Employment Practices Exclusion Bars D&O Coverage for Retaliation Claims

The United States District Court for the Western District of Louisiana, applying Louisiana law, has held that an employment practices exclusion barred coverage under a D&O liability policy for retaliation claims arising out of alleged whistleblower activity, limiting coverage to the policy’s EPL coverage part. Burney v. Madison Parish Hosp. Serv. Dist., 2026 WL 921770 (W.D. La. Mar. 2, 2026).

The claimant, a hospital employee, alleged that the insured employer and its officers retaliated against her after she reported suspected unlawful conduct to internal management and government authorities, asserting claims under 42 U.S.C. § 1983 and Louisiana’s anti-retaliation statute. The insured tendered the lawsuit to its insurer, seeking coverage under the policy’s EPL and D&O coverage parts. The insurer contended that only the policy’s EPL coverage was potentially implicated.

Although the court acknowledged that the claims could facially fall within the policy’s D&O coverage as “Wrongful Acts,” it held that coverage was precluded by an exclusion for claims “alleging, arising out of, based upon or attributable to” any Employment Practices Wrongful Act (“EPWA”). The policy defined EPWAs to expressly include, in relevant part, actual or alleged employment-related retaliation and violation of § 1983. Central to the court’s analysis was its interpretation of the phrase “arising out of,” which it characterized as broad and comprehensive under Louisiana law. The court explained that the phrase encompasses claims that “originate from,” “grow out of,” or are “incident to” the excluded conduct. Applying this standard, the court concluded that the plaintiff’s § 1983 and state-law retaliation claims were all connected to alleged employment-related retaliation. Because the factual bases of the claims flowed from that alleged retaliation, the court concluded that they necessarily “arose out of” EPWAs and were therefore excluded from D&O coverage.

The court rejected the plaintiff’s argument that the policy’s “separate limits of liability” provision created ambiguity or preserved overlapping coverage under the policy’s D&O and EPL coverage parts. Instead, it held that the policy unambiguously distinguished between coverage parts and validly excluded claims that fall within EPL from D&O coverage, preventing duplicative recovery across coverage parts.