Lawsuits by Two Employees Alleging Retaliation and Discrimination Arise From Interrelated Wrongful Acts

In a win for Wiley’s client, the United States District Court for the Eastern District of New York, applying New York law, has held that a private company management and employment practices liability policy does not cover a lawsuit by the insured’s former employee alleging retaliation for his opposition to the insureds’ discrimination against another employee asserted in a prior lawsuit because both cases arose from the same or Interrelated Wrongful Acts and were deemed a single Claim first made prior to the policy’s inception. Complete Packaging & Shipping Supplies, Inc. v. Arch Ins. Co., No. 22-cv-02821 (E.D.N.Y. Apr. 18, 2024).

Prior to the claims-made policy period, the insured was sued for discriminatory behavior under Title VII by an employee. During the policy period, a different employee sued the insured, alleging wrongful termination and discriminatory conduct against him under Title VII and various state laws based on his opposition to discrimination against the employee who brought the earlier claim.

The insurer denied coverage for the second lawsuit based upon the policy’s interrelated claims provision, which stated that “all Claims arising from, based upon, or attributable to the same Wrongful Act or Interrelated Wrongful Acts shall be deemed to be a single Claim first made on the earliest date that . . . any of such Claims was first made, even if such date is before the Policy Period.” The policy defined “Interrelated Wrongful Acts” to mean “Wrongful Acts that have as a common nexus any fact, circumstance, situation, event, transaction, cause or series of causally connected facts, circumstances, situations, events, transactions or causes.”

In the coverage litigation that followed, the court found the policy language to be unambiguous and observed that, in the second lawsuit, the insured acknowledged “the clear factual nexus between” the two employee suits, noting that the earlier discrimination case was heavily referenced in the later complaint and served as a basis for the claimant’s retaliation claim in the later lawsuit. The insured’s pleadings also conceded that the later action was related to and was “derivative” of the previous lawsuit. For these reasons, the court concluded that the two lawsuits arose from the same or Interrelated Wrongful Acts and were deemed a single Claim first made at the time the earlier suit was filed. Because that suit was filed before the policy period began, the court determined that no coverage was available.