Filed: Jul. 15, 1994
Latest Update: Mar. 02, 2020
Summary: IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT _ No. 93-4068 _ THE SOCIETY OF THE ROMAN CATHOLIC CHURCH OF THE DIOCESE OF LAFAYETTE AND LAKE CHARLES, INC., Plaintiff-Appellee-Cross Appellant-Appellant and Cross-Appellee, versus INTERSTATE FIRE & CASUALTY CO., ET AL., Defendants, ARTHUR J. GALLAGHER & COMPANY AND GALLAGHER BASSETT SERVICES, INC., Defendants-Appellees-Cross Appellants, versus INTERSTATE FIRE & CASUALTY COMPANY, Defendant-Appellee-Cross Appellee and Cross- Appellant, v
Summary: IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT _ No. 93-4068 _ THE SOCIETY OF THE ROMAN CATHOLIC CHURCH OF THE DIOCESE OF LAFAYETTE AND LAKE CHARLES, INC., Plaintiff-Appellee-Cross Appellant-Appellant and Cross-Appellee, versus INTERSTATE FIRE & CASUALTY CO., ET AL., Defendants, ARTHUR J. GALLAGHER & COMPANY AND GALLAGHER BASSETT SERVICES, INC., Defendants-Appellees-Cross Appellants, versus INTERSTATE FIRE & CASUALTY COMPANY, Defendant-Appellee-Cross Appellee and Cross- Appellant, ve..
More
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_____________________
No. 93-4068
_____________________
THE SOCIETY OF THE ROMAN CATHOLIC CHURCH OF THE
DIOCESE OF LAFAYETTE AND LAKE CHARLES, INC.,
Plaintiff-Appellee-Cross
Appellant-Appellant and
Cross-Appellee,
versus
INTERSTATE FIRE & CASUALTY CO., ET AL.,
Defendants,
ARTHUR J. GALLAGHER & COMPANY AND GALLAGHER
BASSETT SERVICES, INC.,
Defendants-Appellees-Cross
Appellants,
versus
INTERSTATE FIRE & CASUALTY COMPANY,
Defendant-Appellee-Cross
Appellee and Cross-
Appellant,
versus
ALLEN GODFREY LEE AND LLOYD'S OF LONDON,
Defendants-Appellees-Cross
Appellees,
versus
PACIFIC EMPLOYERS INSURANCE COMPANY,
Defendant-Third Party
Plaintiff-Appellee-Appellant
and Cross-Appellee,
and
FIREMAN'S FUND INSURANCE,
Defendant-Appellee-Appellant
and Cross-Appellee,
and
PREFERRED RISK MUTUAL INSURANCE COMPANY,
Defendant-Appellee-Appellant
and Cross-Appellee,
and
CENTENNIAL INSURANCE COMPANY,
Defendant-Appellee,
versus
HOUSTON GENERAL INSURANCE COMPANY,
Defendant-Appellant-Cross-
Appellee and Appellee,
LOUISIANA COMPANIES, INC.,
Third Party Defendant-
Appellee.
_______________________________________________________
Appeal from the United States District Court for
the Western District of Louisiana
_______________________________________________________
(July 15, 1994)
Before REAVLEY, GARWOOD and HIGGINBOTHAM, Circuit Judges.
REAVLEY, Circuit Judge:
Two pedophilic priests of the Diocese of Lafayette1 molested
thirty-one children over a period of seven years, prompting a
1
The Society of the Roman Catholic Church of the Diocese of Lafayette, Inc. and the Diocese of
Lake Charles, Inc. are both appellants in this appeal. At oral argument the parties indicated that one Diocese is the
successor of the other, so we will refer to the appellants as "the Diocese."
2
spate of claims from the children and their parents. The Diocese
and its insurance carriers, unable to compromise on the
allocation of loss under the "occurrence" policies, settled the
claims against the Diocese with contributions on a pro rata basis
(using years of coverage as a benchmark) and agreed to let a
court decide their coverage dispute. The Diocese filed a
declaratory judgment action in state court, which was removed
upon diversity jurisdiction to federal court. The parties then
submitted motions for summary judgment, and the court granted
summary judgment on all claims. We affirm in part, reverse in
part, and remand.
