Insurers can’t use sexual misconduct exception in Cosby defamation suits

A California court has ruled that Bill Cosby’s insurer cannot rely on a homeowner policy exclusion barring coverage for claims “arising out of” alleged sexual misconduct. Cosby was sued for defamation because he called the plaintiffs liars when they publicly alleged he had raped them.

The court found the use of the phrase “arising out of” in the sexual misconduct exclusion only excluded claims relating to actual sexual misconduct or proximately caused by sexual misconduct and did not exclude the defamation claims.

This is a narrow interpretation of the phrase “arising out of” particularly in the context of the policy which covers claims arising out of “alleged” sexual abuse. The court said the insurer should have excluded claims “in any way” involving sexual misconduct if they wanted to avoid any connected claim.

First published by: Financial Institutions Legal Snapshot