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Is a Youth Camp Corporation Insured if It’s Sole Employee Sexual
Peter Drutchal ran “Adventure Quest Inc.,” a summer camp for youth. He sexually abused some of his clients. Drutchal purchased insurance for Adventure from Virginia Surety Co. Inc. The policy excluded coverage if the sued individual had personally engaged in sexual abuse. The abuse came to light in 2001. Scott Mann sued Adventure Quest Inc. because its agent, Drutchal, had sexually abused him.
Virginia declined coverage saying Drutchal and Adventure Quest should be regarded as legally identical perpetrators. Drutchal, it claimed, was the sole full time employee and effectively he and the corporation were indistinguishable. It also claimed that Drutchal, as an agent of Adventure Quest, had lied on the policy application when he answered “No” when asked if Adventure Quest had ever had an incident of reported sexual abuse. The trial Court granted summary judgment for Virginia, and Mann appealed.
The Supreme Court sent the case back for trial. It ruled it wasn’t clear that Drutchal had lied on the application because there was no reported sex case. As to the agency issue, the Court ruled that ordinarily, a corporation and an agent are one and the same, unless the agent is acting for himself and not the corporation. Clearly Drutchal was serving his own sexual pleasure, so ordinarily his acts would not be those of the corporation, with one exception: if Drutchal so controlled and dominated the corporation that it was a fiction, his acts could be regarded as those of the corporation and there would not be coverage. Adventure Quest had an active Board of Directors. Drutchal wasn’t on it. So the Court ruled the record wasn’t clear enough to decide if he and the Board were legally the same.
There is a catch 22 in this case. Virginia argued that if the Board should have known Drutchal was abusing kids, even if it didn’t actually know, it should be regarded as perpetrator. The Court said there had to be actual knowledge to void coverage. In an earlier case where a church Pastor abused kids, the Court had ruled that the church itself was not liable unless the Board actually knew of the abuse. So to win his case against Adventure, Mr. Mann had to prove the Board knew he was being abused, but if he did that, there would be no insurance.
The case is yet another twist on the many issues arising out of current exposure of sexual abuse of minors. Scott Mann et al vs. Adventure Quest v. Virginia Surety Inc. 2009 VT 38.
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