November 04, 2026|Coverage Compass
By Jeanine Donohue
As insurers confront growing exposure from revived sexual abuse claims, many have turned to a familiar coverage defense: that the alleged injuries were “expected or intended” and therefore fall outside the scope of coverage. Carriers frequently argue that institutional policyholders knew of prior allegations, warning signs, or risks of misconduct and, as a result, expected the harm that later occurred.
While appealing in theory, the defense is far more limited under California law than insurers often suggest. California courts have consistently construed “expected or intended” provisions narrowly and require insurers to satisfy a demanding burden before coverage can be denied.
The Insurer Bears the Burden
Insurers sometimes contend that because “expected or intended” language appears within the definition of an “occurrence,” rather than in a separate exclusion, the policyholder bears the burden of establishing coverage. California law rejects that distinction.
In Dart Industries, Inc. v. Commercial Union Insurance Co., 28 Cal. 4th 1059 (2002), the California Supreme Court confirmed that while an insured bears the burden of proving provisions necessary to establish coverage, the insurer bears the burden of proving policy provisions that operate to limit or defeat coverage. In Armstrong World Industries, Inc. v. Aetna Casualty & Surety Co., 45 Cal. App. 4th 1 (1996), the appellate court recognized the carrier’s burden of establishing whether an injury was expected or intended by the insured. Accordingly, an insurer invoking an “expected or intended” defense must establish that the defense applies.
That burden can become particularly challenging where an insurer has already funded a defense or contributed to a settlement and later seeks reimbursement based on an alleged lack of coverage.
California Applies a Strictly Subjective Standard
The most significant obstacle facing insurers is California’s subjective standard for determining whether an injury was expected.
In Shell Oil Co. v. Winterthur Swiss Insurance Co., 12 Cal. App. 4th 715 (1993), the court rejected a “should have known” approach and held that the issue must be evaluated from the standpoint of the insured. The relevant question is not whether injury was foreseeable, but whether the insured actually believed injury was substantially certain or highly likely to occur.
That distinction is critical in sexual abuse coverage litigation. Insurers frequently point to evidence that an institution could have investigated more thoroughly, responded differently to complaints, or recognized warning signs sooner. Such evidence may support allegations of negligence, but negligence is not the same as subjective expectation.
California courts have repeatedly recognized the difference between careless conduct and proof that an insured actually expected the resulting injury.
Prior Complaints Alone May Not Establish Expectation
Insurers often argue that prior reports or complaints concerning an alleged perpetrator establish that subsequent abuse was expected. California’s subjective standard, however, requires more than evidence that prior concerns existed.
The existence of earlier complaints does not necessarily establish that an insured believed future abuse was substantially certain to occur. Rather, courts focus on what the insured actually believed and how it responded to the information it received. Evidence that an organization investigated allegations, imposed restrictions, sought professional guidance, terminated employment, or otherwise attempted to prevent future harm may undermine an insurer’s contention that injury was expected.
Similarly, evidence that an institution was surprised by later allegations and promptly implemented corrective measures may support a finding that the resulting injury was not expected from the insured’s perspective.
Severability Matters
Sexual abuse lawsuits frequently involve multiple insureds, including schools, religious organizations, nonprofit entities, affiliated organizations, and parent entities. In those cases, severability provisions can significantly limit an insurer’s ability to invoke the “expected or intended” defense.
In Minkler v. Safeco Insurance Co. of America, 49 Cal. 4th 315 (2010), the California Supreme Court held that a severability-of-interests clause required separate consideration of coverage for different insureds under the same policy. As a result, where such a clause exists, coverage issues generally must be analyzed from the perspective of the particular insured seeking coverage.
An insurer therefore cannot simply aggregate knowledge from various individuals or affiliated entities and assume that all insureds are equally barred from coverage.
Knowledge Is Not Automatically Imputed
Insurers often attempt to impute the knowledge of employees, volunteers, agents, or lower-level personnel to a corporate or institutional policyholder. Whether such knowledge may be attributed to an insured depends on the facts, the individual’s authority, and applicable agency principles.
The fact that an employee may have been obligated to report concerns internally does not necessarily establish that the information was actually communicated to organizational decisionmakers. This distinction is particularly important because California’s subjective standard focuses on what the insured actually knew and believed, not on what others may have known or what should have occurred under internal procedures.
Punitive Damages Allegations Do Not Necessarily Establish Expected Injury
Insurers also frequently point to punitive damages allegations as evidence that injury was expected or intended. But punitive damage claims do not automatically satisfy an insurer’s burden.
Under California law, punitive damages may be premised on recklessness, conscious disregard, or other aggravated forms of misconduct. Those concepts are materially different from proof that an insured subjectively believed injury was substantially certain or highly likely to occur. Moreover, potential liability for the predicate claim can exist in the absence of punitive damages.
Accordingly, allegations of gross negligence, recklessness, or conscious disregard do not necessarily establish the actual expectation of injury required to defeat coverage.
Insurance Code Section 533 Often Enters the Analysis
Insurers frequently pair “expected or intended” arguments with California Insurance Code section 533, which precludes indemnification coverage for an insured’s willful acts. However, Section 533 does not bar coverage for all negligence-based claims asserted against institutional defendants.
As with the “expected or intended” defense, courts evaluating Section 533 issues generally distinguish between intentional misconduct committed by a wrongdoer and separate negligence claims asserted against organizations accused of failing to prevent that misconduct. Whether Section 533 applies therefore depends on the particular insured and the specific conduct at issue.
Key Takeaway
As coverage disputes arising from sexual abuse claims continue to expand, California policyholders remain well-positioned to challenge “expected or intended” defenses. The defense requires far more than proof that warning signs existed or that an institution could have acted differently. California law requires evidence that the insured actually believed injury was substantially certain or highly likely to occur.
Policyholders confronting these arguments should focus on several recurring principles:
- The insurer bears the burden of proving policy provisions that limit or defeat coverage.
- California applies a subjective, not objective, standard when evaluating expected injury.
- Prior complaints or warning signs do not automatically establish that future injury was expected.
- Coverage must often be analyzed separately for each insured under severability principles.
- Knowledge possessed by employees or agents is not automatically attributed to institutional insureds.
- Allegations of recklessness or punitive damages do not necessarily establish expected injury.
For institutional insureds facing decades-old abuse claims, these principles can substantially narrow or defeat an insurer’s reliance on the “expected or intended” defense and help preserve access to critical insurance coverage.
This communication is not intended to create or constitute, nor does it create or constitute, an attorney-client or any other legal relationship. No statement in this communication constitutes legal advice nor should any communication herein be construed, relied upon, or interpreted as legal advice. This communication is for general information purposes only regarding recent legal developments of interest, and is not a substitute for legal counsel on any subject matter. No reader should act or refrain from acting on the basis of any information included herein without seeking appropriate legal advice on the particular facts and circumstances affecting that reader. For more information, visit www.buchalter.com.
