Federal Court Applying Iowa Law Holds No Coverage Available for Sexual Harassment Action Relating Back to Claims Predating Retroactive Date
The United States District Court for the Southern District of Iowa, applying Iowa law, held that an insurer owed no duty to defend or indemnify its insured in connection with a sexual harassment action by the United States Equal Employment Opportunity Commission (“EEOC”) because the alleged employment practices at issue were interrelated with earlier claims that predated the policy’s retroactive date. Illinois Cas. Co. v. Los Agaves, Inc., 2026 WL 1849905 (S.D. Iowa May 21, 2026).
In 2016, a female employee filed a sexual harassment complaint against the insured, a restaurant chain, with the Iowa Civil Rights Commission. In 2023, the insured purchased an insurance policy with an Employment-Related Practices Liability endorsement (“EPL Endorsement”). The EPL Endorsement had an April 6, 2018 retroactive date and further specified that an “interrelated” series of “employment practices” would be treated as a single claim deemed made when the first such claim was made. On July 5, 2023, the EEOC issued a letter of determination finding reasonable cause that the insured had engaged in sex discrimination and retaliation against female employees. On September 29, 2023, the EEOC filed a complaint against the insured in federal court alleging that the insured had subjected four female employees to sexual harassment and retaliation “since at least August 2016.” The insurer denied coverage for the lawsuit because the alleged employment practices began before the EPL Endorsement’s April 6, 2018 retroactive date. In the ensuing coverage litigation, the parties each filed motions for summary judgment.
In granting the insurer’s motion for summary judgment, the court ruled that the “employment practices” alleged in the claims were all “interrelated” under the terms of the EPL Endorsement, such that the claims constituted a single claim deemed first made prior to the EPL Endorsement’s retroactive date. The court determined that the EPL Endorsement broadly defined “employment practice” to include “actual or alleged acts” of “harassment, coercion, discrimination, or humiliation” on the basis of gender, sexual orientation, or sexual preference, and that all of the claims against the insured alleged similar kinds of “employment practices” within the meaning of the EPL Endorsement. The court further observed that the EPL Endorsement broadly defined “interrelated” to require only a “common connection” among “any” facts, circumstances, situations, events, transactions, or causes. The court cautioned against “micro-distinguishing” between claims when determining interrelatedness, emphasizing that the “mere fact that individuals may have been individually and uniquely harmed does not necessarily overcome a logical connection between claims.”
The court thus found numerous connections between the claims demonstrating that the claims were “interrelated”: all of the claimants were female former employees; all of the claimants allegedly suffered sexual harassment by male superiors; all of the claimants alleged unwanted sexual advances and lewd jokes; some of the claims alleged exposure to male superiors’ genitalia; all of the claimants worked at and allegedly were harassed at the same restaurant location; all of the claimants worked under the same owners and management; all of the allegations were governed by the same sexual harassment policy; and the EEOC advanced all of the claims in the same proceeding, which the insured resolved through a single consent decree.
In so holding that the claims were “interrelated” under the EPL Endorsement, the court rejected the insured’s argument that the claims could not be related because different actors committed the harassment at different times. Instead, the court concluded that the claims all involved the same “root behavior” of male superiors at the same location allegedly subjecting female employees to sexual harassment. As such, the court held that the insurer had no duty to defend or indemnify the insured because the claims were “interrelated” and thus deemed one claim made before the retroactive date.
