New York Court Clarifies Policy Limits and Self-Insured Retention in Archdiocese Coverage Dispute

The Hunton Insurance Recovery Blog reports on a New York Supreme Court ruling that a self-insured retention (SIR) does not reduce an insurer’s policy limits.

The decision in The Archdiocese of New York, et al. v. Century Indemnity Company, et al. stemmed from a dispute over whether the Archdiocese’s $100,000 per-occurrence retention should be deducted from the $200,000 policy limit or simply act as a threshold before coverage applied.

The court concluded that, under the plain language of the policies, the retention operated independently of the policy limits, requiring insurers to pay the full amount above the retention.

Between 1956 and 2003, the Archdiocese purchased liability policies from multiple insurers. Following the passage of the Child Victims Act and Adult Survivors Act, more than 1,700 lawsuits alleging sexual abuse were filed, prompting a declaratory judgment action to clarify coverage.

The Archdiocese sought summary judgment on one policy, asserting that its insurers must pay $200,000 per covered occurrence after the $100,000 retention. The insurer contended the retention should reduce the available limit, capping payments at $100,000.

The court rejected the insurer’s argument, emphasizing that policy interpretation must reflect the parties’ intent as expressed in the written terms.

It found the policies’ reference to coverage “in excess of $100,000” clearly meant the SIR functioned as a payment threshold, not as a limit reduction. The ruling also noted that treating the retention as part of the limit would nullify excess coverage for certain losses, contrary to the insured’s reasonable expectations.

This decision reinforces the need for attorneys to pay careful attention to policy wording when negotiating coverage and pursuing claims. The distinction between a deductible and a self-insured retention has a material impact on recovery.

Even where policy terms appear clear, insurers may advance restrictive interpretations, making judicial clarification crucial.