As more and more sexual harassment and sexual assault claimscome to light in all realms, including Hollywood, the judiciary andCongress, it's important to ensure that your insurance clients'businesses are prepared to manage any such allegations withadequate insurance coverage.

Related: Insights for handling a sexual harassmentclaim

This includes ensuring clients have the proper insurancepolicies in place and that the exclusions of these policies do notbar coverage for these types of allegations.

These claims can arise in a number of ways. For example, if abusiness is subject to the Florida Civil Rights Act of 1992 orTitle VII of the Civil Rights Act of 1964, it could face a sexualharassment claim filed by an employee, alleging quid pro quoharassment, such as demanding a raise in exchange for a sexual act,or that there is a hostile work environment that interferes withthe employee's performance, including the making of constant,unwanted sexual comments.

An employee may also bring a lawsuit directly against thealleged perpetrator or a director or officer of the company for atort claim arising from the harassment or assault. Oralternatively, a customer or other third party may bring suitalleging negligent hiring or negligent retention if an employeesexually assaults or harasses him or her.

Business' liability

A commercial general liability policy, which covers a business'liability for bodily injury and property damage arising out of anoccurrence, may not cover these types of claims. The plaintiff'sdamages will likely be solely for emotional distress and will notconstitute “bodily injury,” or the insurer will argue that noaccidental “occurrence” has been alleged because the harassment wasintentional.

Related: Follow these steps to minimize the risk ofworkplace harassment

And even so, most commercial general liability policies excludecoverage for bodily injury to an employee arising out of hisemployment with the insured (employer's liability exclusion) orinclude an exclusion for employment-related practices, includingwrongful termination or harassment. This is likely because thiscoverage is provided under separate insurance policies.

EPLI policies

It's thus important to ensure that insurance clients have theseadditional policies in place, including a separate policy foremployment practices liability insurance (EPLI), if their businessfaces these risks.

EPLI policies cover an insured's liability for wrongful acts inthe employment process. This includes coverage for wrongfultermination, sexual harassment, retaliation and employment-relateddefamation, among other things.

Related: Sexual harassment claims are difficult for allinvolved

An EPLI policy will usually also cover directors and officers,management, and employees as insureds. However, it should be notedthat claims of harassment brought by third parties that are notemployees are not typically covered under EPLI policies. Thus, aninsured will need to secure an endorsement providing thisadditional coverage for third parties.

Or alternatively, this additional coverage may be provided as anadd-on under a directors and officers liability insurance(D&O) policy. D&O policies cover the wrongful acts ofdirectors and officers and potentially the organization forwrongful acts committed in their scope of their duties as directorsand officers.

Personal homeowners' policy coverage

Another source of potential coverage for an individual is undera personal homeowner's policy. While these policies typicallyexclude losses arising out of an insured's business pursuits, thesepolicies should still be reviewed to determine whether coverage isavailable.

And even if you secure these additional coverages, it'simportant to review the provisions closely. Many policies aresubject to an intentional acts exclusion providing that there is nocoverage for intentional or willful acts or alternatively for thewillful, intentional violation of a legal duty.

This is problematic if the exclusion is interpreted broadlybecause most allegations of sexual assault or harassment are forwillful, intentional behavior. Thus, any intentional acts exclusionshould be removed or significantly narrowed.

Policy periods, statute of limitation issues

And lastly, it's important that policy periods and retroactivedates account for the applicable statute of limitation for thesetypes of claims, particularly given how many years have passedsince some of the alleged misconduct first occurred before they arereported.

In sum, it's important to review your clients' insurancecoverages carefully to ensure businesses are prepared in the eventof sexual assault or harassment claim, including ensuring adequateEPLI coverage and that no exclusions will bar coverageotherwise.

Walter J. Andrews ([email protected]), apartner at Hunton & Williams, focuses his practice on complexinsurance litigation, counseling and reinsurance arbitrations andexpert witness testimony. Katherine Miller ([email protected]), an associateat the firm, focuses her practice on complex businesslitigation with an emphasis on insurance coverage counseling andlitigation. ​