a dispute between two insurers, and this case is a dispute between an insurer and an insured.

In Lee, one insurer "followed form" to the other's policy and was therefore equally its author, so the rule of construing ambiguity against the drafter did not apply. In this case, the insurer is the drafter, and the insured can either "take-it-or-leave-it."

The appellate court reversed the district court's grant of summary judgment to the insurers and remanded for further proceedings.

Editor's Note

The court found that both the church's and the insurer's interpretations of the policy were reasonable. Since the policy was open to more than one reasonable interpretation, it was ambiguous under Utah law. The court did not need to find the church's interpretation more reasonable in order to reverse the ruling, simply that it was plausible.

The insurers cited Lee in support of their argument, but the appellate court distinguished that case as a dispute between two insurers and the current case as a dispute between an insurer and an insured. Since insurance policies between an insurer and an insured are typically contracts of adhesion, ambiguous clauses go against the drafter of the policy.

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