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To defray his legal costs in defamation suits, Cosby turns to his insurance

 
Facing several women’s defamation suits, Bill Cosby is using AIG coverage.
Facing several women’s defamation suits, Bill Cosby is using AIG coverage.
Published March 14, 2016

In defending himself against lawsuits from women who say he sexually assaulted and then defamed them, Bill Cosby is facing mountainous legal expenses.

Luckily for him, he has home­owners insurance.

That is the surprising tool Cosby is using to pay his legal fees as he battles defamation claims filed by 10 women in three states.

Cosby's insurer, American International Group, better known as AIG, has gone to court to deny him coverage, arguing, among other things, that it should not have to cover claims that arose from alleged acts of sexual misconduct.

But so far, Cosby is winning.

"The court finds that plaintiff has a duty to defend," Judge Beverly Reid O'Connell of U.S. District Court in Los Angeles said in a ruling in November that favored Cosby.

Though it may seem novel, Cosby's policy is a lot like those held by millions of affluent home­owners and other wealthy people who bolster their insurance coverage so that they are protected if they are ever sued.

Roger Clemens, O.J. Simpson and Bill Clinton have used so-called personal injury coverage, typically tied into their homeowners policy, to battle suits.

In 1994, Clinton was fending off accusations that he had sexually harassed Paula Corbin Jones, and that he had his aides cast her account as a lie when they denied the incident occurred. Jones sued on defamation and other grounds, and Clinton's insurers helped defray the costs. Clinton's lawyer said that Clinton was surprised when he learned his policies would help cover the legal expenses.

The typical homeowners policy covers bodily injury, the sort of claim that arises when the mail carrier slips on your broken front stoop. But many wealthy Americans, with assets to protect, often pay for enhanced "personal injury" clauses or umbrella policies that provide coverage in a range of other circumstances, including lawsuits that accuse the policyholder of defamation. Two decades ago, the insurance industry estimated that 7 million people in the United States held such policies, though the Insurance Information Institute said it does not have current estimates.

"I don't think that celebrities go out looking for defamation coverage. I think they buy quality insurance, and that happens to include defamation coverage," said Randy Maniloff, an insurance coverage lawyer in Philadelphia.

But in Cosby's case, the defamation suit has become a popular weapon for women who say the entertainer sexually assaulted them decades ago. When they came forward, it was too late to sue on sexual assault grounds, because the statute of limitations had expired. So women have sued him for defamation instead, asserting they were branded as liars when Cosby's lawyers and other representatives dismissed their allegations as fabrications.

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To cover legal costs, Cosby is relying on the insurance policies he had on homes in Massachusetts and California, each with limited liability coverage of $1 million, court records show. Cosby and his wife, Camille, also have an extra liability policy with coverage of $35 million.

AIG is fighting in federal court in Massachusetts and California and in state court in Pennsylvania to reclaim its legal costs, while also arguing it should not be on the hook for any final judgments.