D&O Insurer Has Duty to Defend Wrongful Death Suit Because of “Discrepancy” Between Exclusions

The United States District Court for the Northern District of Ohio, applying Ohio law, has held that a D&O insurer had a duty to defend a wrongful death lawsuit against its insured because of a “discrepancy” between the policy’s exclusion for employment-related wrongful acts and an exception to the policy’s bodily injury exclusion.  Roadway Servs., Inc. v. Travelers Cas. & Sur. Co. of Am., 2022 WL 55556, at *1 (N.D. Ohio Jan. 6, 2022).

The insured road construction company’s employee was killed by a driver while placing orange reflectorized barrels by the side of the road as part of a paving project.  His wife filed a wrongful death lawsuit against the company asserting that the company created a dangerous work environment and failed to institute adequate safety controls.  The company sought coverage under its D&O insurance policy.  The insurer denied coverage based on a bodily injury exclusion and an exclusion for employment-related wrongful acts.  Coverage litigation ensued, and the parties cross-moved for summary judgment. 

The policy’s bodily injury exclusion precluded coverage “for any Claim for any bodily injury, sickness, disease, death, loss of consortium, emotional distress, mental anguish, humiliation, loss of reputation, libel, slander, oral or written publication of defamatory or disparaging material, or invasion of privacy.”  However, this exclusion included a carveout, which stated that it would not apply to “any Claim for emotional distress, mental anguish, or humiliation with respect to any employment related Wrongful Act.”  The Court concluded that the wrongful death lawsuit fell within the carveout because it alleged mental anguish as part of the damages sought in connection with an employment-related Wrongful Act.  The Court rejected the insurer’s argument that “Claim” should be equated to a cause of action and that a reference to damages for mental anguish was insufficient to trigger the carveout. 

The policy’s exclusion for employment related wrongful acts precluded coverage “for any Claim [against the Company] based upon or arising out of any employment related Wrongful Act.”  The Court explained that, although this exclusion appeared on its face to apply to the wrongful death lawsuit, the Court found it to be inconsistent with the carveout in the bodily injury exclusion stating that Claims alleging mental anguish with respect to employment-related Wrongful Acts would be covered.  Given the “discrepancy” between these two provisions, the Court held that there was at least arguable or potential coverage for the wrongful death lawsuit under the policy, and therefore the insurer had a duty to defend.  The Court further observed that it was expressing no opinion regarding the insurer’s duty to indemnify pending conclusion of the underlying action.