Q: There's employment practices liability coverage for sexual misconduct or harassment in the workplace, but what if someone outside the work environment claims sexual misconduct or harassment? Can homeowners insurance or a personal umbrella address this?
Response 1: A few high net-worth personal lines policies address this issue.
Response 2: Probably not. Sexual misconduct is an intentional act that is not fortuitous and is therefore never an insured against loss.
Response 3: The ISO HO policy excludes: "Bodily injury" or "property damage" arising out of sexual molestation, corporal punishment or physical or mental abuse.
A personal umbrella may grant broader coverage, but most umbrellas today follow form, which means the exclusions in the underlying policy apply to the umbrella as well. Check the specific umbrellas available to your agency to see if any have broader language.
For example, although my own personal umbrella does not include a specific Sexual Molestation exclusion, it of course still includes an exclusion for any intentional injury. It would be up to a court to define “intentional.” In the meantime, my policy would provide defense coverage.
Response 4: Both the ISO HO and personal umbrella policies specifically exclude this exposure. The exclusion makes no reference to any particular “insured," which means it is absolute:
7. Sexual Molestation, Corporal Punishment Or Physical Or Mental Abuse
"Bodily injury" or "property damage" arising out of sexual molestation, corporal punishment or physical or mental abuse.
Sexual molestation is not a personal injury offense, either. I'm not aware of any personal lines coverage for this exposure.
Response 5: Most likely only if exclusionary wording is poorly drafted. Policies generally exclude intentional losses, and courts have historically found that sexual harassment and molestation are intentional losses.
If the insured is not the perpetrator, and there's a Separation of Insureds clause, the insured may have coverage if the policy provides bodily and/or personal injury coverage. In general, though, policies often include wording like the following to extend the exclusion to all insureds if any insured engages in an intentional act:
Expected Or Intended Injury
"Bodily injury" or "property damage" which is expected or intended by an "insured", even if the resulting "bodily injury" or "property damage":
a. Is of a different kind, quality or degree than initially expected or intended;
b. Is sustained by a different person, entity or property than initially expected or intended.
However, this Exclusion E.1. does not apply to "bodily injury" or "property damage" resulting from the use of reasonable force by an "insured" to protect persons or property;
If the perp isn't an insured, there may be coverage if an insured is allegedly liable and the nature of the occurrence is covered.
Response 6: An HO policy or PUP might provide defense until proven guilty, but many have added exclusions over the years. You’d have to review each form to determine whether it contains a specific exclusion. Also consider that willful acts and intentional acts are often excluded by the form or the insurance code. Sexual misconduct coverage denials often rely on those exclusions.
Response 7: No insurance policy covers an illegal act. Take a look at an EPLI form—while it may provide defense for these acts, it will not pay if the person is found guilty. Likewise, an HO policy specifically excludes such a loss.
There may be a case for defense cost protection based on the coverage grant in the Coverage E insuring agreement, but don't count on it. It's unlikely that such protection can be purchased. What carrier wants to insure an unlawful act, especially one so heinous?
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