Hospitality Industry Insurance Risks: "Employment Practices Liability Insurance" May Contain "Exclusions For Intentional Acts" That May Deny Coverage To Hotel Executives In "Disparated Treatment And Sexual Harassment" Cases

“…a panel of arbitrators found that (the executive)  “was well acquainted with the company’s policy on sexual harassment and other acts of inappropriate conduct.”  They further found that (the executive)  “did not comply with the policy on sexual harassment and that his refusal was willful.” 

“…attorneys should remind their clients to carefully review their existing EPLI policies and to understand all exclusions that may apply, as well as to be mindful of such exclusions when negotiating the purchase of a new EPLI policy…”

Exclusions typically found in EPLI policies include exclusions for Fair Labor Standards Act claims, National Labor Relations Board decisions, ERISA matters, costs of complying with accommodations mandated by the Americans with Disabilities Act, and claims arising out of facts or circumstances known to the employer before the effective date of the policy.  Another possible exclusion is for intentional acts.  This exclusion generally is intended to eliminate coverage if an employer acts with “wonton, willful, reckless, or intentional disregard for any laws.” This exclusion is a carryover from other policies traditionally offered, including commercial general liability policies and workers compensation policies.

The question that arises is whether an intentional acts exclusion precludes coverage for disparate treatment or sexual harassment claims.  By their very nature, disparate treatment and sexual harassment require some type of intentional conduct.  If the intentional acts exclusion is interpreted broadly enough, an allegation of disparate treatment or sexual harassment may provide the insurer grounds for denying coverage under the policy.

For more:  http://www.lexology.com/library/detail.aspx?g=54d3b2ac-48f1-497b-ac65-ee0e32826815