I. Background
The sordid picture underlying this insurance coverage
dispute is that of two miscreant priests who subjected thirty-one
children to extended periods of sexual molestation. These
molestations began in August of 1976 and ended in June of 1983.
The record on appeal does not show how many times each child was
molested, nor the extent of damage resulting from each encounter.
The parties, however, have stipulated to the dates when the
molestations began and ended for each child (the "grid").2 And
2
Represented as uncontested facts, Lloyd's of London presented a grid, along with its motion for
summary judgment, listing when each child's molestation began and ended. On appeal, Houston General
Insurance Company does not contest its accuracy, though it once did. See Cinel v. Connick, 15 F.3d 1338, 1345
(5th Cir. 1994) ("An appellant abandons all issues not raised and argued in its initial brief on appeal.") (emphasis
omitted). Pacific Employers' Insurance Company argues that the dates of child molestation are disputed fact
questions. But because Pacific failed to contest the grid under the district court's local rules, it has waived any
objection it may have had to the grid. Local Rule 2.10 ("Opposition to Summary Judgment. ... All material facts set
forth in the statement required to be served by the moving party will be deemed admitted, for purposes of the
motion, unless controverted as required by this rule.").
3
during oral argument, the parties further agreed that each child
was molested at least once during each stipulated year of
molestation.
A. The Insurance Policies
The complexity of this case arises from the different
periods of the Diocese's insurance coverage, primary and excess.
Fireman's Fund Insurance Company was the primary carrier from
1975 to 1978, and Preferred Risk Mutual Insurance Company covered
the Diocese from 1978 through July 1981. Houston General
Insurance Company was the excess carrier from 1975 to 1979, and
Pacific Employers' Insurance Company was the succeeding excess
carrier through July 1981.
In July 1981, the Diocese switched its coverage to a form of
limited self-insurance. Under this self-insurance plan, the
Diocese presented the first layer of coverage by contributing
$400,000 to a yearly loss fund, from which the Diocese was
responsible for the first $100,000 of each occurrence. Lloyd's
of London's excess aggregate policy, with a $450,000 aggregate
limit, offered the next layer of coverage.3 And Interstate Fire
& Casualty's $5 million umbrella policy provided the excess
coverage.4
3
Centennial Insurance Company, also a party to this appeal, participated in 20% of the Lloyd's
policy. It did not issue a separate policy insuring the Diocese.
4
From the parties' appellate briefs, we are unable to determine exactly how the loss fund, the
excess aggregate policy, and the excess policy interact. While this does not affect our analysis, the district court
will have to determine the structure of this self-insurance plan before it can enter a final judgment.
4
All insurance policies are "occurrence" based policies,
meaning their limits of coverage are capped on a per occurrence
basis. Under such a policy, it is the date of the occurrence,
and not the date of the claim, that determines coverage. When
bodily injury results from an occurrence during a policy period,
coverage is triggered. This coverage extends to all resulting
damages – both present and future – emanating from the injury.
The policy does not, however, cover bodily injury occurring
outside the policy period.
Because the insurance companies and the Diocese could not
agree on the proper definition of "occurrence," they opted to
settle the molestation claims among themselves on a pro rata
basis and leave the proper allocation of loss to the court.
Accordingly, the Diocese filed a declaratory judgment action in
state court, which was removed to federal court on diversity
grounds. Decision of the issues affect either the allocation of
loss between successive primary carriers and the Diocese or
between primary and excess carriers.
