Liability policies often have what I call bad-conduct exclusions.  Coverage is precluded for sexual abuse, assault and battery, criminal acts, etc.  Often, when you look at a complaint, it seems clear as can be that the particular exclusion applies.

For example, when a complaint alleges that the insured beat the stuffing out of the plaintiff in a bar fight, you’ll likely come away with the conclusion that an assault and battery exclusion applies to preclude a defense.

But duty to defend determinations must be undertaken with more nuance than simply reaching a conclusion as to the nature/crux of the case.  With the duty to defend generally being broad, with a defense owed if there is any potential for coverage, the policyholder will often pull out a microscope, put the complaint under it and look for any allegation that could possible fall outside of the exclusion.  Clearly that is not the intent of the exclusion, but the duty to defend standard invites such exercise.

But policyholders often have a difficult time with this argument given that the lead-in language to the policy’s exclusions is broad.  For example, the policy exclusions are often – or should be -- prefaced by language along these lines: “The insurer shall have no obligation whatsoever under this policy to pay damages or expense for, arising out of, caused by, resulting from, in consequence of, in connection with or in any way involving any of the following:….”

Courts often use this broad lead-in language to preclude an allegation, that may technically fall outside of an exclusion, from triggering a defense.  As the court sees it, the argued allegation is simply too interconnected with the excluded conduct to be a stand-alone basis for a defense.

This was the issue in Insoft v. Steadfast Ins. Co., 24-1817 (M.D. Fla. Mar. 17, 2025) and the policy language served to preclude a defense – but not because the lead-in language to the exclusions was that comprehensive.

At issue was coverage for a tour operator, that organized an overnight school trip, where a minor child was allegedly sexually abused by other classmates.  Suit was filed and coverage litigation resulted. 

The insurer argued that coverage was precluded by the following exclusion:

Any Claim or Suit based upon or arising, in whole or in part, out of any:

1. Alleged, actual or threatened Sexual Abuse or Sexual Harassment by anyone of any person;

2. The negligent employment, investigation, or supervision of any person who causes or commits or is alleged to have caused or committed Sexual Abuse or Sexual Harassment....

The parents of the minor, following a settlement and assignment of policy rights, made the argument that the underlying complaint triggered a defense because it alleged, in addition to sexual abuse, bullying, mental anguish, embarrassment, physical abuse, etc.

But the court was not persuaded that these allegations took the complaint outside of the Sexual Abuse exclusion.  The reason – the exclusion’s lead-in language made the exclusion applicable “to any claim or suit based upon or arising, in whole or in part, out of any…:

The court concluded that, by including “or in part” in the exclusion, the allegations of bullying, physical abuse, etc. did not extricate the complaint from the Sexual Abuse exclusion:

“Here, Steadfast’s exclusionary language is broader than that contemplated in Guideone. Unlike Guideone’s focus on discrete acts and injuries of either a sexual or non-sexual nature, Steadfast’s exclusion applies to ‘[a]ny claim or suit . . . arising, in whole or in part, out of any alleged, actual or threatened sexual abuse[.]’ Plaintiffs’ lawsuit against Sonshine plainly arose at least in part out of alleged sexual abuse. It is therefore not covered, and the Court may not ‘rewrite contracts, add meaning that is not present, or otherwise reach results contrary to the intentions of the parties.’ (citation omitted). Steadfast had no duty to defend[.]”