Court Opinion

ID: 6519
Source: CourtListenerOpinion
Date Created: 2010-04-25 05:18:17+00
Date Added: 2024-06-11T16:46:11.029325
License: Public Domain

IN THE UNITED STATES COURT OF APPEALS

                 FOR THE FIFTH CIRCUIT

                 _____________________

                      No. 93-4068
                 _____________________

THE SOCIETY OF THE ROMAN CATHOLIC CHURCH OF THE
DIOCESE OF LAFAYETTE AND LAKE CHARLES, INC.,

                              Plaintiff-Appellee-Cross
                              Appellant-Appellant and
                              Cross-Appellee,

                        versus

INTERSTATE FIRE & CASUALTY CO., ET AL.,

                              Defendants,

ARTHUR J. GALLAGHER & COMPANY AND GALLAGHER
BASSETT SERVICES, INC.,

                              Defendants-Appellees-Cross
                              Appellants,

                        versus

INTERSTATE FIRE & CASUALTY COMPANY,

                              Defendant-Appellee-Cross
                              Appellee and Cross-
                              Appellant,

                        versus

ALLEN GODFREY LEE AND LLOYD'S OF LONDON,

                              Defendants-Appellees-Cross
                              Appellees,

                        versus

PACIFIC EMPLOYERS INSURANCE COMPANY,

                              Defendant-Third Party
                              Plaintiff-Appellee-Appellant
                              and Cross-Appellee,
                  and

         FIREMAN'S FUND INSURANCE,

                                                               Defendant-Appellee-Appellant
                                                               and Cross-Appellee,

                  and

         PREFERRED RISK MUTUAL INSURANCE COMPANY,

                                                               Defendant-Appellee-Appellant
                                                               and Cross-Appellee,

                  and

         CENTENNIAL INSURANCE COMPANY,

                                                               Defendant-Appellee,

                                                     versus

         HOUSTON GENERAL INSURANCE COMPANY,

                                                               Defendant-Appellant-Cross-
                                                               Appellee and Appellee,

         LOUISIANA COMPANIES, INC.,

                                                               Third Party Defendant-
                                                               Appellee.

         _______________________________________________________

             Appeal from the United States District Court for
                     the Western District of Louisiana
         _______________________________________________________
                              (July 15, 1994)

Before REAVLEY, GARWOOD and HIGGINBOTHAM, Circuit Judges.

REAVLEY, Circuit Judge:

         Two pedophilic priests of the Diocese of Lafayette1 molested

thirty-one children over a period of seven years, prompting a

         1
                  The Society of the Roman Catholic Church of the Diocese of Lafayette, Inc. and the Diocese of
Lake Charles, Inc. are both appellants in this appeal. At oral argument the parties indicated that one Diocese is the
successor of the other, so we will refer to the appellants as "the Diocese."

                                                         2
spate of claims from the children and their parents.                                            The Diocese

and its insurance carriers, unable to compromise on the

allocation of loss under the "occurrence" policies, settled the

claims against the Diocese with contributions on a pro rata basis

(using years of coverage as a benchmark) and agreed to let a

court decide their coverage dispute.                               The Diocese filed a

declaratory judgment action in state court, which was removed

upon diversity jurisdiction to federal court.                                       The parties then

submitted motions for summary judgment, and the court granted

summary judgment on all claims.                            We affirm in part, reverse in

part, and remand.

                                              I. Background

        The sordid picture underlying this insurance coverage

dispute is that of two miscreant priests who subjected thirty-one

children to extended periods of sexual molestation.                                           These

molestations began in August of 1976 and ended in June of 1983.

The record on appeal does not show how many times each child was

molested, nor the extent of damage resulting from each encounter.

