Judge dismisses two insurers from sex abuse coverage fight

A Delaware trial judge Wednesday dismissed two of a team sports and spirit company’s primary insurers from a sex abuse coverage dispute, saying the court lacked authority to allow claims to proceed against them.

Delaware Superior Court Judge Meghan A. Adams, ruling in Varsity Brands Holding Co. LLC et al. v. Arch Insurance Co. et al., said litigating the claims against Arch Insurance Co. and Philadelphia Indemnity Insurance Co. would violate their rights to due process under the 14th Amendment.

Judge Adams said the court could not exercise specific personal jurisdiction over the insurers because the lawsuit “neither arises out of or is sufficiently related to Arch and PIIC’s connections to Delaware.”

The judge said the insurers’ policies, the coverage dispute and Delaware are only connected because Varsity is a Delaware entity.

In August 2022, several former cheer athletes sued Varsity in federal court in Greenville, South Carolina, alleging they were victims of sexual abuse while still minors. Similar lawsuits were later filed in federal courts in California, Florida, Georgia, North Carolina, Ohio and Tennessee. Varsity notified its primary commercial general liability insurers, excess CGL insurers and professional liability insurers, court records show.

Varsity sued the insurers in October 2023 after they refused to fund a settlement of the first case filed in federal court in South Carolina. Arch and PIIC moved to dismiss the suit due to a lack of personal jurisdiction.

The other insurers filed motions to dismiss saying the lawsuit was premature or because the allegations of bad faith refusal to settle were based on confidential mediation communications. The judge denied those motions.

Representatives for the parties did not respond to requests for comment.