If only Clair Huxtable, Esq. were willing to take on Cliff Huxtable’s cases pro bono, maybe William “Bill” Cosby could have avoided the extended legal battle with American International Group, Inc. (“AIG”) over whether it was obligated to defend Mr. Cosby in three underlying lawsuits for defamation against Cosby.

It is common in the insurance practice for the insurer to file for declaratory relief against the insured on a variety of matters after an insured presents a claim under a policy.  When a policy exclusion is at issue, an insurer may initiate a lawsuit for a declaration as to its duty to defend the insured in the underlying litigation.

As was widely publicized, many women came forward with allegations of sexual assault against Mr. Cosby. What was less publicized was the legal battle that followed between Mr. Cosby and his insurance carrier, AIG, regarding the duty to provide a defense in the underlying defamation actions commenced against him.

Following the media attention surrounding the various allegations of sexual assault and misconduct against Mr. Cosby, there were several civil lawsuits brought against Mr. Cosby for defamation by his accusers. In December 2014, Tamara Green filed a civil complaint against Mr. Cosby for defamation in the United States District Court for the District of the District of Massachusetts, Western Division.[1] The Green complaint was later amended to include two additional plaintiffs, Therese Serignese and Linda Traitz, who also asserted defamation claims against Mr. Cosby.[2] These defamation claims stemmed from the women’s allegations that Mr. Cosby sexual assaulted each of them on separate occasions.[3] In short, the women alleged that, after they each alleged that they were sexually assault by Mr. Cosby, he, personally and through his representatives, disclosed their allegations to the public, falsely denied the accusations, and branded each of them as liars.[4] The women alleged that these actions of Cosby and his representatives painted them in a false light and were defamatory.[5] The complaint later was amended again to include four additional plaintiffs, all of whom alleged defamation and intentional infliction of emotion distress.[6]

In 2015, two additional underlying lawsuits were commenced against Cosby for defamation in Massachusetts, one by plaintiff Kristina Ruehli[7] and one by plaintiff Katherine Mae McKee.[8] Both of these lawsuits contained similar allegations of sexual assault, subsequent false denial and defamation.

The underlying lawsuits raised the issue of whether Cosby’s homeowner’s insurance policies would cover the defense of the lawsuits and, of course, indemnity for any liability thereunder. AIG had issued both a Massachusetts homeowners policy and a personal excess liability policy to Cosby, both for the period of January 1, 2014 to January 1, 2015.[9]  Both policies provided coverage for personal injury and property damage and defined “personal injury” as including “[b]odily injury”; “[s]hock, emotional distress, mental injury”; [i]nvasion of privacy”; and “[d]efamation, libel, or slander.”[10] In addition, both policies included “sexual misconduct exclusions.”[11] The homeowner’s policy included the following exclusion for personal injury arising from sexual conduct:

  1. Exclusions

This policy does not provide coverage for liability, defense costs or any other cost or expense for:

* * * *

  1. Sexual Molestation or Corporal Punishment

Personal injury arising out of any actual, alleged or threatened by any person:

  1. Sexual molestation, misconduct or harassment;

* * * *

  1. Sexual, physical or mental abuse.[12]

In addition, the excess policy contained the following similar exclusion:

  1. As respects Excess Liability, the following also applies:

This insurance does not provide coverage for liability, defense costs or any other cost or expense:

* * * *

  1. Sexual Misconduct

Arising out of any actual, alleged or threatened:

  1. Sexual misconduct, molestation or harassment.[13]

AIG initially agreed to defend Mr. Cosby under a reservation of rights.[14] AIG later, however, filed a lawsuit seeking a declaration that it was excused under the two policies from defending and indemnifying Mr. Cosby against the three underlying lawsuits for personal injury based on the foregoing sexual misconduct exclusions as the personal injuries claims were “arising out of” sexual misconduct.[15]

In the declaratory judgment action, both AIG and Mr. Cosby moved for summary judgment.[16] Honorable Mark G. Mastroianni ultimately ruled that AIG must defend Mr. Cosby in the three underlying lawsuits.[17] The Court examined both California and Massachusetts law[18] and determined that, applying either, AIG had the duty to defend. In reaching this conclusion, the Court examined whether the underlying claims unambiguously arose out of sexual misconduct so as to fall under the exclusion.[19]

The Court found that the phrase “arising out of” in the sexual misconduct exclusion in the Massachusetts homeowner’s insurance policy was ambiguous. The Court determined that the defamation was too far removed from the alleged sexual misconduct:

Critically, the sources of the underlying plaintiffs’ injuries are the allegedly defamatory statements issued by Cosby or his agents, not the sexual misconduct itself. While no doubt related to and setting the stage for the defamation claims, the alleged sexual misconduct is multiple steps removed from the defamatory injury-causing statements. The underlying plaintiffs allege: (1) Cosby sexually assaulted them during incidents spanning from the 1960s to the 1990s; (2) they publicly disclosed the allegations as early as 2005 (but mostly in 2014); and, finally, (3) Cosby publicly denied the allegations in 2014, thereby branding them as liars and causing injury. Arguably, therefore, the defamation is sufficiently independent of the sexual misconduct such that the exclusions do not apply.

