A federal magistrate in Boston has ruled that a dealership's commercial general liability insurance policy does not cover sexual harassment and retaliatory discharge claims by a former employee.
As a result, the magistrate said Travelers Indemnity Corp. does not have to reimburse Conway Chevrolet-Buick of Pepperell, Mass., for its expenses in defending the lawsuit and paying damages to Ellen Young, a former billing clerk,
Conway's policy covered negligence but excluded employment, harassment and discrimination claims. When Young sued the dealership for sexual harassment, wrongful termination and negligence, Travelers agreed to defend Conway only against the negligence claims.
Travelers withdrew from the case when the negligence claims were dismissed before trial. Conway then incurred about $50,000 in attorney fees.
At trial, a jury awarded Young $5,000 in compensatory damages and $20,000 in punitive damage for retaliatory discharge. It awarded no damages for sexual harassment.
Conway sued Travelers for reimbursement.
In a May 16 decision, U.S. Chief Magistrate Judge Joyce Alexander said Travelers had no legal duty under the policy to defend or indemnify the dealership.
Joseph Wadland, a Boston attorney for the insurance company, said the decision signals businesses that commercial general liability policies don't cover employment-related claims. To get such coverage, a business needs a separate policy or an endorsement on their general liability policy, he added.
Conway's lawyer, Stephen Reed of Boston, said the magistrate misapplied legal principles in her decision. He said he does not know whether the dealership will appeal.