Cosby's Coverage Dispute Has Ramifications for Many Policyholders

Over the last few years, numerous individuals have made claims of sexual misconduct against comedian Bill Cosby. These claims have led to disputes about the obligation of Cosby’s insurers to pay for his defense attorneys and any eventual settlements or judgments. A recent decision by a Massachusetts federal court addressing these disputes provides important guidance about standard contract language found in different kinds of policies issued to all kinds of businesses and individuals. The specific provision at issue in AIG Property Casualty v. Green, No. 15-30111-MGM (D. Mass. Nov. 8, 2016), barred insurance coverage for liability “arising out of” sexual misconduct. But, the same “arising out of” policy language at issue appears in provisions relating to all manner of subjects, from cyberattacks to alleged breaches of contract. It is important for counsel and others to be aware of this decision because it has ramifications for the scope of coverage under a variety of policies.

Summary of Decision

Shocking accounts of disgraced comedian Cosby’s purported sexual misconduct toward numerous accusers have been hard to miss in the news. Cosby has publicly denied the accusations. Enflamed by these denials, several of the accusers brought lawsuits claiming that Cosby defamed them by publicly disputing their stories. Cosby has liability insurance coverage under a homeowners policy and a personal excess liability policy, which were both issued by AIG Property Casualty Co. AIG filed suit and sought a court ruling that it did not owe any coverage to Cosby in connection with the defamation lawsuits. The AIG policies do not cover defense costs or liability for personal injury “arising out of any actual, alleged, or threatened” sexual molestation, misconduct, or related acts. AIG argued that Cosby’s public statements that formed the basis of the claims in the defamation lawsuits “arose out of” his alleged sexual misconduct and, therefore, there was no coverage. Disputing this interpretation, Cosby advanced a narrower reading of the language that required direct causation between the sexual misconduct and the injuries resulting from the alleged defamation.