Circuit Affirms District Court’s Ruling that Archdiocese Was Not Entitled to Coverage for Claims It Settled for Which It Was Not Legally Liable

February 28, 2014 | Insurance Coverage

The U.S. Court of Appeals for the Eighth Circuit, affirming a district court’s decision, has ruled that the Archdiocese of St. Louis was not entitled to coverage under its insurance policy for a settlement of claims for which it was not legally liable.

The Case

After the Archdiocese of St. Louis and Archbishop Robert J. Carlson (together, the “Archdiocese”) were sued for allegedly employing a priest who sexually molested a boy, the parties reached a settlement. The Archdiocese paid the settlement amount and turned to its insurers for indemnification.

A secondary excess carrier, Chicago Insurance Company (“CIC”), denied the Archdiocese’s demand for coverage under its policy, which provided that it would indemnify the Archdiocese for “sums paid as damages in settlement of a claim or in satisfaction of a judgment for which the insured is legally liable.”

CIC went to federal court, seeking a declaration that its policy did not provide coverage for the underlying litigation. The insurer moved for summary judgment.

The district court granted summary judgment in favor of CIC, finding that because the wrongful death claim in the underlying complaint alleged a form of negligence against a religious organization, the Archdiocese could not be held legally liable under Missouri Supreme Court precedent. If the Archdiocese could not be held legally liable, the district court reasoned, the Archdiocese had failed to establish that a “loss” as defined in the policy had occurred. The district court also decided that because the remaining underlying claims against the Archdiocese alleged intentional conduct, they did not fit within the policy’s definition of “occurrences.” Accordingly, the district court concluded that CIC’s policy did not provide coverage for the underlying claims, and it granted CIC’s motion for summary judgment.

The Archdiocese appealed.

The Circuit Court’s Decision

The circuit court affirmed.

In its decision, it found that the Archdiocese was unable to show that it faced potential liability in the underlying action because, given Missouri Supreme Court precedent, it could not demonstrate that it was legally liable, potentially or otherwise, for the conduct alleged in the wrongful death claim.

The circuit court concluded that there was “no authority” that allowed a settling insured to recover under an indemnity policy where governing law did not permit the claimant’s underlying cause of action against the insured.

The case is Chicago Ins. Co., v. Archdiocese of St. Louis, 740 F.3d 1197 (8th Cir. 2014).

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