Claims Queue By DiANA REi Tz, CPCu
RELATED INJURY CLAIMS
Applying Workers’ Comp, EPLI or Both
J Mental stimulus resulting in physical
J Physical trauma resulting in mental
J Physical injury that results in mental
When physical injury is evident, as in
the first two situations, workers’ compensation likely will apply. But when only
mental injury is evident—such as the case
may be in sexual harassment and discrimination claims—the question of compensa-bility and exclusive remedy is not so clear.
Some jurisdictions that require physical
injury use the argument that mental injury
is too difficult to substantiate, leading to a
greater possibility of fraud.
HERMAN CAIN AT THE NATIONAL PRESS CLUB IN WASHINGTON, MONDAY, OCT. 31, 2011. CAIN DENIED HE SExUALLY HARASSED ANYONE, BRANDING ALLEGATIONS OF MISCONDUCT PART OF A “WITCH HUNT.”
Several years ago, I was the agent handling an employment-related charge of sexual harassment that was filed against a high-ranking officer of a financial institution, who also was a prominent member of the community. Although the claim was very tame in comparison with headlines of today, people who
knew this man could not imagine they were true. Fortunately for the defendant, his
company carried an employment practices liability (EPLI) policy that defended the
case. Had he been found to have committed a wrongful act, the policy would also have
paid the damages.
Many companies, however, do not purchase EPLI coverage. When faced with a similar situation, the alleged harasser and/or the employer may be on the hook for defense
and any damages. But are there other insurance avenues that should be considered for
defense costs when EPLI is not available?
According to Attorney Brit Weimer and his fellow authors of the second edition of
The EPL Guide to Risk Exposures and Coverage, employers and their employees may be
able to find coverage through other policies when EPLI is not available. In some cases,
the exclusive remedy aspects of the workers’ compensation system may actually preclude
separate lawsuits against employers for alleged harassment or discrimination.
The Workers’ Comp Remedy?
There are a number of hurdles to cross in determining whether workers’ compensation is the exclusive remedy in certain employment-related claims, including questions
of whether the harassing injury qualifies as bodily injury under the workers’ compensation policy, how closely the discrimination or harassment is connected to the workplace,
and whether the action and injury are intentional or unintentional.
Workers’ compensation cases that involve emotional or mental injury typically can be
divided into three groups:
Most states have adopted the interpre-
tation that purely emotional or mental in-
jury claims arising from employment are
not compensable. Those jurisdictions that
do permit workers’ compensation cover-
age for claims for mental injury without
accompanying bodily injury emphasize
that the difficulty of formulating appro-
priate legal tests does not justify denying
such claims. For example, in NPS Corp.
v. Insurance Company of North America,
the New Jersey appeals court held that
emotional distress and mental anguish
caused to an employee by sexual harass-
ment from a fellow employee constituted
bodily injury. The court stated that New
Jersey had come to recognize that men-
tal and emotional distress are just as real
as physical pain and that its valuation is
no more difficult. The court said, “We
are unable to separate a person’s nerves
and tensions from his body since, clearly,
emotional trauma can be as disabling to
the body as a visible physical wound.”
Note that the New Jersey Supreme
Court offered its disagreement with this
thinking in SL Industries, Inc. v. American
Motorists Insurance Company, 607 A.2d
1266 (1992). In that case, the court said
that NPS presents “irreconcilable incon-
sistencies and ambiguities lacking coher-