B. The District Court's Opinion
1. Occurrence and First Encounter
The district court relied on Interstate Fire & Casualty Co.
v. Archdiocese of Portland, 747 F. Supp. 618 (D. Or. 1990) to
conclude that "occurrence" should be defined on a per child
basis, with all subsequent molestation treated as injury
resulting from that "occurrence." With thirty-one children
5
molested, the court reasoned that there were thirty-one
occurrences. It also considered the parents' claims as arising
from the same "occurrences," meaning that the parents' injuries
did not constitute separate occurrences under the policies. The
court allocated the loss using the "first encounter rule": the
insurance carrier covering the Diocese during the occurrence of
the first molestation of each child was responsible for all
resulting damages to that child (and his parents), including
damages from molestations occurring after the expiration of that
carrier's policy.5
Depending upon their interests, all parties appeal from the
court's judgment. Some disagree with the court's definition of
"occurrence"; others contest the court's use of the first
encounter rule.
2. The Diocese's Claim Against Gallagher and Bassett
The Diocese sued Arthur J. Gallagher & Company, the
insurance agent that procured the self-insurance program,
alleging that Gallagher failed to provide full coverage above the
loss fund as warranted. The court granted Gallagher's motion for
summary judgment, and the Diocese appeals.
The Diocese also sued Gallagher Bassett Services Inc., the
administrator of the self-insurance plan, claiming that Bassett
breached its obligation to properly administer the plan by
5
The parties submitted nine other molestation claims to arbitration, and the district court held the
arbitration binding. No party contests this ruling on appeal.
6
refusing to contribute money from the loss fund toward the
settlement of molestation claims arising before 1981. The court
granted Bassett's motion for summary judgment, and the Diocese
appeals.
3. Pacific's Claim Against Louisiana Companies
Pacific, an excess carrier, sued its insurance agent,
Louisiana Companies, alleging that Louisiana Companies
misrepresented the Diocese's underlying primary coverage as
$500,000 per year, when it was actually a three-year policy with
a $500,000 per occurrence limit (Preferred's policy). With
"occurrence" defined on a per child basis and with liability
allocated under the first encounter rule, the court concluded
that Pacific suffered no prejudice from the alleged
misrepresentation and granted Louisiana Companies' motion for
summary judgment. Pacific appeals.
II. Analysis
A. Allocation of Loss Under the Insurance Policies
With the claims by the children and their parents settled,
we must determine the proper allocation of loss among the
insurance companies and the Diocese. Because this declaratory
judgment action is based upon diversity jurisdiction, we apply
Louisiana law in interpreting the insurance policies.
1. Defining "Occurrence"
7
a. The Children's Claims
What constitutes an "occurrence" is central to this appeal
because each policy's limits of liability are on a per occurrence
basis; the larger the number of "occurrences," the greater the
loss borne by the primary insurers and the Diocese. The Lloyd's
policy is representative of the other policies involved in both
its scope of coverage and its definition of "occurrence":
Underwriters hereby agree ... to indemnify the Insured
for all sums which the Insured shall be obligated to pay
by reason of the liability imposed upon the Insured by
law ... for damages ... on account of personal injuries
... arising out of any occurrence happening during the
period of the Insurance.
The term "occurrence" wherever used herein shall mean an
accident or a happening or event or a continuous or
repeated exposure to conditions which unexpectedly and
unintentionally result in personal injury, or damage to
property during the policy period. All such exposure to
substantially the same general conditions existing at or
emanating from one location shall be deemed one
occurrence. (emphasis added).
The definition of "occurrence" affords little assistance because
"a continuous or repeated exposure to conditions" and
"substantially the same general conditions" are malleable. An
"occurrence" could be the church's continuous negligent
supervision of a priest, the negligent supervision of a priest
with respect to each child, the negligent supervision of a priest
with respect to each molestation, or each time the Diocese became
aware of a fact which should have led it to intervene, just to
8
name a few possibilities.6 The meaning of "occurrence," as used
in the insurance policies, can be perplexing in application. Cf.
Insurance Co. of N. Am. v. Forty-Eight Insulations, Inc., 633
F.2d 1212, 1222 (6th Cir. 1980), cert. denied,
454 U.S. 1109
(1981). When a term in an insurance policy has uncertain
application, Louisiana courts interpret the policy in favor of
the insured. See Hebert v. First Am. Ins. Co.,
461 So. 2d 1141,
1143 (La. Ct. App. 1984), writ denied,
462 So. 2d 1265 (La.
1985).
