Employment Practices Exclusion of D&O Policy Bars Coverage for Employee Wrongful Death Lawsuit
The United States Court of Appeals for the Sixth Circuit, applying Ohio law, has held that a directors and officers policy’s employment practices exclusion barred coverage for a wrongful death suit alleging failure to maintain safe working conditions. Roadway Servs., Inc. v. Travelers Cas. & Surety Co. of Am., 2022 WL 17986131 (6th Cir. Dec. 29, 2022).
An employee’s wife brought a wrongful death lawsuit against her husband’s former employer alleging failure to maintain safe working conditions after her husband was struck by a vehicle on the job. The employer sought coverage for the lawsuit under its directors and officers policy, which insured the employer for losses “resulting from any claim” made during the policy period. The insurer denied coverage based on the policy’s employment practices exclusion, which barred coverage for any claim “based upon or arising out of any employment related wrongful act.”
In the ensuing coverage litigation, the district court determined that the relevant policy language was ambiguous and, on that basis, entered summary judgment for the insured. The Sixth Circuit reversed and remanded the case with instructions to enter judgment for the insurer.
First, the court rejected the insured’s argument that the exception to the bodily injury exclusion, relevant to claims for mental anguish “with respect to any employment related wrongful act,” acted as a carve back to the employment practices exclusion such that the exclusion did not bar coverage. The court reasoned that the carve back to the exclusion was not a grant of coverage.
Second, the court rejected the insured’s argument that the employment practices exclusion’s prefatory language “based upon or arising out of” encompassed only a narrow set of physical injury claims brought by an employee and would not include a wrongful death suit brought by an employee’s widow. According to the court, “arising out of” means causally related to the occurrence. The court held that a claim can “arise out of” a wrongful act, be a claim for injury brought “with respect to” that wrongful act, and also “result from” the same wrongful act such that, while coverage may be triggered in the first instance, the claim may nevertheless implicate the exclusion.
Third, the court rejected the insured’s argument that the employment practices exclusion did not apply because the claim could be described as both “arising out of” an employment-related wrongful act and as being brought “with respect to” such an act or as a loss “resulting from” such an act. The court held that the insured’s reading would render the exclusion superfluous because any triggering circumstances also would trigger coverage under the applicable insuring agreement.
Finally, the court rejected the insured’s argument that the policy was ambiguous, observing that the insuring agreement and bodily injury and employment-related wrongful act exclusions could be read together naturally such that no conflict existed.