The parties, however, have stipulated to the dates when the

molestations began and ended for each child (the "grid").2                                                And

        2
                   Represented as uncontested facts, Lloyd's of London presented a grid, along with its motion for
summary judgment, listing when each child's molestation began and ended. On appeal, Houston General
Insurance Company does not contest its accuracy, though it once did. See Cinel v. Connick, 15 F.3d 1338, 1345
(5th Cir. 1994) ("An appellant abandons all issues not raised and argued in its initial brief on appeal.") (emphasis
omitted). Pacific Employers' Insurance Company argues that the dates of child molestation are disputed fact
questions. But because Pacific failed to contest the grid under the district court's local rules, it has waived any
objection it may have had to the grid. Local Rule 2.10 ("Opposition to Summary Judgment. ... All material facts set
forth in the statement required to be served by the moving party will be deemed admitted, for purposes of the
motion, unless controverted as required by this rule.").

                                                         3
during oral argument, the parties further agreed that each child

was molested at least once during each stipulated year of

molestation.

A.     The Insurance Policies

         The complexity of this case arises from the different

periods of the Diocese's insurance coverage, primary and excess.

Fireman's Fund Insurance Company was the primary carrier from

1975 to 1978, and Preferred Risk Mutual Insurance Company covered

the Diocese from 1978 through July 1981.                                     Houston General

Insurance Company was the excess carrier from 1975 to 1979, and

Pacific Employers' Insurance Company was the succeeding excess

carrier through July 1981.

         In July 1981, the Diocese switched its coverage to a form of

limited self-insurance.                       Under this self-insurance plan, the

Diocese presented the first layer of coverage by contributing

$400,000 to a yearly loss fund, from which the Diocese was

responsible for the first $100,000 of each occurrence.                                                 Lloyd's

of London's excess aggregate policy, with a $450,000 aggregate

limit, offered the next layer of coverage.3                                       And Interstate Fire

& Casualty's $5 million umbrella policy provided the excess

coverage.4

         3
                   Centennial Insurance Company, also a party to this appeal, participated in 20% of the Lloyd's
policy. It did not issue a separate policy insuring the Diocese.
         4
                  From the parties' appellate briefs, we are unable to determine exactly how the loss fund, the
excess aggregate policy, and the excess policy interact. While this does not affect our analysis, the district court
will have to determine the structure of this self-insurance plan before it can enter a final judgment.

                                                           4
     All insurance policies are "occurrence" based policies,

meaning their limits of coverage are capped on a per occurrence

basis.   Under such a policy, it is the date of the occurrence,

and not the date of the claim, that determines coverage.       When

bodily injury results from an occurrence during a policy period,

coverage is triggered.   This coverage extends to all resulting

damages – both present and future – emanating from the injury.

The policy does not, however, cover bodily injury occurring

outside the policy period.

     Because the insurance companies and the Diocese could not

agree on the proper definition of "occurrence," they opted to

settle the molestation claims among themselves on a pro rata

basis and leave the proper allocation of loss to the court.

Accordingly, the Diocese filed a declaratory judgment action in

state court, which was removed to federal court on diversity

grounds.   Decision of the issues affect either the allocation of

loss between successive primary carriers and the Diocese or

between primary and excess carriers.

B.   The District Court's Opinion

     1. Occurrence and First Encounter

     The district court relied on Interstate Fire & Casualty Co.

v. Archdiocese of Portland, 747 F. Supp. 618 (D. Or. 1990) to

conclude that "occurrence" should be defined on a per child

basis, with all subsequent molestation treated as injury

resulting from that "occurrence."       With thirty-one children

                                    5
molested, the court reasoned that there were thirty-one

occurrences.             It also considered the parents' claims as arising

from the same "occurrences," meaning that the parents' injuries

did not constitute separate occurrences under the policies. The

court allocated the loss using the "first encounter rule": the

insurance carrier covering the Diocese during the occurrence of

the first molestation of each child was responsible for all

resulting damages to that child (and his parents), including

damages from molestations occurring after the expiration of that

carrier's policy.5

         Depending upon their interests, all parties appeal from the

court's judgment.                 Some disagree with the court's definition of

"occurrence"; others contest the court's use of the first

encounter rule.