While there are many possible applications of the term
"occurrence," we are not without guidance. In Lombard v.
Sewerage & Water Bd. of New Orleans, 284 So. 2d 905 (La. 1973),
where the ongoing construction of a drainage canal damaged many
adjacent property owners, the Louisiana Supreme Court discussed
the proper method for determining an "occurrence" when the cause
of harm continues to injure different persons:
The word "occurrence" as used in the policy must be
construed from the point of view of the many persons
whose property was damaged. As to each of these
plaintiffs, the cumulated activities causing damage
should be considered as one occurrence, though the
circumstances causing damage consist of a continuous or
repeated exposure to conditions resulting in damage
arising out of such exposure. Thus, when the separate
property of each plaintiff was damaged by a series of
events, one occurrence was involved insofar as each
property owner was concerned. Notwithstanding, therefore,
6
We have couched the underlying tort in language of negligent supervision, assuming that the
Louisiana Supreme Court would not consider the priests' actions to be within the scope of their employment, nor
would it consider the molestations a "risk of harm fairly attributable to the employer's business." See Roberts v.
Benoit, 605 So. 2d 1032, 1040-41 (La. 1991); McClain v. Holmes,
460 So. 2d 681, 683-84 (La. Ct. App. 1984),
writ denied,
463 So. 2d 1321 (La. 1985). But even if the Diocese is liable for the priests' intentional acts under a
respondeat superior theory, see Miller v. Keating,
349 So. 2d 265, 268-69 (La. 1977), such liability does not affect
our decision on what constitutes an "occurrence" or the number of occurrences suffered by each child.
9
that the same causes may have operated upon several
properties at the same time resulting in varying degrees
of damage, it cannot be regarded as one occurrence, but
the damage to each plaintiff is a separate occurrence.
Id. at 915-16. Following Lombard, "the damage to each [child] is
a separate occurrence." See also
Interstate, 747 F. Supp. at 624
("Each time this negligent supervision presented Father Laughlin
with the opportunity to molest a different child, the Archdiocese
was exposed to new liability," which constitutes an "occurrence"
under the policy language.); Murice Pincoffs Co. v. St. Paul Fire
& Marine Ins. Co., 447 F.2d 204, 206 (5th Cir. 1971) (holding
that the liability creating event constitutes an "occurrence").
b. The Parents' Claims
Interstate argues that the injuries suffered by the
children's parents are separate "occurrences" under the policies.
In its brief, Interstate launches a flotilla of Louisiana cases
showing that the parents have a direct cause of action against
the church for their injuries, but Interstate misses the mark.
Whether the parents' claims are direct under Louisiana law is not
relevant. The issue is whether, under the policy language, the
parents' injuries are derivative of an "occurrence." If the
children had not been molested, the parents would have gone
unharmed. Thus, the parents' injuries do not amount to separate
"occurrences" under the policies. See Crabtree v. State Farm Ins.
Co., 632 So. 2d 736, 738 (La. 1994) (finding that while the
wife's claim for mental anguish constituted "bodily injury"
10
separate from that suffered by her husband, entitling her to a
separate "per person" limit of coverage, her claim was
nevertheless subject to the "per accident" limit in the policy);
Lantier v. Aetna Casualty & Sur. Co., 614 So. 2d 1346, 1357 (La.
Ct. App. 1993) (concluding that spouses' wrongful death suits
were derivative of a single "occurrence"); Geico v. Fetisoff,
958
F.2d 1137, 1143 (D.C. Cir. 1992) (holding that while a spouse may
have a legally independent claim for loss of consortium, it is
nevertheless derivative of the "occurrence" under the policy
language).
2. The Number of "Occurrences" Per Child
While Lombard instructs that the molestation of each child
is a separate occurrence, it does not answer the question of how
many "occurrences" each child suffered, because the issue of
multiple occurrences during successive policy terms never arose.
