Business Law Journal

For example, a real property policy that provides coverage up to the dollar amount equal to the replacement cost of the insured dwelling may also contain a sublimit for water damage claims that restricts the maximum payout for water-related claims to an amount that is less than the primary policy limit.  If the policyholder files a claim for water damage to its property, the insurer may have no obligation to pay more than the sublimit if all of the damage is caused by water intrusion, regardless of the higher primary coverage limits available under the policy.   

Many policyholders will first discover the existence of sublimits and their impact after they file a claim and learn that the total amount they will be reimbursed under the policy is the sublimit, which is typically much less than the amount they would receive under the policy’s primary coverage limits.  A recent federal court decision illustrates the impact a sublimit can have on a claim. 

In Great American Insurance Co. v. Bigger Dream LLC et al., Case No. 3:24-cv-01309 (Middle District of Tennessee, March 11, 2026), female patrons of a gym filed lawsuits against the gym and one of the gym’s trainers, alleging that the trainer had stolen intimate photographs and videos from the patrons’ mobile phones under the guise of installing a fitness app on their devises, and secretly photographing the patrons while they were undressing.  The gym tendered the lawsuits to its insurer (Great American) for coverage under its policies.  The policy’s commercial general liability coverage form provided up to $1,000,000 in coverage for bodily injury, property damage, and personal and advertising injury claims; and its professional liability form provided up to $1,000,000 in coverage for errors and omissions in rendering professional services.  The policy also contained an “abuse and molestation” coverage form that set a coverage limit of $100,000 for “abuse” claims,  which the policy defined, in relevant part, as any actual, threatened, or alleged act, error, omission, conduct, or misconduct of “sexual behavior, sexual misconduct or misconduct, sexual battery, sexual abuse, or sexual molestation, of or directed at a person” or “non-sexual assault, non-sexual battery, or non-sexual abuse, directed at a person.” 

Great American filed a declaratory relief action seeking a judicial declaration that the maximum amount of coverage available under the policy was $100,000 under the “abuse and molestation” coverage form because the patrons’ lawsuits alleged “abuse” as defined by the policy.  The gym argued that coverage was not limited to $100,000 because the trainer’s alleged copying of intimate media from the patrons’ phones and taking unauthorized photographs were acts directed at the patrons’ electronic data and not “at a person”; and thus, did not fall within the policy’s definition of “abuse.”  The gym also argued that the patrons’ claims of emotional distress from invasion of their privacy and negligence against the gym for negligently supervising the trainer triggered coverage under the policy’s commercial general liability and professional liability coverage forms which, in turn, meant that their higher coverage limits applied to the underlying claims. 

The court ruled that the maximum amount of coverage available under the policy was the “abuse and molestation” coverage form’s $100,000 sublimit.  The court opined that the trainer’s copying of electronic data and taking unauthorized photographs was “abuse” as defined by the policy because it was done “for the purpose of sexual arousal or gratification” and the definition of “abuse” included “sexual and non-sexual behavior or conduct of any kind directed to a person.”  The court also held that there was no potential for coverage under the commercial general liability and professional liability coverages because both coverages contained exclusions for “abuse” claims, and since all of the underlying claims arose out of the trainer’s acts of “abuse,” the higher limits available under the commercial general liability and professional liability coverages did not apply.

The Bigger Dream decision serves as a cautionary tale for policyholders to carefully review their policies for sublimits that could significantly reduce the amount of coverage available for a claim to which the sublimit applies.  If a policyholder discovers that one of its policies contains a sublimit, the policyholder should discuss with its broker available options for ensuring it has adequate coverage for a potential claim, including procuring a separate insurance policy that covers the same type of risk as the sublimit but has higher coverage limits than what would otherwise be available if only the sublimit applies. 

This AALRR publication is intended for informational purposes only and should not be relied upon in reaching a conclusion in a particular area of law. Applicability of the legal principles discussed may differ substantially in individual situations. Receipt of this or any other AALRR publication does not create an attorney-client relationship. The Firm is not responsible for inadvertent errors that may occur in the publishing process.

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