         2. The Diocese's Claim Against Gallagher and Bassett

         The Diocese sued Arthur J. Gallagher & Company, the

insurance agent that procured the self-insurance program,

alleging that Gallagher failed to provide full coverage above the

loss fund as warranted.                      The court granted Gallagher's motion for

summary judgment, and the Diocese appeals.

         The Diocese also sued Gallagher Bassett Services Inc., the

administrator of the self-insurance plan, claiming that Bassett

breached its obligation to properly administer the plan by

         5
                  The parties submitted nine other molestation claims to arbitration, and the district court held the
arbitration binding. No party contests this ruling on appeal.

                                                          6
refusing to contribute money from the loss fund toward the

settlement of molestation claims arising before 1981.    The court

granted Bassett's motion for summary judgment, and the Diocese

appeals.

     3. Pacific's Claim Against Louisiana Companies

     Pacific, an excess carrier, sued its insurance agent,

Louisiana Companies, alleging that Louisiana Companies

misrepresented the Diocese's underlying primary coverage as

$500,000 per year, when it was actually a three-year policy with

a $500,000 per occurrence limit (Preferred's policy).    With

"occurrence" defined on a per child basis and with liability

allocated under the first encounter rule, the court concluded

that Pacific suffered no prejudice from the alleged

misrepresentation and granted Louisiana Companies' motion for

summary judgment.   Pacific appeals.

                           II. Analysis

A.   Allocation of Loss Under the Insurance Policies

     With the claims by the children and their parents settled,

we must determine the proper allocation of loss among the

insurance companies and the Diocese.   Because this declaratory

judgment action is based upon diversity jurisdiction, we apply

Louisiana law in interpreting the insurance policies.

1. Defining "Occurrence"

                                 7
     a. The Children's Claims

     What constitutes an "occurrence" is central to this appeal

because each policy's limits of liability are on a per occurrence

basis; the larger the number of "occurrences," the greater the

loss borne by the primary insurers and the Diocese.   The Lloyd's

policy is representative of the other policies involved in both

its scope of coverage and its definition of "occurrence":

     Underwriters hereby agree ... to indemnify the Insured
     for all sums which the Insured shall be obligated to pay
     by reason of the liability imposed upon the Insured by
     law ... for damages ... on account of personal injuries
     ... arising out of any occurrence happening during the
     period of the Insurance.

     The term "occurrence" wherever used herein shall mean an
     accident or a happening or event or a continuous or
     repeated exposure to conditions which unexpectedly and
     unintentionally result in personal injury, or damage to
     property during the policy period. All such exposure to
     substantially the same general conditions existing at or
     emanating from one location shall be deemed one
     occurrence. (emphasis added).

The definition of "occurrence" affords little assistance because

"a continuous or repeated exposure to conditions" and

"substantially the same general conditions" are malleable.   An

"occurrence" could be the church's continuous negligent

supervision of a priest, the negligent supervision of a priest

with respect to each child, the negligent supervision of a priest

with respect to each molestation, or each time the Diocese became

aware of a fact which should have led it to intervene, just to

                                8
name a few possibilities.6                       The meaning of "occurrence," as used

in the insurance policies, can be perplexing in application. Cf.

Insurance Co. of N. Am. v. Forty-Eight Insulations, Inc., 633
F.2d 1212, 1222 (6th Cir. 1980), cert. denied, 454 U.S. 1109

(1981).           When a term in an insurance policy has uncertain

application, Louisiana courts interpret the policy in favor of

the insured. See Hebert v. First Am. Ins. Co., 461 So. 2d 1141,

1143 (La. Ct. App. 1984), writ denied, 462 So. 2d 1265 (La.

1985).

         While there are many possible applications of the term

"occurrence," we are not without guidance.                                     In Lombard v.

