In this podcast, Beth Levene, Head of Claims, discusses the history and implications of recent legislative reviver activity:
- What it a ‘reviver’ statute, and why is it in the news?
- How will it impact insurers
- Some practical pointers for every insurer to consider
Can’t listen now? Read the transcript
The Background Behind ‘Reviver’ Legislation
One of the bedrock principles of jurisprudence is the statute of limitations – that you bring your claim within a defined timeframe, or you become time barred from making a claim. ‘Reviver’ statutes open up that statute of limitation, they revive the rights to make a claim that would have otherwise expired.
The pressure to revive these rights stems from the sexual abuse and molestation claims. Oftentimes with these situations, there is not an immediate recognition of the harm that has been done. Sometimes that harm manifests itself much later in life. By then the statute of limitations has restricted the ability to make a claim. Since every US state has a statute of limitations for civil remedy, without ‘reviver’, there would be no right to claim.
An accusation was made against a California priest in the early 2000s. When the victims filed a claim, and sought evidence to support it, they received some inconclusive documents. An attorney received an anonymous tip-off “you need to ask for the bishop C-files, they’re secret files kept in a locked file cabinet, only accessible by the bishop”. The subpoena and subsequent search revealed hundreds of pages documenting all the misconduct by priests (alcohol, drugs, relationships with congregants), including complaints about the particular priest in question.
As a result of the public outcry, the state legislature opened a one-year ‘reviver window’. That led to approximately one thousand claims that would otherwise have been time barred. The settlement figure was just over $1.1 billion dollars.
Subsequent publicity around US Gymnastics, Penn State and the Boy Scouts of America has led to similar public pressure in other states.
Recent Legislative Developments
As of today, eight states have recently enacted reviver windows, for different periods of times. Some states won’t go back and open the window, but rather expand the statute of limitations, which means a claim that can be brought today can also be brought in 10, 15 or 55 years, whatever the particular state statute says.
That changes the insurance company risk. We and our customers have assumed that the statute of limitations has expired and that no further claims will be made on policies we wrote in the past. How does an insurer defend a 40 year old claim? How do you gather documents and witnesses? Reviver statutes raise constitutional questions and state-by-state challenges are currently underway.
How much? The impact of inflation
California’s one year window resulted in 1,000 claims, settled at just over $1million per claim. That figure would be considerably higher today.
As each state enacts its own reviver statute, insurers must assess where their risks are, who their insureds were, and how many potential claims they might expect. The published data from the Boy Scouts in Oregon alone reported almost 8,000 offenders (often not one-time offenders).
Insurers do not want to cover criminal conduct. The sexual abuse/molestation civil claims rely on standard tortious causes of action: negligent hiring, negligent retention, improper employee/volunteer supervision. Starting in the late 1980s, insurers developed policy exclusions for risks involving children. Most current policies have some limitations and exclusions but older policies have no such limits, and sometimes insurers sold specific supplements. The intent is never to cover the offender, but the hiring entity may not have known, so they expect coverage, depending on the facts and circumstances. If an employer never received notice that someone was an offender, and had no reasonable basis to think that they were, that is different from an organization that knew they were an offender and moved them from location to location.
Get Ready – (Re)insurer Checklist
If you drive the highways and byways of America, you see all the plaintiff lawyer billboards, looking for victims to sign up and bring claims (whether ‘reviver’ or current). If a reviver claim is constitutional, and a window opens, how do you determine the number of occurrences:
- First encounter – however long a person was abused by a single offender, a single occurrence is allocated to the first policy, when the victim first encountered that offender
- Pro-rata – allocates one occurrence to each policy year that the abuse happened (per abuser). One claimant, abused over three years, would have three occurrences, with any settlement split evenly between the three policies)
- Per offender per period – one occurrence per offender in each policy year. That means all victim claims against that one offender in that policy year.
Any insurer who was around 40 years ago writing third party liability programs for any organization that involved children and non-parental access to those children, should be reviewing their files and checking their policy wordings, on a state-by-state basis.
- Do you have reviver legislation in that state?
- What are its terms? How long is the open window period?
- Has the statute of limitations been expanded?
- What policies did you write? (GL, umbrella, access, even possibly homeowner’s) These policies are going to have exposure. It’s a matter of where, when and how much.
- To whom did you write them? Try to identify the particular defendants.
- What is the policy language?
- Do you have an exclusion? Is the exclusion enforceable? Is it enforceable against the offender, or the institution, or the organization, the named insured?
- Estimate what do you think your exposure is
- How does that roll through your policies and up through their reinsurance?
- How are you going to determine the occurrence trigger?
- How will you aggregate your exposure?
(Pre-1985 GL policies did not have a general aggregate, so each occurrence (if you wrote a policy with $100,000 each offender or first encounter) could be unlimited. With 300 children, you have 300 occurrences at $100,000 each. These could be big numbers)