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Mobilicity coverage issues in sexual misconduct

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Sexual misconduct by a company executive or employee can result in a wide variety of legal claims against the company itself. Sexual misconduct allegations can spawn litigation beyond claims by the alleged victim as well.

For example, former Uber CEO Travis Kalanick was sued by an early investor in the company following widely-publicized allegations of sexual harassment and gender discrimination. It is also not uncommon for the alleged perpetrator to file a suit claiming defamation following public allegations of sexual misconduct.

Sexual misconduct allegations can spawn...

For example, Dov Charney, former CEO of American Apparel, sued his former company and a hedge fund for defamation, alleging that both sought to damage his personal and professional reputation by suggesting to third parties that he had engaged in criminal misconduct of a sexual nature. Because no single insurance policy will provide coverage for every type of claim that may result from misconduct allegations, policyholders should look carefully at the following coverages:. Employment practices liability insurance EPLI is the most likely source of coverage for sexual misconduct claims asserted by employees.

EPLI generally covers claims made by employees based on employment-related misconduct of their superiors or co-workers.

Most policies expressly cover claims for sexual harassment, wrongful termination, discrimination and retaliation and some provide coverage for additional employment-related claims such as defamation or negligent retention and supervision.

Some EPLI policies also cover claims that are made by non-employees, such as customers or vendors, in addition to claims by employees. A significant limitation is the common EPLI exclusion for claims alleging bodily injury.

Thus, while claims for verbal sexual harassment may be covered under an EPLI policy, claims for physical sexual assault typically are not.

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If a claimant alleges both verbal and physical harassment or assault, an EPLI policy may provide at least partial coverage. Some claims arising out of alleged sexual misconduct may be covered under a general liability GL policy.

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Thus, a defamation suit by an accused harasser, like the American Apparel lawsuit, could be covered under a GL policy. Another limitation on coverage under GL policies is the standard exclusion for claims made by employees of the policyholder. Some courts, however, have found that such claims are covered where the alleged misconduct occurred outside the workplace or were otherwise unrelated to employment.

Many policies also cover claims against the entity itself, but such coverage is generally narrower than the coverage for insured individuals. The "Mobilicity coverage issues in sexual misconduct" damage caused by sexual misconduct allegations may be more costly to a business than any other litigation expenses it will incur. When a triggering event occurs, crisis management insurance typically pays for the hiring of a public relations firm to respond to the issue. Reputation risk insurance generally provides coverage for actual business loss sustained as the result of a negative publicity event.

Coverages and policy forms for the two types of insurance vary widely, and sexual misconduct-related events may or may not be covered, depending on the coverage purchased.

When a sexual misconduct claim is made against a company or one of its executives or employees, the company should immediately report the claim to all of its liability carriers, even if it is unclear whether there may be coverage under a given policy.

When tendering claims and engaging in negotiations with insurers, policyholders and risk managers should not accept at face value any conventional wisdom on what types of liability are covered. If an insurance carrier initially denies coverage, a company should not accept this response without testing its basis and, if necessary, consulting insurance recovery counsel.

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