D&O ‘sexual misconduct’ exclusion includes sexual harassment: court
Sexual harassment is included in a directors and officers (D&O) insurance policy exclusion for ‘sexual misconduct,’ even if the words sexual harassment don’t appear in the definition, the Court of King’s Bench of New Brunswick found Monday.
AIG Insurance is therefore not obligated to pay for the legal defence of Crandall University in a wrongful termination lawsuit brought against the university by a former professor who was let go after an investigation into the alleged sexual harassment of a student.
The court dismissed the university’s claim that AIG’s policy exclusion for ‘sexual misconduct’ did not apply because the the policy’s definition of sexual misconduct did not include the words “sexual harassment.”
In the university’s D&O policy, issued by AIG, the exclusion for ‘sexual misconduct’ states:
“’Sexual Misconduct’ means any licentious, immoral or sexual behavior, sexual abuse, sexual assault, or molestation intended to lead to or culminating in any sexual act against individual(s).”
As the court noted, “sexual harassment is not defined in the EPL coverage or in the sexual misconduct exclusion of the insurance policy.”
The court went on to note a 1989 Supreme Court of Canada case in which sexual harassment is defined as the “unwelcome conduct of a sexual nature that detrimentally affects the work environment or leads to adverse job-related consequences for the victims of the harassment.”
With that, the New Brunswick court concluded: “The plain and ordinary meaning of sexual harassment is a form of sexual violence, a form of sexual behaviour.
“The definition of sexual misconduct in the sexual misconduct exclusion includes ‘immoral and sexual behaviour’ and therefore includes sexual harassment.
“Crandall’s suggestion that sexual harassment should have been spelled out in the definition of sexual misconduct is misguided. The term sexual behaviour is sufficiently broad to include sexual harassment.”
The court has not yet considered the merit of the professor’s wrongful termination lawsuit.
In other news: Intact’s appetite in Alberta auto reducing, CEO says
Background
Crandall University launched an internal investigation after posts on a social media account titled @DoBetterCrandall, made anonymous allegations of harassment at the hands of Crandall employees, the court decision states.
The Michaud Report documented the findings of the internal investigation. “In reviewing over 100 pages of correspondence between [a professor] and a student over a seven-month period, and interviewing the parties, the investigator concluded this was a classic case of grooming and constituted sexual harassment,” as the court summarized part of the report’s findings.
The investigation led to Crandall terminating one of its employees for sexual harassment of a student.
The professor and his partner filed a civil claim against the university for wrongful termination, defamation, false light in public eye, intrusion upon seclusion, public disclosure and breach of confidence.
Crandall University sought coverage for its legal costs from AIG’s D&O policy. It claimed the exclusion for sexual misconduct did not apply because it was a wrongful termination suit.
AIG said the termination suit was indirectly a result of sexual harassment, which the policy excluded.
The court found sexual harassment was indeed included in the policy’s definition of sexual misconduct and was therefore excluded from policy coverage.
Feature photo courtesy of iStock.com/Hailshadow
