Insured-employers take note: In the age of #MeToo and the seemingly endless flood of sexual misconduct and sexual harassment claims, insureds should be aware that a court’s evaluation of the number of “occurrences” under a general liability policy could significantly impact available insurance coverage when defending claims of negligent hiring or supervision, or training of an individual accused of sexual harassment or sexual misconduct.

The U.S. Sixth Circuit Court of Appeals recently addressed this issue and that which insured-employers should consider when confronted with a claim of negligent hiring, supervision, or retention of an employee accused of sexual misconduct.  Scott Fetzer Co. v. Zurich American Insurance Co., 2019 WL 1925550 (6th Cir. April 30, 2019), involved coverage for an underlying lawsuit alleging negligent hiring, retaining and supervision of an independent contractor who allegedly committed verbal abuse and sexual harassmentThe insured settled the claims with the accusers and sought indemnification under its general liability policies.

Zurich agreed to indemnify the insured but contended that the alleged sexual misconduct against each of the three individuals was a separate “occurrence.” Id.  Zurich agreed to pay $2 million per “occurrence” of bodily injury coverage, but Fetzer was responsible for a deductible of the first $1 million for each “occurrence.”  Id.  Of the three settlements, only one met or exceeded the per-occurrence deductible amount.  Id.  Applying its interpretation that each claim was a separate “occurrence,” Zurich stated it would only pay the amount that exceeded the deductible on the one claim and refused to indemnify any portion of the other two settlements.  Id.  In contrast, Fetzer contended that there was only one “occurrence.” Id.

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