Hunton Insurance Recovery Blog

There was nothing ambiguous in former U.S. Supreme Court Justice David Souter’s ruling in AIG Property Cas. Co. v. Cosby, No. 17-1505 (1st Cir. June 7, 2018), where, sitting by designation, Justice Souter ruled that AIG Property and Casualty Co. (“AIG”) must defend Bill Cosby in suits brought by eight women alleging that Cosby defamed them after they accused him of sexual misconduct.  Cosby held two insurance policies issued by AIG:  a homeowner’s policy and a personal excess liability policy (the “umbrella policy"”).  Under each policy, AIG has a duty to “pay damages [Cosby] is legally obligated to pay [due to] personal injury or property damage caused by an occurrence covered[] by this policy anywhere in the world . . . .”  Both policies define “personal injury” to include “[d]efamation” and require AIG to pay the cost of defending against suits seeking covered damages.  Both policies also contain so-called “sexual misconduct” exclusions.  The homeowner’s policy’s exclusion bars coverage for liability or defense costs “arising out of any actual, alleged[,] or threatened . . . [s]exual molestation, misconduct or harassment[,] . . . or . . . [s]exual, physical or mental abuse.”  The umbrella policy contained similar wording.  However, that policy also contained another “sexual misconduct” exclusion under the “Limited Charitable Board Directors and Trustees Liability” coverage part.  That exclusion applied more broadly to claims for damages “[a]rising out of, or in any way involving, directly or indirectly, any alleged sexual misconduct” (emphasis added).

As the New York Times recently reported, Bill Cosby joins the ranks of celebrity homeowners who have tapped defense coverage under their ordinary homeowner’s insurance. Others who paved the way include Roger Clemens, O.J. Simpson, and Bill Clinton. Each had “enhanced personal injury clauses” buried in the fine print of their policies that can provide a defense against lawsuits.¹ Bill Cosby has such a policy, and a federal court in California recently denied American International Group’s (“A.I.G.”) request to allow A.I.G. to immediately appeal an earlier decision which held that a “sexual misconduct” exclusion in Mr. Cosby’s homeowner’s policy did not limit this coverage and that A.I.G., therefore, owed a duty to defend Mr. Cosby against a lawsuit brought in California state court by Janice Dickinson (“Dickinson action”).² In denying A.I.G.’s request for an interim appeal, the court determined that it would be more efficient for the Ninth Circuit to “analyze all exclusions of the policy at the same time.”³