Sewerage & Water Bd. of New Orleans, 284 So. 2d 905 (La. 1973),

where the ongoing construction of a drainage canal damaged many

adjacent property owners, the Louisiana Supreme Court discussed

the proper method for determining an "occurrence" when the cause

of harm continues to injure different persons:

         The word "occurrence" as used in the policy must be
         construed from the point of view of the many persons
         whose property was damaged. As to each of these
         plaintiffs, the cumulated activities causing damage
         should be considered as one occurrence, though the
         circumstances causing damage consist of a continuous or
         repeated exposure to conditions resulting in damage
         arising out of such exposure. Thus, when the separate
         property of each plaintiff was damaged by a series of
         events, one occurrence was involved insofar as each
         property owner was concerned. Notwithstanding, therefore,

         6
                  We have couched the underlying tort in language of negligent supervision, assuming that the
Louisiana Supreme Court would not consider the priests' actions to be within the scope of their employment, nor
would it consider the molestations a "risk of harm fairly attributable to the employer's business." See Roberts v.
Benoit, 605 So. 2d 1032, 1040-41 (La. 1991); McClain v. Holmes, 460 So. 2d 681, 683-84 (La. Ct. App. 1984),
writ denied, 463 So. 2d 1321 (La. 1985). But even if the Diocese is liable for the priests' intentional acts under a
respondeat superior theory, see Miller v. Keating, 349 So. 2d 265, 268-69 (La. 1977), such liability does not affect
our decision on what constitutes an "occurrence" or the number of occurrences suffered by each child.

                                                         9
     that the same causes may have operated upon several
     properties at the same time resulting in varying degrees
     of damage, it cannot be regarded as one occurrence, but
     the damage to each plaintiff is a separate occurrence.

Id. at 915-16.   Following Lombard, "the damage to each [child] is

a separate occurrence."   See also Interstate, 747 F. Supp. at 624

("Each time this negligent supervision presented Father Laughlin

with the opportunity to molest a different child, the Archdiocese

was exposed to new liability," which constitutes an "occurrence"

under the policy language.); Murice Pincoffs Co. v. St. Paul Fire

& Marine Ins. Co., 447 F.2d 204, 206 (5th Cir. 1971) (holding

that the liability creating event constitutes an "occurrence").

     b. The Parents' Claims

     Interstate argues that the injuries suffered by the

children's parents are separate "occurrences" under the policies.

In its brief, Interstate launches a flotilla of Louisiana cases

showing that the parents have a direct cause of action against

the church for their injuries, but Interstate misses the mark.

Whether the parents' claims are direct under Louisiana law is not

relevant.   The issue is whether, under the policy language, the

parents' injuries are derivative of an "occurrence."   If the

children had not been molested, the parents would have gone

unharmed.   Thus, the parents' injuries do not amount to separate

"occurrences" under the policies. See Crabtree v. State Farm Ins.

Co., 632 So. 2d 736, 738 (La. 1994) (finding that while the

wife's claim for mental anguish constituted "bodily injury"

                                10
separate from that suffered by her husband, entitling her to a

separate "per person" limit of coverage, her claim was

nevertheless subject to the "per accident" limit in the policy);

Lantier v. Aetna Casualty & Sur. Co., 614 So. 2d 1346, 1357 (La.

Ct. App. 1993) (concluding that spouses' wrongful death suits

were derivative of a single "occurrence"); Geico v. Fetisoff, 958
F.2d 1137, 1143 (D.C. Cir. 1992) (holding that while a spouse may

have a legally independent claim for loss of consortium, it is

nevertheless derivative of the "occurrence" under the policy

language).

2.     The Number of "Occurrences" Per Child

        While Lombard instructs that the molestation of each child

is a separate occurrence, it does not answer the question of how

many "occurrences" each child suffered, because the issue of

multiple occurrences during successive policy terms never arose.

The court's opinion in Davis v. Poelman, 319 So. 2d 351 (La.

1975) is equally unhelpful because it dealt with a single injury

resulting in continuing damage over a period of time.                                             It did not

address a situation where an individual was repeatedly injured

during multiple policy terms.

        The most applicable line of Louisiana cases dealing with

multiple injuries during successive years are the asbestosis

cases.7 See e.g., Cole v. Celotex Corp., 599 So. 2d 1058 (La.

