The bulk of the New York Court of Appeals’s decision in Selective Insurance Co. v. County of Rensselaer (N.Y. Feb. 11, 2016) addresses the number of deductibles that the County of Rensselaer was obligated to pay, following a settlement of a class action involving unlawful strip searches in its jail. Various policies had deductibles of $10,000 or $15,000 for all covered damages “sustained by one person or organization as the result of any one ‘occurrence.’” The settlement involved a payment of $1,000 to each of approximately 800 plaintiffs, a $5,000 payment to the named plaintiff and $442,000 in attorney’s fees for the class.

The “number of deductibles” issue was resolved by the court without breaking a sweat. It was dictated by the policy language: “The policy defines ‘occurrence’ as ‘an event, including continuous or repeated exposure to substantially the same general harmful conditions, which results in ... ‘personal injury’ ... by any person or organization and arising out of the insured’s law enforcement duties’ (emphasis added). Thus, the language of the insurance policies makes clear that it covers personal injuries to an individual person as a result of a harmful condition. The definition does not permit the grouping of multiple individuals who were harmed by the same condition, unless that group is an organization, which is clearly not the case here. The harm each experienced was as an individual, and each of the strip searches constitutes a single occurrence.”

Thus, none of the payments ($1,000 each), to any of the plaintiffs, exceeded the deductible.

The more interesting issue is the court’s treatment of the attorney’s fees vis-à-vis the deductible. Selective, seizing on the court’s decision that the injuries constituted multiple occurrences, argued that the attorney’s fees should be allocated ratably among the deductibles. By doing so, about $550 would be allocated to each of the deductibles. Translation, still none of the deductibles are met for a single plaintiff.

The court disagreed: “Equally reasonable is the County’s assertion that given that there was one defense team for all class members, the fee should be attributed only to the named plaintiff, Bruce. It is undisputed that the policies are silent as to how attorney’s fees would be allocated in class actions and therefore ambiguous on this point. Where the language of the policy at issue is ambiguous, and both parties’ interpretation of the language is reasonable, the policy language should be interpreted in favor of the insured.”

So, while the County struck out concerning the $800,000 or so settlement, it was covered for almost all of the $442,000 of the attorney's fees.

It’s an interesting decision, although I’m not sure how often this scenario – involving several aligned stars -- will repeat itself.