Allocation Fight Intensifies
Gencon said ARM initially handled nonsexual physical abuse claims under general liability policies and sexual abuse allegations under employment practices and sexual misconduct liability policies.
But in 2020, ARM shifted all claims to the general liability policies. For reinsurance billing purposes, ARM first allocated the initial 27 claims to three policy years involving the most severe injuries and billed reinsurers accordingly.
Later, ARM concluded that approach did not reflect the complexity and breadth of emerging claims and was inconsistent with contract language. It revised the methodology, allocating claims based on each claimant’s first year of attendance.
To ensure uniform treatment across all claims, ARM designated them as 19 occurrences — one for each year the school accepted students. If aggregated losses for any year exceeded $1 million, the excess general liability policies were triggered, Gencon said.
The captive insurer disputes the reinsurers’ argument that courts could find separate or multiple occurrences for each victim.
Lexington and Westport’s proposed approach would be “unworkable,” Gencon argued, because former students often could not identify specific dates or instances of abuse, and school records could not reliably establish attendance periods.
