A $2.9 Million Verdict and No Insurance: What World Harvest Church Teaches Injury Victims

Published June 21, 2016 · Ohio Supreme Court

A two-and-a-half-year-old boy was dropped off at a church-run daycare in Columbus one January morning. When his father picked him up that evening, the child was anxious and clinging, and in the restroom on the way out the father saw fresh cuts, welts and red marks across his son's back, buttocks and thighs. The marks were linear, consistent with a ruler. The boy said the afternoon teacher had "spanked" him. The emergency physicians found the injuries consistent with physical abuse. Nine days later, the church's headmaster wrote the parents a letter telling them not to come back or they would be charged with trespassing.

The family sued the church and the worker. A Franklin County jury returned a verdict that, with punitive damages and attorney fees, produced a judgment of $2,871,431.87, nearly all of it against the church. The church then turned to its insurer, Grange, to pay. On May 12, 2016, in World Harvest Church v. Grange Mut. Cas. Co., 148 Ohio St.3d 11, 2016-Ohio-2913, a unanimous Supreme Court of Ohio held that Grange owed nothing: not the compensatory damages, not the attorney fees, not the post-judgment interest.

The family had settled with the church for $3,101,147 before this coverage fight was decided, so this is not a story about a family left with nothing. But it is a warning about how a verdict can turn out to be uncollectible, and about the work that has to happen before trial to make sure it is not.

The exclusion that ended coverage

The church's commercial general liability policy had an endorsement titled "Abuse or Molestation Exclusion." It excluded bodily injury "arising out of" the actual or threatened abuse or molestation "by anyone of any person while in the care, custody or control of any insured," and it separately excluded injury arising from the insured's negligent hiring, supervision, retention or reporting of the abuser.

The church's main argument was that the exclusion did not mention vicarious liability. The jury had found the church liable in part simply because its employee committed the abuse within the scope of his job, not because the church itself intended anything. The church argued that this kind of secondary liability was not "clearly" excluded, and that ambiguities in exclusions are construed against the insurer.

What the Court held

Chief Justice O'Connor's opinion applied the ordinary rules: read the policy as a whole, give words their plain meaning, and construe exclusions narrowly and ambiguity against the insurer. Even under those rules, the exclusion was unambiguous. It bars coverage for any bodily injury arising out of abuse "by anyone" of a person in the insured's care. It does not distinguish between direct and vicarious liability, and the Court refused to insert a distinction the policy does not contain. As the opinion put it, "there is no coverage for any injury arising from abuse or molestation."

Because no claim in the underlying case was covered, the Court also reversed the lower courts on the attorney fees ($693,861.87) and the post-judgment interest ($229,716). The policy's promise to pay interest on "any judgment" applied only to suits for injuries "to which this insurance applies," and this was not one.

The lesson is not that the Court was wrong. The exclusion said what it said, and the church, not the family, chose the policy. The lesson is about what injured people and their lawyers must do with that reality.

Lesson one: a verdict is only worth what can be collected

Juries decide what a case is worth. Insurance policies and defendants' balance sheets decide what gets paid. Those are different numbers, and the gap between them can be enormous.

In every serious case, one of the first tasks is identifying every source of recovery: the defendant's primary liability policy, any umbrella or excess policy, policies of other responsible parties (a property owner, a franchisor, a staffing agency, a parent company), and the defendant's own assets. Then every policy has to be read for exclusions. Abuse-and-molestation exclusions are standard in policies issued to daycares, schools, churches, youth programs and care facilities. Assault-and-battery exclusions are common for bars and apartment complexes. Liquor-liability exclusions, as I noted last month, can leave a drunk-driving victim with no bar coverage at all. And the business-auto coverage trap I described in the Sauer v. Crews case left a wrongful-death judgment with no policy behind it.

Lesson two: the theory of liability matters to coverage

The jury in the underlying case found the church liable on several theories, including negligent supervision. The exclusion here swept in negligent supervision expressly. But that is not always so. In some policies, a negligence claim against the institution (negligent hiring, negligent security, failure to follow its own safety policies) is covered even when the employee's intentional act is not, and Ohio courts have held that an insurer may owe a defense where the facts could support a covered claim, as I discussed in the Granger decision last fall. How a case is pleaded and tried can determine whether coverage exists. That analysis has to happen at the beginning, not after the verdict.

Lesson three: the defendant's own assets are part of the case

When coverage is excluded, the defendant pays or no one does. Here, the church was an institution with resources, and the family's settlement reflected that. Many defendants are not. Evaluating a defendant's ability to pay, and pursuing punitive damages where the conduct warrants them (which, as I explained in the Whetstone decision in April, can survive even the defendant's death), is part of an honest assessment of what the case can actually deliver.

For families of children and vulnerable adults

Abuse in daycares, schools, camps, group homes and nursing facilities is, sadly, a recurring category of case, and I have written about the options families have when a nursing-home resident is neglected. Institutions in these fields know their policies contain abuse exclusions. Some carry separate abuse-and-molestation coverage; many do not. Finding out which, and identifying every other responsible party and policy, is the difference between a judgment that changes a family's life and one that hangs on a wall.

What this means for you

If your child or a vulnerable family member was harmed by someone in a position of trust, the civil case is about accountability, but it is also about recovery, and recovery requires coverage or assets. Our personal injury and premises liability practices start every institutional-abuse case by demanding the policies, reading the exclusions and mapping every path to payment before a lawsuit is filed.