The court's opinion in Davis v. Poelman, 319 So. 2d 351 (La.
1975) is equally unhelpful because it dealt with a single injury
resulting in continuing damage over a period of time. It did not
address a situation where an individual was repeatedly injured
during multiple policy terms.
The most applicable line of Louisiana cases dealing with
multiple injuries during successive years are the asbestosis
cases.7 See e.g., Cole v. Celotex Corp., 599 So. 2d 1058 (La.
7
The district court refused to follow the asbestos cases because under these stipulated facts, the
time of injury is certain. True, the courts dealing with the asbestos cases wrestled with the issue of when bodily
injury occurred: was the employee injured when he inhaled asbestos fibers (the exposure rule), or was the employee
11
1992); Houston v. Avondale Shipyards, Inc., 506 So. 2d 149 (La.
Ct. App.), writ denied,
512 So. 2d 460 (La. 1987); Ducre v. Mine
Safety Appliances Co.,
645 F. Supp. 708 (E.D. La. 1986) (applying
Louisiana law), approved,
833 F.2d 588 (5th Cir. 1987); Porter v.
American Optical Corp.,
641 F.2d 1128 (5th Cir.) (applying
Louisiana law), cert. denied,
454 U.S. 1109 (1981). In Cole, the
most recent Louisiana Supreme Court decision in this area, the
court answered the question of how to determine the number of
occurrences when the victim is repeatedly injured during multiple
policy years. Adopting the exposure rule, the court concluded
that the inhalation of asbestos fibers causes bodily injury as
defined in the "occurrence" policies. The court held that an
employee suffered bodily injury from an occurrence when the
employee inhaled asbestos fibers during a policy year and all
subsequent inhalation during that year arose out of the same
occurrence. When the employee inhaled asbestos during the next
policy year, again, the employee suffered bodily injury from an
occurrence. Thus, each employee suffered injury from an
occurrence during each year in which he inhaled asbestos.
Cole,
599 So. 2d at 1075-80.
We believe the Louisiana Supreme Court would apply the same
analysis to the stipulated facts of this case. When a priest
molested a child during a policy year, there was both bodily
injury and an occurrence, triggering policy coverage. All
injured once asbestosis manifested itself (the manifestation rule)? But the court overlooked the similarity, based
upon this record, concerning the indivisibility of the injury. The asbestos cases provide significant direction
regarding the number of occurrences when a victim suffers repeated injuries during multiple policy years.
12
further molestations of that child during the policy period arose
out of the same occurrence. When the priest molested the same
child during the succeeding policy year, again there was both
bodily injury and an occurrence. Thus, each child suffered an
"occurrence" in each policy period in which he was molested. See
Diocese of Winona v. Interstate Fire & Casualty Co., 841 F. Supp.
894, 898-99 (D. Minn. 1992) (accepting that the church's
negligent supervision of a priest can constitute an occurrence
during each policy period in which a child was molested);
Cole,
599 So. 2d at 1075-80 (holding that policy coverage is triggered
in each year that the plaintiff inhaled asbestos);
Houston, 506
So. 2d at 150 ("It is reasonable to conclude that each year
during which plaintiff was exposed, he suffered additional injury
for which there may be liability which triggers [the insurer's]
risk exposure under each of its policies in effect during
plaintiff's exposure."); Ducre, 645 F. Supp. at 713 ("Thus, this
Court concludes that liability under the [insurer's] insurance
policies shall be determined on a yearly basis, and that [the
insurer] is on the risk for each plaintiff asserting a claim, for
each policy period during which the plaintiff was exposed to
silica dust."); Porter, 641 F.2d at 1145; Forty-Eight
Insulations, 633 F.2d at 1226.
In the case of Preferred and Fireman's Fund, both of which
issued a three-year occurrence policy, the analysis is the same.8
8
This is an issue of first impression in Louisiana. While the courts have dealt with multi-injury,
multi-policy cases, they have never addressed a situation where some of the policies last for more than one year.