        7
                   The district court refused to follow the asbestos cases because under these stipulated facts, the
time of injury is certain. True, the courts dealing with the asbestos cases wrestled with the issue of when bodily
injury occurred: was the employee injured when he inhaled asbestos fibers (the exposure rule), or was the employee

                                                        11
1992); Houston v. Avondale Shipyards, Inc., 506 So. 2d 149 (La.

Ct. App.), writ denied, 512 So. 2d 460 (La. 1987); Ducre v. Mine

Safety Appliances Co., 645 F. Supp. 708 (E.D. La. 1986) (applying

Louisiana law), approved, 833 F.2d 588 (5th Cir. 1987); Porter v.

American Optical Corp., 641 F.2d 1128 (5th Cir.) (applying

Louisiana law), cert. denied, 454 U.S. 1109 (1981).                                            In Cole, the

most recent Louisiana Supreme Court decision in this area, the

court answered the question of how to determine the number of

occurrences when the victim is repeatedly injured during multiple

policy years.              Adopting the exposure rule, the court concluded

that the inhalation of asbestos fibers causes bodily injury as

defined in the "occurrence" policies.                                 The court held that an

employee suffered bodily injury from an occurrence when the

employee inhaled asbestos fibers during a policy year and all

subsequent inhalation during that year arose out of the same

occurrence.            When the employee inhaled asbestos during the next

policy year, again, the employee suffered bodily injury from an

occurrence.            Thus, each employee suffered injury from an

occurrence during each year in which he inhaled asbestos. Cole,
599 So. 2d at 1075-80.

         We believe the Louisiana Supreme Court would apply the same

analysis to the stipulated facts of this case.                                        When a priest

molested a child during a policy year, there was both bodily

injury and an occurrence, triggering policy coverage.                                              All

injured once asbestosis manifested itself (the manifestation rule)? But the court overlooked the similarity, based
upon this record, concerning the indivisibility of the injury. The asbestos cases provide significant direction
regarding the number of occurrences when a victim suffers repeated injuries during multiple policy years.

                                                         12
further molestations of that child during the policy period arose

out of the same occurrence.                        When the priest molested the same

child during the succeeding policy year, again there was both

bodily injury and an occurrence.                             Thus, each child suffered an

"occurrence" in each policy period in which he was molested. See

Diocese of Winona v. Interstate Fire & Casualty Co., 841 F. Supp.
894, 898-99 (D. Minn. 1992) (accepting that the church's

negligent supervision of a priest can constitute an occurrence

during each policy period in which a child was molested); Cole,
599 So. 2d at 1075-80 (holding that policy coverage is triggered

in each year that the plaintiff inhaled asbestos); Houston, 506
So. 2d at 150 ("It is reasonable to conclude that each year

during which plaintiff was exposed, he suffered additional injury

for which there may be liability which triggers [the insurer's]

risk exposure under each of its policies in effect during

plaintiff's exposure."); Ducre, 645 F. Supp. at 713 ("Thus, this

Court concludes that liability under the [insurer's] insurance

policies shall be determined on a yearly basis, and that [the

insurer] is on the risk for each plaintiff asserting a claim, for

each policy period during which the plaintiff was exposed to

silica dust."); Porter, 641 F.2d at 1145; Forty-Eight

Insulations, 633 F.2d at 1226.

