Class actions against religious congregations: lessons for insurers

In Quebec, class actions against religious congregations brought by groups of victims alleging past sexual abuse have been on the rise for several years and remain a subject of interest to this day.

This tendency was bolstered by Bill 55, which came into force on June 12, 2020, and abolished limitation periods for sexual abuse cases. With few exceptions, such class actions are usually settled before judgment on the merits is rendered. As a result, most relevant judgments in such actions deal with preliminary exceptions, and the most detailed judgments are often rendered in the context of applications to approve out-of-court settlements.

While it is not always easy to detect trends in judgments approving settlement agreements reached in such class actions, there are nevertheless several factors that may influence the terms of settlement. These include the composition of the class, the financial resources of the religious congregation sued and whether there is an insurance policy covering its liability, to name but a few.

To date in Quebec, over $100 million has or will be paid by religious congregations and other co-defendants to groups of victims in the context of sexual abuse class actions.

Recently, in February 2022, the Superior Court of Quebec heard an application to approve a $28 million settlement in a class action instituted against the Clercs de Saint-Viateur in connection with sexual assaults allegedly committed against 375 former student residents of its establishments. Judgment in that case should be rendered in the coming months.

Many settlements were previously approved by the Quebec courts in similar cases. In 2011, the Communauté de la Congrégation de Sainte-Croix settled a class action for $18 million and indemnified 206 victims of alleged sexual assaults. Then, in 2014, the Congrégation du Très-Saint-Rédempteur settled a class action against it involving 75 victims for $20 million. Later, in 2016, the Clercs de Saint-Viateur du Canada and other defendants settled a first class action brought against it involving 150 victims for $30 million. More recently, in September 2021, in the context of settlements in A. c. Frères du Sacré-Cœur and F. c. Frères du Sacré-Cœur, the Superior Court of Quebec approved a settlement agreement in its entirety in a case involving over 250 victims for the historic amount of $60 million, an unequalled settlement amount in Quebec sexual abuse class action cases. The outcome of that case is part of an unprecedented new trend in the case law faced by not only religious congregations, but also their insurers who are often called in warranty.

Because the religious congregations sued in such class actions have increasingly taken the approach of involving their insurers through actions in warranty, certain subjects of interest warrant further attention.

The presence of abuse exclusions

First, sexual misconduct must be rigorously circumscribed in insurance policies issued to insureds such as religious congregations. Although not always possible, as many insurers involved are on risk for policies that predate the year 2000, when situations of abuse in religious settings and schools started to become known, the best advice is to “be proactive rather than reactive”. The use of endorsements to exclude all claims for sexual abuse from coverage is becoming an increasingly frequent practice among certain insurers to avoid having to pay such claims in the future.

Insurers that issued policies between 1950 and 2000 obviously cannot go back in time to include or apply such endorsements, but these exclusions nevertheless remain useful for the future. While some insurers of religious congregations offer or have offered some protection against sexual abuse claims, such protection is usually circumscribed by specific conditions and subject to well-defined coverage sub-limits.

Whether claims for sexual misconduct are included or excluded from the insurance policy, it is important to be as clear as possible in the coverage grant and ensure that there is no ambiguity. A clear exclusion clause that is general in scope and unconditional is probably the best way to ensure a strong defence in the event of proceedings in warranty against an insurer.

Prudence and diligence are always advisable

Similarly, insurers must exercise prudence and diligence throughout the course of the business relationship with the insured religious congregation. Insurers must therefore thoroughly consider several aspects of that business relationship. For example, knowledge by the insured religious congregation at the time it took out the insurance of actual or alleged sexual abuse within its establishments is clearly determinative information for the insurer. If the insured is aware that such acts were committed, the insured must disclose that information to its insurer as soon as it becomes aware of it, and more specifically at the time of taking out or renewing the insurance policy. This is part of the obligation of “utmost good faith” applicable to insurance contracts. Knowledge that a risk the insurer plans to directly or indirectly insure has previously occurred has an enormous impact on the decision to underwrite the risk.

It is therefore in the insurer’s interest to prepare a list of specific questions to ask the religious congregations it insures, at the time the insurance is taken out and upon each renewal, to ensure that all relevant information is disclosed and that the coverage granted remains proportionate to the risk the insurer agreed to or continues to agree to insure. That said, even if a question is not asked directly, an insured nevertheless has the obligation to voluntarily disclose all information that could have an impact on the risk insured or proposed.

However, some now argue that the collective knowledge of the perpetration of sexual abuse in religious educational settings should be considered notorious. Insurers are therefore at risk of being faulted for not asking religious congregations such questions, whether at the time the insurance policy is taken out or upon its renewal.

For that reason, if the insurer receives a claim for sexual abuse during the policy period, it is essential that the investigation conducted focusses on the information disclosed by the insured at the time the insurance was taken out or upon its renewal. That moment in the relationship between the insurer and the insured is determinative. During the investigation, it will be necessary to determine whether the information provided at the time the insurance was taken out was complete, unconditional and accurate, to the best of the religious congregation’s knowledge. If the management of a religious congregation is aware of sexual abuse or cannot reasonably be unaware of it due to a situation of systemic sexual abuse, for example, and that knowledge was never disclosed to the insurer, that will likely undermine the validity of the insurance contract. The insurer will therefore have a strong defence to proceedings in warranty brought against it as part of class actions of this kind. With this in mind, an assessment and complete reassessment of the risk by the insurer, when conducted in a reasonable manner at the time the insurance is taken out and at renewal, may also be effective means of ensuring that coverage remains proportionate to the initial agreement.

Attachment to policy periods

It may seem absurd that an insurance policy issued to a religious congregation in 2005, for example, could cover sexual abuse committed by its members between 1930 and 1980. That is in fact one of the main arguments raised by insurers when faced with an action in warranty in the context of sexual abuse class actions. However, religious congregations often submit that the damage resulting from such abuse occurs over time and thus triggers the insurance coverage of all subsequent insurers. This is known as the “continuous trigger” theory, which remains highly contested by insurers. No Quebec judgment has confirmed the validity of the theory. Accordingly, until such a judgment is rendered, it seems unlikely, and even impossible, for insurers to completely avoid becoming involved in class actions of this kind, even if their insurance policies were issued 30, 40 or 50 years after the actual or alleged sexual abuse. This highlights the importance of including clear abuse exclusions when possible and conducting a risk analysis that includes asking religious congregations direct questions about their knowledge of actual or alleged past sexual abuse.

Out-of-court settlements: the trend

A sexual abuse claim is a particularly delicate issue that would normally be treated in a private and confidential manner. In that respect, since 2016, the Code of Civil Procedure has solidified the obligation to consider private dispute prevention and resolution processes before referring disputes to the courts. This consideration is particularly important in sexual abuse claims, as finding common ground while protecting the confidentiality of the process is an obvious advantage for the victims and the religious congregations involved. Unfortunately, it is not always possible, hence the substantial number of such class actions that have been submitted to the courts in the past ten years.

Nevertheless, the emerging trend is to hold a settlement conference after completing certain steps in the file, in particular after disclosing documents and conducting examinations. Indeed, this type of class action has not resulted in a judgment on the merits since the Rédemptoristes case several years ago, because such class actions are usually settled out of court.

In view of the foregoing, it seems unrealistic to think that the insurers of religious congregations will cease being involved in sexual abuse class actions anytime soon without clear case law preventing such actions in warranty. It is therefore essential for those insurers to equip themselves with several means of defence, such as those discussed here, to counter as best as possible the general argument that sexual abuse and the claims resulting from it should be covered by an insurance policy.