No Coverage under EPL Policy for “Wrongful Act” Committed Against Non-Employee
The Superior Court of Pennsylvania has held that two patients’ lawsuit against their therapist alleging various misdeeds did not involve a “Wrongful Act” under an EPL policy because the patients are not employees of the insured psychiatric center. Penn Psychiatric Ctr., Inc. v. U.S. Liab. Ins. Co., 2021 WL 2460789 (Pa. Super. Ct. June 17, 2021).
The psychiatric center had purchased an EPL policy that provided indemnity and defense coverage for actions that sought to impose liability on the insured for a Wrongful Act. The policy defined a Wrongful Act to include, among other acts, discrimination, harassment, and a “Workplace Tort” “involving and brought by any Employee, former Employee, or applicant for employment.” The policy defined a “Workplace Tort” as “employment-related . . . negligent supervision, training or evaluation,” among other torts.
Two former patients sued the psychiatric center and its employee-therapist for alleged misconduct, including sexual assault, sexual abuse, and HIPPA violations. The complaint included causes of action against the psychiatric center for negligent hiring and negligent supervision. The psychiatric center reported the claim to its EPL insurer, the insurer denied coverage, and then the psychiatric center filed a declaratory judgment action against the insurer seeking coverage under the policy. The trial court dismissed the action because the patients had no employment relationship with the insurer. The psychiatric center appealed.
The Superior Court of Pennsylvania affirmed the trial court, rejecting the insured’s argument that all negligent supervision causes of action are employment-related even if brought by non-employees. The court explained that the psychiatric center’s argument was unacceptable because it would render the Workplace Tort definition’s “employment-related” language surplusage with respect to most of the enumerated Workplace Torts. The court distinguished between negligent supervision of an employee that causes harm to a third party and negligent supervision of an employee that causes harm to another employee and reasoned that under the policy’s definition, only the latter claim would be covered. Additionally, the court highlighted that the policy’s Wrongful Act definition itself unambiguously limited coverage to claims brought by former, current, or prospective employees.