Commercial general liability (CGL) insurance

The Commercial General Liability (“CGL”) policy used to be the main source of insurance coverage for employment practice claims. Insurance companies don’t usually create their own policy forms for this type of coverage; instead, they rely on standardized forms prepared by the Insurance Services Organization (ISO).

What CGL policies cover:

1. “Bodily injury.” CGL insurance covers an employer’s liability for: (1) “bodily injury” caused by an “occurrence” (this is an occurrence policy); or (2) “bodily injury” claims first made against the employer during the policy period (this is a claims-made policy).

2. Personal injury. CGL policies also provide coverage for personal injuries, which means injuries other than bodily injuries that can arise out of one or more of the following offenses: (a) false arrest, detention, or imprisonment; (b) malicious prosecution; (c) wrongful entry into or eviction of a person from a room, dwelling place, or premises that the person occupies as a residence; or (d) oral or written publication, in any manner, of material that slanders or libels a person or organization or disparages a person’s or organization’s goods, products or services, or otherwise violates a person’s right of privacy.

CGL policies and employment practice claims:

a. Courts’ interpretation of “emotional distress”

Some state courts have held that emotional distress (such as harassment, discrimination, and wrongful termination of employment) do not constitute “bodily injury” within the meaning of the insurance agreement. California, for example, has determined that emotional distress that stemmed from an occurrence that was not covered by the policy was not covered by the insurance policy.

Courts sometimes require that there be physical manifestation or proof of the plaintiff’s emotional distress in order for there to be coverage of the injury under the CGL form.

b. How insurers limit or disclaim coverage

1. The “occurrence” requirement. CGL policies limit coverage of “bodily injury” to an injury caused by an “occurrence.” An occurrence is an accident. Unless otherwise defined in the CGL policy, the courts have interpreted “accident” using the common-sense interpretation: an unintentional, unexpected, or chance [occurrence] event or series of events.

Just as most employment-related claims do not cause “bodily injury,” these claims do not arise from accidental conduct; instead, they result from intentional acts, even where the injury suffered (such as harassment, discrimination, or retaliation) was neither foreseen nor intended. Disparate treatment or disparate impact claims (where the employee claims that the employer treated him unfairly because of his race, sex, age, disability, natural origin, or religion), however, may satisfy the “accident” requirement because these claims arise from unintentional negligent conduct.

Employment-related claims do not result in injuries covered by the explicit definition of “personal injury.”

2. Standard exclusions. Insurance companies may rely on a variety of standard exclusions in the insurance policies. The most frequently referred-to standard exclusions that insurers use to disclaim coverage for discrimination, harassment, and wrongful termination are: (1) exclusions for intentional or deliberate acts; (2) exclusions for contract; and (3) exclusion for employment.

3. Public policy. In jurisdictions that prohibit indemnification for intentional acts, insurers also invoke public policy, based either on legislation or by case law handed down by the courts, to disclaim coverage for employment practices liability claims.