Turning to an examination of the language in the policy as a whole, the Court further noted that a separate exclusion in the personal liability excess policy applicable to “Limited Charitable Board of Directors and Trustees Liability” barred coverage for damage “arising out of, or in any way involving, directly or indirectly, any alleged sexual misconduct.”[20] The Court reasoned that, if AIG had intended “to exclude from coverage all expenses merely “involving” or “indirectly arising out of” sexual misconduct, it could have used that language in the sexual misconduct exclusions at issue.”[21] However, because AIG did not use that same language in the sexual misconduct exclusions, the Court could not say, when viewing the policy “from the perspective of a reasonable insured, that it was the intent of the parties to exclude the kinds of claims brought in the defamation cases.”[22] Thus, because Mr. Cosby’s interpretation of the policy was reasonable, the exclusionary language was considered at least ambiguous; thus, AIG was obligated to defend the insured in the underlying cases.[23]

However, the Court left open the issue of whether AIG was required to indemnify Mr. Cosby for any damages that he may be required to pay the plaintiffs in the underlying lawsuits and instead held that the indemnification issue “must await the completion of trial or settlement.”[24]

The decision was appealed to the First Circuit, which affirmed the District Court’s ruling.  The three-judge panel, however, stated that “out of caution we also note that this appeal decides only the question of coverage in providing defense to the policyholder. Coverage for any damages that may be awarded if the defense is unsuccessful could turn on facts beyond those pertinent here.”[25]

At the same time that AIG commenced the Massachusetts litigation for declaratory relief, it also commenced a declaratory judgment action in the Central District of California regarding its obligations under the same two insurance policies[26] and a third California homeowner’s insurance policy, but as to a different underlying litigation, a similar case brought by Janice Dickinson.[27] There, the Court, applying California state law, granted Mr. Cosby’s motion to dismiss and also ruled that AIG had a duty defend Cosby against claims made in the California state action because the sexual misconduct exclusions did not unambiguously bar coverage.[28] Similar to the Massachusetts Court, the California Court found the injuries allegedly suffered by Ms. Dickinson originated from Mr. Cosby’s statements, which had only “an attenuated factual connection with sexual misconduct,” and was not the direct cause of the injuries, despite the fact that the misconduct was the subject matter of the statements.[29] Because ambiguous terms are interpreted in favor of finding coverage, the court concluded that AIG had a duty to defend Cosby in the underlying Dickinson case.[30]

Since these rulings, it has been reported that many of the underlying defamation suits have settled. In April 2019, after a confidential settlement was reached in the underlying matter initially brought by Green, a spokesperson for Cosby released a statement stating that “A.I.G. decided to settle these cases, without the knowledge, permission and/or consent of Mr. Cosby. Mr. Cosby vehemently denies the allegations brought against him in these defamation suits, and he maintains his innocence.”[31]

The rulings, of course, did not involve or apply to the Pennsylvania criminal case of alleged sexual assault, for which Mr. Cosby was found guilty and is currently serving a sentence of three to ten years.[32]


[1] Green v. Cosby, Case No. 14-cv-30211- MGM; See AIG Property Casualty Co. v. Green et al,, 3:15-cv-30111-MGM, U.S. District Court, District of Massachusetts, Dkt. 1 at 7.

[2] AIG, 3:15-cv-30111-MGM, Dkt. 1 at 7.

[3] Id. at 8-10.

[4] Id.

[5] Id.

[6] AIG, 3:15-cv-30111-MGM, Dkt. 95 at _13-36.

[7] Ruehli v. Cosby, Case No. 15-cv-13796-MGM; See also AIG, 3:15-cv-30111-MGM, Dkt. 95 at 36.

[8] McKee v. Cosby, Case No. 15-cv-30221- MGM; See also AIG, 3:15-cv-30111-MGM, Dkt. 95 at 38.

[9] AIG, 3:15-cv-30111-MGM, Dkt. 1 at  2, 4.

[10] Id.at 4, 6.

[11] Id.

[12] See also id. at 4.

[13] Id. at 6-7.

[14] https://www.businessinsurance.com/article/20180608/NEWS06/912321895/Bill-Cosby-entitled-to-defense-by-AIG-1st-Circuit-appeals-court-rules.

[15] AIG, 3:15-cv-30111-MGM, Dkt. 1.

[16] Cosby filed a Motion to Dismiss, which the Court treated as a motion for judgment on the pleadings as a responsive pleading was already filed. See id., Dkt 132.

[17] Id.

[18] The Court examined the potential application of California law based on Mr. Cosby’s argument of judicial estoppel against AIG based on a ruling in a concurrent Central District of California case, discussed supra.

[19] AIG, 3:15-cv-30111-MGM, Dkt 132 at 12.

[20] Id. at 15.

[21] Id.

[22] Id.

[23] Id.

[24] Id.

[25] https://www.businessinsurance.com/article/20180608/NEWS06/912321895/Bill-Cosby-entitled-to-defense-by-AIG-1st-Circuit-appeals-court-rules.

[26] AIG Prop. Cas. Co. v. Cosby, 2015 WL 9700994 at 4-6 (C.D. Cal. Nov. 13, 2015).

[27] Dickinson v. Cosby, case no. BC58090.

[28] AIG Prop. Cas. Co. v. Cosby, 2015 WL 9700994 at 4-6 (C.D. Cal. Nov. 13, 2015).

[29] Id.

[30] Id.

[31] https://www.nytimes.com/2019/04/05/arts/television/cosby-defamation-lawsuit-settlement.html.

[32] https://www.nytimes.com/2019/04/05/arts/television/cosby-defamation-lawsuit-settlement.html.

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