Coverage litigation is an infrequent subject before the D.C. Circuit. So it was not surprising that, even with his twelve years on this court, I could locate only one opinion authored by SCOTUS nominee, Judge Brett Kavanaugh, on the subject. Of course, since coverage cases do not get to the U.S. high court, looking into how Judge Kavanaugh has addressed such issues could be considered an impractical use of one’s time. Like learning how to ice fish in Arizona. But I was curious.

In the event that “number of claims,” for purposes of limits, is a litmus test issue for any Senators who will be voting on Judge Kavanaugh’s nomination, they will no doubt be scrutinizing his 2008 opinion in Essex Ins. Co. v. Doe, 511 F.3d 198 (D.C. Cir. 2008). And there’s a lot to examine there. Despite it being a brief opinion, Judge Kavanaugh used five distinct rationales to find in favor of the policyholder. I guess when you write just one opinion in a coverage case in twelve years you need to make the most of it.

Doe involved the extent of coverage for Associates for Renewal in Education, Inc. (A.R.E.), a children’s residential facility in Washington, D.C. John Doe, age 7, a resident, was sexually assaulted on four occasions, by four different older boys. Doe and A.R.E. ultimately settled a lawsuit. A.R.E. assigned to Doe its rights under a liability policy issued by Essex Insurance Company.

At issue before the D.C. Circuit was the number of claims. The policy contained a sublimit endorsement providing coverage for sexual abuse claims alleging negligent supervision. The coverage provided an “each claim limit” of $100,000 and an “aggregate limit” of $300,000 per year. The policy stated: “The sublimit of liability shown in this endorsement is the most [Essex] will pay for all damages including investigation and defense because of injury arising out of any one claim for sexual abuse and/or misconduct.” The policy defined the term “occurrence” to mean “an accident” and it was not disputed that there were four occurrences - one for each time Doe was assaulted. However, the policy did not define the term “claim” for purposes of the $100,000 “each claim” limit. Thus, the issue was whether there was one claim or four claims, when a sexual abuse victim makes a single demand for compensation for four occurrences.

Essex argued that Doe had only one “claim,” for the four occurrences, because he submitted only one demand for compensation. Doe argued that he had four “claims” because he was sexually assaulted on four different occasions.

Judge Kavanaugh found in favor of Doe, i.e., four claims (so up to the $300,000 aggregate was owed, less defense costs, as he also held that the endorsement was eroding). In addition to looking at some limited case law that favored Doe, Kavanaugh noted that the policy “tethers the term ‘claim’ to the term ‘occurrence’ and appears to establish a one-to-one relationship between (i) an occurrence causing injury to a third party and (ii) that third party’s ensuing claim against A.R.E.”

Kavanaugh needed little effort to reject Essex’s argument that the term “claim” means “the actual demand for money by the third-party claimant against A.R.E., regardless of how many occurrences the claimant alleges in the demand. But even apart from the contract’s linkage of claims and occurrences,” Kavanaugh stated, “Essex’s interpretation is illogical. First of all, it seems highly unlikely that a rational insurer or rational insured party would allow insurance liability coverage -- in a situation where a single third party suffers injuries caused by multiple occurrences -- to vary dramatically based solely on whether the injured third party happens to make (i) one summary demand against the insured A.R.E. or (ii) multiple demands against the insured A.R.E. Moreover, contrary to the logical implication of Essex’s argument, in a case with one sexual assault occurrence and one victim, A.R.E. obviously could not seek coverage from Essex for multiple claims simply because the victim sent multiple demand letters to A.R.E. For those reasons, we are not persuaded by Essex’s argument that the number of claims depends on the number of demand letters sent by the victim rather than on the number of occurrences.”

Kavanaugh added more reasons to find for Doe. Essex is “well aware how to limit [its] coverage for sexual abuse claims made against an insured. It could have used a $100,000 “each-injured-party limit” for coverage of sexual abuse claims.” Lastly, while Kavanaugh found the policy to be unambiguous, even if were ambiguous, D.C. law requires that it be construed against the insurer.

In one brief decision, Judge Kavanaugh used five rationales to find in favor of the policyholder – case law; policy language; reasonable expectations (without using that term); insurer being more sophisticated than the insured; and contra proferentem. Based on this, it seems he would give a thorough examination to any coverage case that came before the Supreme Court, which, of course, has less chance of happening than going ice fishing in Arizona.