Insurers Have No Duty To Defend Chiropractor Against Failure To Warn of Sexual Assault Claim

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In Hanover American Insurance Co. v. Balfour, 2015 U.S. Dist. LEXIS 874 (10th Cir. Jan. 21, 2015), the U.S. Court of Appeals for the Tenth Circuit affirmed an Oklahoma federal district court’s rulings in favor of two insurers arising out of a claim against a chiropractor for negligent failure to warn her patient of the insured’s husband propensity to commit a sexual assault.  The Tenth Circuit first found that under the subject chiropractor’s malpractice policy, the underlying complaint failed to allege “professional services.”  The Tenth Circuit also found that under the businessowner’s or general liability policy, the underlying complaint failed to allege the “personal and advertising injury” offense of “humiliation.”

The underlying complaint was brought by a student of the insured’s husband and alleged that the perpetrator sexually assaulted the claimant at the insured’s office.  It specifically alleged with respect to the insured that she was aware that her husband had a history and propensity to sexually molest underage females.  However, the insured allegedly failed to warn the claimant of this, and moreover, the insured allowed her husband full access to her office.

Hanover, the businessowner’s liability insurer, initiated this declaratory judgment action.  The district court granted Hanover’s motion for summary judgment.  The district court also granted NCMIC Insurance Company’s, the professional liability insurer, motion to dismiss.

On appeal, the Tenth Circuit held that NCMIC had no duty to defend the insured under the chiropractic malpractice policy it issued because there were no allegations in the underlying complaint of conduct by the insured within the scope of a chiropractor’s “professional services.”  The court rejected the insured’s reliance on statutes and regulations regarding a chiropractor’s maintenance of a proper office.  The court also declined a broad reading of “professional services” since doing so “would transform a medical malpractice policy into a general commercial liability policy.”  Thus, even though the insured was alleged to have violated some duty to the claimant, the Tenth Circuit held that the alleged violation was not of a “professional chiropractic duty” owed by the insured to the claimant.

Additionally, the Tenth Circuit held with respect to the businessowner’s liability policy that while the claimant’s injuries potentially arose out of the insured’s business, the underlying complaint did not set forth the “personal and advertising injury” offense of “humiliation.”  In particular, the court rejected that rape or sexual assault is per se humiliation, distinguishing between the act of humiliation and the humiliating effects of conduct.  The court held that “humiliation” refers to “character and reputation tort which may have at their cores humiliating conduct”—not humiliation damages.  The Tenth Circuit indicated that “humiliation” does not arise from negligent conduct, although the court was not entirely clear why that is the case, except that the “personal and advertising injury” torts do not include the word “negligence.”

This decision at the intersection of general liability and professional liability coverage provides an important example of the gap in coverage created by certain claims.  Are you familiar with other claims that seem to fall under neither GL or PL coverages, even though it would stand to reason the claims should fall under one or the other?  Please share your feedback and comments with us.