Prior Knowledge Provision Precludes Coverage For Known Sexual Assault Under Either An Objective Or Subjective Standard

The Superior Court of New Jersey, Appellate Division, applying New Jersey law, has held that a professional liability policy afforded no coverage for a lawsuit alleging sexual misconduct because the insured had knowledge of the sexual act in question before the policy took effect. CMGK, LLC v. Certain Underwriters at Lloyd's, London, 2024 WL 2966570 (N.J. Super. Ct. App. Div. June 13, 2024).

The insured massage facility purchased a Specified Medical Professions Professional Liability Insurance Policy for the claims-made-and-reported policy period of March 9, 2018, to March 9, 2019. The policy included a Sexual Acts Liability Endorsement, which required that, "prior to the effective date of this policy, the Insured had no knowledge of such Sexual Act or any fact, circumstance, situation or incident involving such Sexual Act which may result in a Claim under this policy" (the "Prior Knowledge Clause").