Q: An insured health care organization with directors & officers and employment practices liability insurance policies asked its agent if sexual harassment was covered on its D&O policy.

Is sexual harassment covered on a D&O policy? Or only an EPLI?

Response 1: The client's EPLI insuring agreement's definition of “wrongful employment practice" includes sexual harassment alleged by an employee, volunteer, intern or independent contractor.

But, since you're asking about the D&O policy of a health care organization specifically, I suspect the insured is concerned about sexual harassment of a third party, such as a patient or facility resident.

Your client's D&O insuring agreement has a broad definition of a “wrongful act" that is restricted by several exclusions that may eliminate coverage for sexual harassment of a third party. Exclusions apply to any claim based upon, alleging, arising out of, or in any way relating to, directly or indirectly:

• Any actual or alleged bodily injury, sickness, disease, death or loss of consortium, with notable exceptions for emotional distress, mental anguish and humiliation.
• Any actual or alleged act, error, omission, misstatement, misleading statement or neglect of any insured in the rendering of or failure to render any health care services.
• Any insured committing any intentionally dishonest or fraudulent act or omission, or committing any willful violation of any statute, rule or law;

The organization's professional liability coverage may be a better source of protection against sexual harassment allegations from third parties.

This is a reminder that an agent should often tread very carefully by avoiding affirmative coverage assertions to a client with regard to any insurance policy, and by advising clients to submit any claim to a carrier when there is a possibility—even a remote one—that the policy will cover the claim.

Response 2: While the D&O policy does not include sexual harassment, the EPLI policy does include both wrongful employment practice and third-party wrongful act coverage. Here's what it says in the Definitions section of the EPLI policy: 

CC. Wrongful Employment Practice means any actual or alleged:

1. Discrimination.

2. Retaliation;

3. Sexual Harassment;

4. Workplace Harassment;

5. Wrongful Termination;

6. Breach of Employment Agreement;

7. Violation of the Family Medical Leave Act;

8. Employment-related misrepresentation;

9. Defamation, including libel or slander, or invasion of privacy;

10. Failure to create or enforce adequate workplace or employment policies and procedures, employ or promote, or grant tenure;

11. Wrongful discipline, denial of training, deprivation of career opportunity, denial or deprivation of seniority, or evaluation; and

12. Negligent hiring, supervision of others, training, or retention, but only if such act is alleged in connection with a Wrongful Employment Practice set forth in 1. through 11. above.

Z. Third Party Wrongful Act means, with respect to any natural person other than a Claimant, any actual or alleged:

1. disparate treatment in violation of any discrimination law or because he or she is or claims to be a member of a class which is or is alleged to be legally-protected; or

2. unwelcome sexual advances, requests for sexual favors or any other conduct of a sexual nature which violates the civil rights of any such person, committed or attempted by any Insured.

Response 3: I would reach out to the underwriter requesting their interpretation of the potential coverage limitations. This response should be in a written format specifically addressing the policy language concerning sexual abuse and harassment.

I would also request that underwriting offer a proposal specifically for sexual harassment coverage as a limit or as a sublimit. You also may want to explore an excess policy on behalf of the named insured. If coverage is declined, this must be signed off at every level of management.

While we're here, I did notice the policy included a declination of expanded defense limits available to the named insured. I would presume that the policyholder was clearly made aware of the coverage limitation with a sign off from multiple persons within management of the named insured—right?

Response 4: My advice to the insured is that sexual harassment falls under the definition of wrongful employment practice.

Sexual harassment is very rarely "accidental." There is an exclusion in the D&O policy for an intentionally dishonest or fraudulent act. I'm not sure if the claims department would consider this exclusion to also exclude sexual harassment. Claims can be quite precise based on the circumstances and it may be difficult to determine coverage until after the event occurs.

This question was originally submitted by an agent through the Big “I" Virtual University's (VU) Ask an Expert service, with responses curated from multiple VU faculty members. Answers to other coverage questions are available on the VU website. If you need help accessing the website, request login information.

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