See e.g., Cole, 599 So. 2d at 1074 n.47 (involving thirty-three one-year policies);
Houston, 506 So. 2d at 150, 154
13
For each child who was molested while either of these carriers
was on the risk, coverage was triggered. All subsequent
molestations during the policy period constitute "repeated
exposure to conditions which unexpectedly ... result in personal
injury." (The "condition" is the Diocese's negligent supervision
of the priest during the policy period). Houston General argues
that the carriers issuing three-year policies should bear the
same burden as if they had issued three one-year policies, thus
allocating the loss on a per year basis. Not only does this
ignore policy language, but it is also inconsistent with the
intent of the parties. Clearly, a three-year "occurrence" policy
provides less coverage than three one-year policies, because an
occurrence could last longer than one year. While an insurance
policy should be interpreted in favor of the insured, we see no
justification for providing more insurance coverage than the
insured bargained for. Pareti v. Sentry Indem. Co., 536 So. 2d
417, 420 (La. 1988) ("[C]ourts have no authority to alter the
terms of policies under the guise of contractual interpretation
when the policy provisions are couched in unambiguous
language.").
We reject the district court's use of the first encounter
rule for the following reasons. First, and foremost, it flouts
the policy language. The insurance policies all excluded bodily
injury occurring outside of the policy period. The district
court, and Lloyd's in oral argument, failed to recognize the
(involving one-year policies, except for one six-month policy).
14
distinction between the future damages resulting from a
molestation and the subsequent injurious acts of molestation.
All the policies cover consequential damages resulting from a
molestation. However, a subsequent molestation, occurring
outside the policy period, is not a consequential damage of the
previous molestation; it is a new injury, with its own resulting
damages. Second, under these facts, the first encounter rule
would prevent insurance companies from limiting their coverage to
damages emanating from molestations taking place during their
policy period. And third, the first encounter rule is an
inequitable administrative rule. The first encounter rule would
deny coverage to a child who was molested a day before the
Diocese procured insurance coverage, even though separate
molestations continued through the policy year and beyond.
By allocating the loss according to the language of the
insurance policies, we avoid the shortcomings of the reductive
first encounter rule. Each carrier is responsible, up to its
occurrence limits, for all damages emanating from molestations
that occur during the insurer's policy period. All molestations
occurring outside a carrier's policy are covered by the insurer
on the risk at the time of the molestation. This approach
maximizes coverage for the insured and allocates the loss
according to the policy language.
If the number of molestations were known and the damages
from each molestation proved, we could allocate the loss
according to the actual injury suffered by each child during each
15
policy period. It may be that a child's psychological injury
wrought by prolonged molestations during Preferred's three years
of coverage dwarfs the injury emanating from later molestations
during the time the Diocese was self-insured. If that were the
case, Preferred would bear a significantly larger amount of the
loss than would the Diocese, Lloyd's and Interstate.
Unfortunately, there is no measure of the amount of damage caused
by the molestations during any given policy period. This leaves
us with only one avenue under the policies' language, which is to
allocate the loss based upon the policy periods. Thus, the loss
is apportioned according to the percentage of the time or period
of each child's molestation occurring during each carrier's
policy period.
B. Diocese v. Gallagher & Diocese v. Bassett
1. Diocese v. Gallagher
In Gallagher's self-insurance proposal, it stated that the
Diocese would be "fully insured" for all losses above the loss
fund. Gallagher, however, failed to mention that once Lloyd's
reached its excess aggregate limit of $450,000, the Diocese would
again be obligated to make payments toward the occurrence claims
before Interstate's excess policy kicked in.9 The Diocese,
stunned by this gap in coverage, filed suit against Gallagher.
While the Diocese filed within the ten-year prescriptive period
for a contractual claim, it missed the one-year period for a
9
Again, the amount of the Diocese's exposure after the exhaustion of Lloyd's excess aggregate
policy is unclear. The district court can resolve this issue on remand.
16
delictual claim. Thus, the Diocese's suit against Gallagher will
rise or fall on the nature of its claim.
