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Employers Behaving Badly: Are Discriminatory Acts Covered?

The trajectory of Paula Deen's career is the source of much speculation. But how are discriminatory acts treated under insurance policies?

By Susan Massmann | Updated on August 01, 2013
Anyone who has clicked on a news website or turned on a TV in the past months has heard about the controversy surrounding Paula Deen’s conduct. The celebrity chef’s use of racial slurs and the allegations brought against her and her brother by a former employee for race discrimination and creating a hostile work environment have claimed many headlines.

Deen co-owns a restaurant with her brother, whom the plaintiff, Lisa Jackson, says violated her rights via “unremitting violent, sexist, and racist behavior.” Jackson says management knew about the behavior, yet did nothing to stop it. Much has been said about how this incident will affect Deen’s career. At press time, both Wal-Mart and the Food Network had dropped her. But how are discriminatory acts treated under insurance policies?

The Insurance Services Office (ISO) Employment-Related Practices liability coverage form excludes coverage for wrongful acts that violate laws applicable to employers, such as Title VII of the Civil Rights Act of 1964, which prohibits discrimination by covered employers on the basis of race, color, religion, sex, or national origin. “Wrongful acts” are defined as, among other actions, “verbal, physical, mental or emotional abuse arising from discrimination.” It is pretty clear that a typical EPL policy would not allow for coverage of acts such as those alleged by Jackson in the Deen case.

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