(Article from Insurance Law Alert, March 2026)
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Holding
The Georgia Court of Appeals vacated a $354 million judgment against insurers whose policies were issued after the alleged abuse occurred, holding that coverage did not apply because the alleged injuries arose from abuse and negligent supervision that predated the insurers’ policies, even though the plaintiffs alleged that the resulting mental anguish continued for years afterward. Phila. Indem. Ins. Co. v. Eubanks, Nos. A25A1664, A25A1665, A25A1666, A25A1668, A25A1669, 2026 Ga. App. LEXIS 140 (Ga. Ct. App. Mar. 6, 2026).
Background
Between 1974 and 1994, a teacher at a Georgia school sexually abused at least 20 boys. In 2017, the school sent a letter to alumni that it had been made aware of one instance of abuse. Following the letter, several former students filed lawsuits against the school and the abuser. The plaintiffs ultimately settled their claims against the school for $351 million, of which the school was to contribute $6 million, and the trial court entered a consent judgment. The school’s insurers issued policies primarily in effect between 1996 and 2000 and refused to defend and indemnify the school. The school assigned its insurance rights to the plaintiffs, who then sued the insurers for breach of contract, direct recovery of insurance benefits, recovery as judgment creditors, and attorneys’ fees.
The trial court granted summary judgment to the plaintiffs, concluding that sexual abuse constituted “bodily injury” under the policies and that coverage was triggered during all years when the injury manifested, rather than only when the abuse occurred. Although the acts of abuse pre-dated the policies, the court held that the victim’s ongoing mental anguish was a covered injury that manifested during the policy periods. The trial court entered a $345 million judgment against the insurers, which the insurers appealed.
Decision
The Georgia Court of Appeals reversed the judgment.
The court examined the relevant policies, several of which contained a “sexual or physical abuse or molestation vicarious liability” (SPAM) endorsement providing coverage for damages due to bodily injury and mental anguish resulting from “abusive conduct” for which the insured could be liable “by reason of” negligent employment, selection, supervision and retention. The endorsement required that the “bodily injury occur[] during the policy period.” Because the policies did not define “occur,” the court relied on a dictionary definition, explaining that the term “occur” means to “appear,” “happen,” or “to come into existence.” Applying that definition, the court reasoned that “[a]n injury could only appear, happen, or come into existence at a single point in time. Therefore, the fact that the mental anguish continued in subsequent years does not mean the injury ‘comes into existence’ in each subsequent policy period.” Instead, the relevant occurrence took place when the abuse happened and when the school allegedly negligently hired and supervised the perpetrator, both of which occurred before the policies took effect.
The court further explained that its conclusion was reinforced by other policy provisions. For example, the policies defined “abusive conduct” in relevant part as “each, every, and all actual, threatened, or alleged acts of physical abuse, sexual abuse, sexual molestation or sexual misconduct performed by one person or two or more people acting together” and are “deemed to take place . . . at the time of the first such act or encounter.” Applying this language, the court concluded that the plaintiffs’ alleged mental anguish stemming from the physical abuse and the school’s failure to supervise was deemed to occur when the abuse occurred in the 1970s and 1980s.
The court also rejected the plaintiffs’ argument that the school’s 2017 alumni letter caused new mental anguish that constituted a separate “bodily injury.” The court concluded that any emotional distress arising from the letter did not stem from negligent hiring or supervision during the policy periods and therefore did not fall within the policies’ coverage.
Additionally, the court concluded that the plaintiffs’ claims under certain umbrella policies failed for the reasons discussed above with respect to the primary policies and on the basis that the underlying abuse claims did not allege an “occurrence,” which was defined as an “accident.” The court concluded that the plaintiffs’ allegations that the school knew of the abuse, failed to act, and concealed the conduct did not allege accidental conduct as would be required for coverage.
Comments
On the issue of trigger, the Georgia Court of Appeals rejected any analogy of the abuse claims to asbestos-related claims for which some courts have applied a “continuous trigger” theory and found coverage across multiple policy periods. The court noted that, “to the extent the plaintiffs’ argument could be to raise a ‘continuous trigger’ theory, we have never applied it to sexual abuse and the resulting mental harm.” The court further emphasized that, regardless, “the language of the policy controls and confirms that coverage is not based on a continuous trigger theory.” The Georgia decision follows on a January 2026 decision from a federal court in Washington that also declined to apply a continuous trigger theory to sex abuse claims. See C.C. v. United States Fid. & Guar. Co., No. 3:24-cv-05535-TMC, 2026 U.S. Dist. LEXIS 12865 (W.D. Wash. Jan. 23, 2026).
The Court’s holding on “occurrence” signifies that even if an underlying action is styled in negligence, if the factual allegations do not allege accidental conduct, insurers can prevail in showing no duty to defend or indemnify under occurrence-based insurance policies.