An insured's claim against its insurance agent is
contractual only when the agent expressly warrants a specific
result; otherwise, it is delictual. Roger v. Dufrene, 613 So. 2d
947, 949 (La. 1993). In Roger, the insured, Crewboats, Inc.,
told its agent "to provide full coverage for Crewboats, Inc.
under all circumstances."
Id. at 950. But when a Crewboats'
employee, using his own vehicle for business purposes, injured
another motorist in a collision, Crewboats found a gaping hole in
its "full coverage ... under all circumstances." To its chagrin,
Crewboats discovered that it was on the hook for the motorist's
claim because its automobile policy did not include an
endorsement covering employee-owned vehicles used for business
purposes. In an attempt to lessen the sting, Crewboats filed a
third-party claim against its agent, but because the prescriptive
period for a delictual claim had passed, it was forced to argue
that its claim was contractual. On appeal, the Louisiana Supreme
Court dismissed Crewboats' third-party claim, holding that the
claim was delictual because the insurance agent did not
specifically warrant that insurance coverage for employee-owned
vehicles would be obtained.
Id.
The Diocese argues that Gallagher warranted a specific
result when it told the Diocese: "If the [Loss] Fund is
exhausted, the Diocese[] becomes fully insured." Following
Roger's lead, the issue is whether Gallagher specifically
17
warranted the amount of the Diocese's coverage, and we conclude
that it did. Indeed, we find it difficult to see how Gallagher
could have been more specific. The Diocese's claim is
contractual because Gallagher specifically stated that the loss
fund capped the Diocese's potential yearly exposure, which it
certainly did not.
2. Diocese v. Bassett
The Diocese alleges that Bassett, the administrator of the
self-insurance plan, breached its obligation to properly
administer the plan by refusing to contribute money from the loss
fund toward the settlement of molestation claims arising before
July 1981, when the self-insurance program began. The Diocese
has offered no summary judgment evidence supporting any breach of
duty. Bassett refused to allocate loss fund monies toward
molestation claims arising before 1981 because those claims were
not covered by the insurance policies it was administering.
C. Pacific v. Louisiana Companies
Pacific, an excess carrier, sued its insurance agent,
Louisiana Companies, alleging that the agent failed to inform
Pacific that Preferred's policy (the underlying primary insurance
policy) was a three-year policy instead of a one-year policy.
Because of the alleged omission, Pacific believed Preferred's
coverage to be $500,000 per year, instead of $500,000 per
occurrence for three years. Based upon our analysis above,
18
Preferred's coverage is $500,000 per occurrence per policy
period. Thus, the court erred when it granted Louisiana
Companies' motion for summary judgment.
D. Interest
The district court awarded interest, but failed to state
when it should begin to run. Some parties argue that only post-
judgment interest should be awarded, but because we reverse and
remand for reallocation of the loss, there is no post-judgment
interest. The only other contention on interest charge is
Interstate's argument that Pacific should be responsible for
prejudgment interest to the extent that it failed to fully
participate in the settlement of the molestation claims, and we
agree. See Trustees of the Univ. of Pa. v. Lexington Ins. Co.,
815 F.2d 890, 908-09 (3d Cir. 1987); Mini Togs Products, Inc. v.
Wallace,
513 So. 2d 867, 872-75 (La. Ct. App.), writ denied,
515
So. 2d 447 (La. 1987).
19
III. Conclusion
When a child was first molested during a policy period,
there was an occurrence triggering coverage. All subsequent
molestations of that child during the policy period, as well as
the resulting injury to the child's parents, arose out of that
same occurrence. Damages are attributed equally to the
occurrence of molestations within the respective policy periods,
and the loss is allocated according to the percentage of the time
or period of each child's molestation occurring during each
insurer's policy period.
We AFFIRM the court's judgment in favor of Bassett; the
judgment is otherwise REVERSED. We REMAND the case to the
district court for further proceedings consistent with this
opinion.
AFFIRMED in Part; REVERSED in Part and REMANDED.
20
