USA Gymnastics v. Liberty Insurance Underwriter, Inc., No. 20-1245 (7th Cir. 2022)
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Larry Nassar sexually assaulted hundreds of girls and young women during his involvement with USA Gymnastics (USAG), the non-profit organization which governs the sport in the United States. As a result of Nassar’s abuse, USAG has been sued several times and investigated by Congress and federal and state authorities. USAG sought financial help with its defense from insurers, including Liberty, with which USAG had a claims-made, directors and officers (D&O) liability insurance policy. An insurance-coverage lawsuit in Indiana state court was removed to federal court.
The Nassar-related litigation and investigations forced USAG into bankruptcy. The bankruptcy court issued proposed findings and conclusions, including that the Nassar-related claims were timely made and that a wrongful-conduct exclusion applied to only those claims for which Nassar was criminally convicted. The district court agreed.
The Seventh Circuit remanded, first holding that it had jurisdiction because the ruling had the “practical effect” of an injunction under 28 U.S.C. 1292(a)(1). USAG’s claims were timely made during the policy period. The wrongful conduct exclusion, which the court found ambiguous as applied to this case, applies to 10 instances of Nassar’s sexual abuse, but not to claims related to his abuse that were not finally adjudicated. A bodily injury exclusion in the policy does not preclude coverage; coverage is proper for various government investigations and other matters.
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