        In the case of Preferred and Fireman's Fund, both of which

issued a three-year occurrence policy, the analysis is the same.8

        8
                  This is an issue of first impression in Louisiana. While the courts have dealt with multi-injury,
multi-policy cases, they have never addressed a situation where some of the policies last for more than one year.
See e.g., Cole, 599 So. 2d at 1074 n.47 (involving thirty-three one-year policies); Houston, 506 So. 2d at 150, 154

                                                        13
For each child who was molested while either of these carriers

was on the risk, coverage was triggered.                           All subsequent

molestations during the policy period constitute "repeated

exposure to conditions which unexpectedly ... result in personal

injury." (The "condition" is the Diocese's negligent supervision

of the priest during the policy period).                           Houston General argues

that the carriers issuing three-year policies should bear the

same burden as if they had issued three one-year policies, thus

allocating the loss on a per year basis.                           Not only does this

ignore policy language, but it is also inconsistent with the

intent of the parties.                     Clearly, a three-year "occurrence" policy

provides less coverage than three one-year policies, because an

occurrence could last longer than one year.                           While an insurance

policy should be interpreted in favor of the insured, we see no

justification for providing more insurance coverage than the

insured bargained for. Pareti v. Sentry Indem. Co., 536 So. 2d
417, 420 (La. 1988) ("[C]ourts have no authority to alter the

terms of policies under the guise of contractual interpretation

when the policy provisions are couched in unambiguous

language.").

        We reject the district court's use of the first encounter

rule for the following reasons.                            First, and foremost, it flouts

the policy language.                   The insurance policies all excluded bodily

injury occurring outside of the policy period.                           The district

court, and Lloyd's in oral argument, failed to recognize the

(involving one-year policies, except for one six-month policy).

                                                        14
distinction between the future damages resulting from a

molestation and the subsequent injurious acts of molestation.

All the policies cover consequential damages resulting from a

molestation.   However, a subsequent molestation, occurring

outside the policy period, is not a consequential damage of the

previous molestation; it is a new injury, with its own resulting

damages.   Second, under these facts, the first encounter rule

would prevent insurance companies from limiting their coverage to

damages emanating from molestations taking place during their

policy period.   And third, the first encounter rule is an

inequitable administrative rule.     The first encounter rule would

deny coverage to a child who was molested a day before the

Diocese procured insurance coverage, even though separate

molestations continued through the policy year and beyond.

     By allocating the loss according to the language of the

insurance policies, we avoid the shortcomings of the reductive

first encounter rule.   Each carrier is responsible, up to its

occurrence limits, for all damages emanating from molestations

that occur during the insurer's policy period.    All molestations

occurring outside a carrier's policy are covered by the insurer

on the risk at the time of the molestation.    This approach

maximizes coverage for the insured and allocates the loss

according to the policy language.

     If the number of molestations were known and the damages

from each molestation proved, we could allocate the loss

according to the actual injury suffered by each child during each

                                15
policy period.              It may be that a child's psychological injury

wrought by prolonged molestations during Preferred's three years

of coverage dwarfs the injury emanating from later molestations

during the time the Diocese was self-insured.                                      If that were the

case, Preferred would bear a significantly larger amount of the

loss than would the Diocese, Lloyd's and Interstate.

Unfortunately, there is no measure of the amount of damage caused

by the molestations during any given policy period.                                           This leaves

us with only one avenue under the policies' language, which is to

allocate the loss based upon the policy periods.                                         Thus, the loss

is apportioned according to the percentage of the time or period

of each child's molestation occurring during each carrier's

policy period.

B.     Diocese v. Gallagher & Diocese v. Bassett

        1. Diocese v. Gallagher

        In Gallagher's self-insurance proposal, it stated that the

Diocese would be "fully insured" for all losses above the loss

fund.       Gallagher, however, failed to mention that once Lloyd's

reached its excess aggregate limit of $450,000, the Diocese would

again be obligated to make payments toward the occurrence claims

before Interstate's excess policy kicked in.9 The Diocese,

stunned by this gap in coverage, filed suit against Gallagher.

While the Diocese filed within the ten-year prescriptive period

for a contractual claim, it missed the one-year period for a

        9
                   Again, the amount of the Diocese's exposure after the exhaustion of Lloyd's excess aggregate
policy is unclear. The district court can resolve this issue on remand.

                                                        16
delictual claim.   Thus, the Diocese's suit against Gallagher will

rise or fall on the nature of its claim.

