Applying Michigan law, a federal district court has held that an employment practices liability insurer had a duty to defend a lawsuit that derived in part from facts or circumstances that were the subject of an EEOC claim and lawsuit filed prior to the policy period. City of Grosse Pointe v. U.S. Specialty Ins. Co., 2020 WL 3961481 (E.D. Mich. July 13, 2020).
In 2018, during the policy period, a public safety officer for the City of Grosse Pointe, Michigan filed a lawsuit against the City’s Department of Public Safety alleging that she had been retaliated and discriminated against on the basis of her sex. Previously, in 2011, the officer filed an EEOC charge against the Department alleging discrimination and a lawsuit asserting that the Department had retaliated against her for filing the EEOC claim.
The insurer issued an EPL policy to the insured for four consecutive years from October 2016 to October 2020. The policy provided specified coverage for an “employment practices wrongful act.” The policy stated that all claims that “arise as a result of related ‘employment practices wrongful acts’ committed by the insured will be deemed to have taken place at the time of the first such ‘employment practices wrongful act.’” The policy excluded coverage for “‘damages,’ ‘claims,’ or ‘suits’ alleging, based upon, arising out of, attributable to, directly or indirectly resulting from, in consequence of, or in any way involving…[a]ny claim deriving in whole or in part from any fact, series of facts or circumstances, or matters asserted or alleged in any prior or pending legal action or litigation, administrative or regulatory proceeding, claim, ‘suit,’ demand, arbitration, decree or judgment against any insured” prior to the beginning of the policy period (the “Prior and Pending Exclusion”). The insurer denied coverage for the 2018 lawsuit based on these policy provisions, and the insured brought suit seeking a declaratory judgment that the insurer owed a duty to defend and indemnify the insured and seeking damages for breach of contract. Both parties filed motions for summary judgment.
The court granted the insured’s motion for partial summary judgment and denied the insurer’s motion for summary judgment. The court held that the insurer had a duty to defend the 2018 lawsuit because the complaint included, in part, allegations of conduct that occurred after the insurer came on the risk. Specifically, the court concluded that two of the counts in the 2018 lawsuit alleged wrongful acts that occurred in 2017 and 2018, and that such allegations were not “related” to the 2011 EEOC claim or lawsuit. The court further rejected the insurer’s argument that the entirety of the 2018 lawsuit was based upon, arose out of, was attributable to, directly or indirectly resulted from, was in consequence of, in any way involved, or derived in whole or in part from the facts, series of facts or circumstances, or matters asserted or alleged in the 2011 EEOC claim and lawsuit. Rather, the court held that the 2011 EEOC claim and lawsuit contained allegations that the insured had discriminated against the claimant “on the basis of her sex on a different set of facts,” and thus, the Prior and Pending Exclusion did not bar coverage.