Workplace Labor Update - Who Is Younger Under the ADEA? – July 1996

An employer who was sued for sexual harassment had no insurance coverage under its business policy and the insurer had no obligation to defend the suit, a federal appeals court recently ruled. Vienna Family Medical Associates v Allstate Insurance, 78 F.3d 580, 1996 WL 9380, (4th Cir. 1996). Intentional wrongdoing, such as the conduct alleged in the lawsuit, was not covered by the policy. The former office manager of a family medical association sued the association and two of its officers, claiming she was subjected to harassment, discrimination, and “constructive” discharge, resulting from “negligent, willful and intentional acts.” The case settled, but the employer's insurance company refused to defend the suit or pay the settlement. The employer had a comprehensive business policy which covered claims for “accidental events, personal injury or advertising injury” and also obligated the insurance company to defend a lawsuit based on one of these events even if the suit was groundless. The policy excluded intentional conduct from the definition of the types of claims covered. The appeals court with jurisdiction over Maryland, West Virginia and other mid-Atlantic states determined that although the lawsuit referred to “negligent” acts the suit was really based upon claims of intentional conduct. The suit claimed the office manager was subjected to a hostile work environment, retaliation, breach of contract, and intentional infliction of emotional distress -- all involving intentional conduct. Under the policy, the court ruled, the insurer had no obligation to cover such claims. The court also stated that if the policy was “reasonably susceptible” of an interpretation that the claims made in the suit might be covered, the insurer may be required to defend. In this case, the court found that only intentional conduct was alleged; as the court determined intentional conduct to be outside the policy's coverage, the insurer was not required to defend the employer. Although the case was decided under West Virginia law, it illustrates the importance of the particular provisions of insurance policies in defining the scope of coverage. Employers should carefully review their policies with counsel to determine the extent and nature of coverage applicable to employment disputes.