     An insured's claim against its insurance agent is

contractual only when the agent expressly warrants a specific

result; otherwise, it is delictual. Roger v. Dufrene, 613 So. 2d
947, 949 (La. 1993).   In Roger, the insured, Crewboats, Inc.,

told its agent "to provide full coverage for Crewboats, Inc.

under all circumstances." Id. at 950.    But when a Crewboats'

employee, using his own vehicle for business purposes, injured

another motorist in a collision, Crewboats found a gaping hole in

its "full coverage ... under all circumstances."   To its chagrin,

Crewboats discovered that it was on the hook for the motorist's

claim because its automobile policy did not include an

endorsement covering employee-owned vehicles used for business

purposes.   In an attempt to lessen the sting, Crewboats filed a

third-party claim against its agent, but because the prescriptive

period for a delictual claim had passed, it was forced to argue

that its claim was contractual.    On appeal, the Louisiana Supreme

Court dismissed Crewboats' third-party claim, holding that the

claim was delictual because the insurance agent did not

specifically warrant that insurance coverage for employee-owned

vehicles would be obtained. Id.

     The Diocese argues that Gallagher warranted a specific

result when it told the Diocese: "If the [Loss] Fund is

exhausted, the Diocese[] becomes fully insured."   Following

Roger's lead, the issue is whether Gallagher specifically

                                  17
warranted the amount of the Diocese's coverage, and we conclude

that it did.   Indeed, we find it difficult to see how Gallagher

could have been more specific.   The Diocese's claim is

contractual because Gallagher specifically stated that the loss

fund capped the Diocese's potential yearly exposure, which it

certainly did not.

     2. Diocese v. Bassett

     The Diocese alleges that Bassett, the administrator of the

self-insurance plan, breached its obligation to properly

administer the plan by refusing to contribute money from the loss

fund toward the settlement of molestation claims arising before

July 1981, when the self-insurance program began.   The Diocese

has offered no summary judgment evidence supporting any breach of

duty.   Bassett refused to allocate loss fund monies toward

molestation claims arising before 1981 because those claims were

not covered by the insurance policies it was administering.

C.   Pacific v. Louisiana Companies

     Pacific, an excess carrier, sued its insurance agent,

Louisiana Companies, alleging that the agent failed to inform

Pacific that Preferred's policy (the underlying primary insurance

policy) was a three-year policy instead of a one-year policy.

Because of the alleged omission, Pacific believed Preferred's

coverage to be $500,000 per year, instead of $500,000 per

occurrence for three years.   Based upon our analysis above,

                                 18
Preferred's coverage is $500,000 per occurrence per policy

period.   Thus, the court erred when it granted Louisiana

Companies' motion for summary judgment.

D.   Interest

     The district court awarded interest, but failed to state

when it should begin to run.   Some parties argue that only post-

judgment interest should be awarded, but because we reverse and

remand for reallocation of the loss, there is no post-judgment

interest. The only other contention on interest charge is

Interstate's argument that Pacific should be responsible for

prejudgment interest to the extent that it failed to fully

participate in the settlement of the molestation claims, and we

agree. See Trustees of the Univ. of Pa. v. Lexington Ins. Co.,

815 F.2d 890, 908-09 (3d Cir. 1987); Mini Togs Products, Inc. v.

Wallace, 513 So. 2d 867, 872-75 (La. Ct. App.), writ denied, 515
So. 2d 447 (La. 1987).

                                19
                           III. Conclusion

     When a child was first molested during a policy period,

there was an occurrence triggering coverage.    All subsequent

molestations of that child during the policy period, as well as

the resulting injury to the child's parents, arose out of that

same occurrence.   Damages are attributed equally to the

occurrence of molestations within the respective policy periods,

and the loss is allocated according to the percentage of the time

or period of each child's molestation occurring during each

insurer's policy period.

     We AFFIRM the court's judgment in favor of Bassett; the

judgment is otherwise REVERSED.    We REMAND the case to the

district court for further proceedings consistent with this

opinion.

AFFIRMED in Part; REVERSED in Part and REMANDED.

                                  20