Between 2007 and 2011, Michael Jensen sexually abused several children while babysitting for families in his local LDS congregation in Martinsburg, West Virginia. Some of his victims later sued the church, alleging it failed to report suspected abuse, protect victims, supervise volunteers, and warn families of Jensen’s prior conduct. The case was settled during trial.
The church then turned to two of its liability insurers, National Union and ACE, to cover its defense and settlement costs. Both refused, so the church sued them in federal court in Utah for breach of contract and breach of the implied covenant of good faith. The district court granted summary judgment to the insurers, and the church appealed.
The policies paid out per “occurrence,” but only once the church’s liability for that occurrence exceeded a set “retained limit.” No single settlement with an individual victim met that threshold – but added together, the settlements did. The outcome hinged entirely on whether the church’s negligence toward multiple victims, abused at separate times and places, counted as one occurrence or several.
The district court sided with the insurers, holding that the policy language unambiguously meant a separate occurrence arose each time Jensen abused a different child at a different time and place.
The Tenth Circuit reversed. Applying Utah law, the court held that the policies’ definitions of “occurrence” were ambiguous – capable of more than one reasonable interpretation – and that ambiguities in insurance policies must be resolved in favor of coverage. The court reasoned that the church could plausibly read “general harmful conditions” to describe the dangerous environment created by the church’s own alleged failures, meaning repeated exposure to that environment could count as a single occurrence – even across different victims, times, and locations.
Notably, the court didn’t need to find the church’s reading was the best interpretation — only that it was plausible. Once a policy provision supports more than one reasonable reading, Utah law requires courts to adopt the insured’s interpretation, even if other jurisdictions read similar language differently. The court also pointed out that other courts around the country have split three ways on this exact issue, which itself reinforced the ambiguity finding. The Tenth Circuit reversed and remanded.
This decision is a reminder that policy drafting carries real consequences. As the court put it, ambiguous provisions let insureds play “heads I win, tails you lose,” and insurers who want certainty need to write clearer terms. For entities facing mass-tort or abuse-related exposure, and for insurers drafting umbrella and liability policies, this ruling underscores how heavily interpretive battles over a single word – “occurrence” – can shift the financial burden of a tragedy. It’s also a useful case study in how federal courts sitting in diversity apply state contract-interpretation principles, and a good reminder that “plausible” is a lower bar than “best,” and it’s the bar that controls.
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Disclaimer: This article is provided for informational purposes only and does not constitute legal advice. Polales Horton & Leonardi LLP is experienced in handling complex insurance coverage matters on behalf of policyholders across the United States.
