Applying Virginia law, a federal district court has held that there is no coverage under an employment practices liability policy where the insured failed to provide notice of an employment discrimination charge for nearly two years, in violation of the policy’s notice condition. E. Dillon & Co. v. Travelers Cas. & Sur. Co. of Am., 2015 WL 3657713 (W.D.Va. June 12, 2015).
A former employee filed a charge of discrimination against the insured company with the Equal Employment Opportunity Commission (EEOC) in April 2011. The company hired counsel to defend the charge. The EEOC dismissed the charge and issued a right to sue notice, but then reversed its position and issued a finding that there was reasonable cause to believe that the company had violated a federal anti-discrimination statute. At the EEOC’s urging, the company and the employee agreed to attend a conciliation meeting in March 2013. Weeks before that meeting, the company notified its employment liability insurer of the discrimination charge. The insurer denied coverage pursuant to the provision in the policy requiring, as a condition precedent to coverage, that the insured provide written notice of the particulars of a claim “as soon as practicable.” After the conciliation was unsuccessful, the employee filed suit against the company. Despite being served with the complaint and summons in September 2013, the company did not inform its insurer of the suit until February 2014. The insurer again denied coverage. After the company settled the claim, it filed a declaratory judgment action against the insurer to recover its defense expenses and the amount of the settlement payment.
The court granted summary judgment in favor of the insurer, concluding that there was no coverage based on the insured’s failure to satisfy the policy’s notice condition precedent. The court held that the company’s two-year delay in providing notice of the EEOC charge was a material breach of the policy. The court explained that it was not reasonable for the company to wait until a lawsuit would be filed before putting its insurer on notice. The court also observed that the insurer was clearly prejudiced by the company’s delay, as it was unable to investigate the claim or control the defense until after the EEOC found there was reasonable cause to conclude the company discriminated against the employee. The court further held that, even if there were no prejudice, the length of the company’s delay would alone be sufficient to find a material breach, as a two-year delay far exceeds the length of delays that have been deemed unreasonable as a matter of law by Virginia courts.