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NJ Court Holds Employer’s Insurance Did Not Cover Sexual Harassment Claims

The Federal District Court for the District of New Jersey recently issued an opinion addressing whether an employer’s insurance policy provides coverage for allegations of sexual harassment against an employee.  U.S. Magistrate Judge Cathy Waldor issued an unpublished decision agreeing with defendant Lloyd’s of London that the policy it had underwritten did not cover an ambulance service’s employee’s sexual harassment lawsuit.

The Insurance Policy

Aaron Ambulance’s main insurance policy contained a clause that excluded from professional liability coverage allegations of sexual misconduct, sexual abuse, and child abuse.  It also excluded claims brought by one insured employee against another for discrimination.  However, Aaron Ambulance had purchased a coverage extension, such that claims arising out of sexual misconduct, sexual abuse, and child abuse would be covered, as long as the sublimit of coverage threshold was met.  The policy extension was memorialized in an endorsement.  The terms of the extension were also subject to the condition that the endorsement did not change any other terms or conditions of the policy.

The Claim

An employee of Aaron Ambulance filed a suit against her employer, alleging that she was sexually harassed and abused while employed by Aaron.  Underwriters at Lloyd’s denied coverage to Aaron for the lawsuit, on grounds that the extension of coverage for sexual misconduct did not insure claims filed by employees—it only covered claims of sexual misconduct filed by patients.  Aaron Ambulance claimed that the policy gave rise to a reasonable expectation that the extension would cover employment-related sexual harassment claims.

The Decision

The court ultimately sided with the Underwriters, Lloyd’s of London.  The judge found that the endorsement did not extend to employment practices coverage (claims filed by employees), and was restricted to professional liability (claims filed by patients).  The Court described the alternate reading as generous interpretation, and used a “plain reading” approach in conjunction with references to other exclusions in the policy (excluding claims brought by employees for discrimination).  In other words, the main policy specifically excluded employee claims of sexual harassment, and the coverage extension simply allowed coverage for claims of harassment filed by patients—that is why the two passages (the main form and the extension) were not inconsistent with one another.  On this basis the Court found that Aaron Ambulance could have held no reasonable expectation that the policy extended to cover sexual harassment claims filed by employees.

Philadelphia Sexual Harassment Lawyers at Sidkoff, Pincus & Green P.C. Handle Sexual Harassment Claims

At Sidkoff, Pincus & Green, we represent individuals in all types of employment related disputes and litigation, including claims for sexual harassment. To learn more about how our sexual harassment lawyers in Philadelphia can help you, call us today at 215-574-0600 or contact us online.