## Facts

- A dentist insured under a professional liability policy was accused by a former patient of sexually abusing her during a dental appointment on May 23, 1977.
- The patient brought a civil action seeking compensatory and punitive damages.
- The dentist also faced professional discipline and was criminally convicted of sexual abuse in the third degree.
- The insurer filed a declaratory judgment action seeking a ruling that the policy did not cover the civil suit, asserting the alleged acts were outside professional services, notice was deficient, and public policy barred coverage for criminal conduct and punitive damages.
- The trial court found no coverage.
- The intermediate appellate court reversed, relying on policy language that expressly included coverage for “assault” and “undue familiarity,” and concluded the insurer would be liable for compensatory and punitive damages (with dissent as to punitive damages).

## Issues

1. Whether a dentist’s professional liability policy that expressly covers “assault” and “undue familiarity” covers a patient’s civil claim alleging sexual abuse occurring during dental treatment.
2. Whether the insured’s alleged failure to provide timely notice relieved the insurer of its defense and indemnity obligations.
3. Whether New York public policy bars insurance indemnification for (a) civil liability arising from criminal conduct and (b) punitive damages based on such conduct.

## Decision

- The court held the policy afforded coverage for the civil claim, requiring the insurer to defend and to indemnify the dentist for any compensatory damages within the policy’s coverage.
- The court held public policy prohibits insurance indemnification for punitive damages; the insurer had no duty to indemnify any punitive damages award.
- The court rejected the insurer’s notice defense on the record presented and did not allow it to defeat the insurer’s duty to defend and compensatory indemnity obligation.

## Legal Principles

- Insurance policies are interpreted according to their text; where the insurer drafts a professional liability policy that expressly covers intentional-tort-type risks such as “assault” and “undue familiarity,” claims alleging such conduct in the professional setting may fall within coverage.
- An insurer’s duty to defend is triggered where the pleadings and known facts potentially bring the claim within coverage; the insurer may be required to defend even if some requested relief (punitive damages) is not indemnifiable.
- New York public policy bars insurance indemnification for punitive damages because punitive awards are meant to punish and deter the wrongdoer; shifting that burden to an insurer is impermissible.
- Public policy does not necessarily bar indemnification for compensatory damages merely because the conduct alleged is intentional or criminal, particularly where the policy language contemplates the risk and the damages sought are compensatory.

## Conclusion

The court required the insurer to defend the dentist and to indemnify him for compensatory damages arising from alleged sexual abuse during treatment under policy language covering “assault” and “undue familiarity,” but held that any punitive damages award could not be insured as a matter of New York public policy.


Public Serv. Mut. Ins. Co. v. Goldfarb, 53 N.Y.2d 392 (N.Y. 1981)