Insurer Argues Baltimore Not Covered for Employee’s Sexual Abuse of Minors

Philadelphia Indemnity Insurance Co. is asking a federal court to declare that it does not have to indemnify Baltimore officials who have been targeted in a class action that was filed after a former city security guard took photos of minors who were undressing at a dance competition.

The insurer is arguing that it is not obligated to indemnify the city officials for any judgment in the underlying circuit court class action in part because Maryland law defines sexual abuse of a minor as an intentional criminal act that is excluded from coverage.

The insurer also argues that the security guard’s actions are not covered because they were not taken on behalf of the city.

If the insurer loses its arguments that there is no indemnity coverage, it at least wants the court to stipulate that the city’s and its liability is capped at $800,000 under local tort law.

PIIC has been providing a defense to the city pursuant to a reservation of rights.

Case Background

On January 24, 2020, four Jane Does filed a complaint in the Circuit Court for Baltimore City against the mayor and city council and others alleging negligence, intrusion upon seclusion, and intentional infliction of emotional distress. They also requested class action certification.

The Jane Does alleged that they suffered damages when a city employee, acting as a security guard at the Baltimore Convention Center, observed and filmed them while they were undressing in a dressing area during a dance competition being held at the city’s convention venue.

The employee’s actions were discovered, and he was terminated from his position and prosecuted for his actions.

At the time of the incident in 2018, the city had a commercial general liability policy that listed the Baltimore Convention Center as an insured location. The policy was issued by Philadelphia Indemnity Insurance Co. (PIIC covering the period July 1, 2017-July 1, 2018.

PIIC notes that the underlying action has offered no evidence that the employee’s actions were taken “by or on behalf of” the city. There is also no evidence that there was publication of those photos in any manner.

PIIC maintains that exclusions in the policy apply to bar coverage, including one for personal injury caused by or at the direction of the insured with the knowledge that the act would violate the rights of another. In addition, the policy also contains an exclusion for bodily injury, property damage or personal and advertising injury arising out of abuse or molestation by anyone of any person while in the care, custody or control of an insured.

According to the insurer, the policy does not provide coverage because the Jane Does have not alleged or proved bodily injury or property damage, or that the security guard’s action were by or on behalf of the city. The insurer further contends that there is no coverage because the underlying case alleges that the security guard acted intentionally in his actions that caused the alleged harm.

Finally, the insurer argues that coverage is barred because Maryland law has defined sexual abuse of a minor to include exploitation, including taking photographs or videos of a minor in states of undress and for the perpetrator’s benefit, even where there is no further use or distribution of the images. Maryland law further provides that any action of sexual abuse of a minor is inherently an intentional act excluded from coverage, according to the insurer.

The policy’s limits of insurance are $1,000,000 per occurrence/$2,000,000 in the aggregate. However, the insurer contends that under a local tort claims ordinance, the city’s potential legal liability for all damages is limited to $800,000 and thus that should be the limit of insurance if the court finds it is obligated to indemnify.

Topics Carriers Maryland