Last month, the U.S. Senate passed the Employment Non-Discrimination Act (ENDA), a bill that would prohibit employment discrimination on the basis of sexual orientation or gender identity. Though ENDA may not pass the House, it is the most recent of many examples of increasing awareness about and protection against discrimination historically faced by lesbian, gay, bisexual, and transgender (LGBT) individuals. Recent legislation and court rulings signal a clear shift toward providing more protection against LGBT discrimination. These additional discrimination protections could affect the scope (and importance) of insurance covering employment discrimination claims.
Apart from ENDA, other laws and court rulings related to LGBT protections have made many headlines recently. The U.S. Supreme Court in U.S. v. Windsor struck down the federal Defense of Marriage Act (DOMA) earlier this year, and last month, two more states (Hawaii and Illinois) became the 15th and 16th states to legalize same-sex marriage. Numerous states and local governments have also recently passed laws protecting the LGBT community. The trend toward providing additional protections against LGBT discrimination makes procuring insurance that covers such discrimination increasingly important.
Many companies procure employment practices liability insurance (EPLI) policies to cover their liability arising from employment-related claims, including discrimination. Most such policies generally cover “claims” made against the insured for an “employment practices act,” “wrongful employment act,” or employment-related “wrongful act.” Though these definitions usually explicitly include “discrimination,” policies vary on how broadly that term is defined.
Some newer policy forms explicitly cover discrimination based on sexual preference. For example, the ISO form EPLI policy (EP 00 01 11 19) defines “Discrimination” to mean “violation of a person’s civil rights with respect to such person’s . . . sexual orientation or preference.” Though it would be difficult for an insurer to argue that such a policy did not cover a discrimination claim against an employee based on the employee’s sexual orientation, modern LGBT discrimination laws (including ENDA) include protections against gender identity discrimination that may not fit cleanly within a policy definition that included only discrimination based on “sexual orientation or preference.”
Other policies simply define “discrimination” to include “violation of employment discrimination laws” or violation “of any federal, state or local law that concerns employment discrimination.” Until recently, EPLI policies that only generically covered claims based on employment discrimination law violations were less likely to cover a discrimination claim brought by an LGBT individual, because many federal, state, and local employment discrimination laws did not explicitly cover discrimination based on sexual preference and gender identity. Indeed, many such laws still do not cover LGBT discrimination. However, even if ENDA is not enacted into law this time around, the trend toward providing more protections against LGBT discrimination will likely continue. With the increasing protections afforded to LGBT individuals and growing awareness about those protections, discrimination claims based on sexual preference and gender identity may rise in the coming years. Employers would be wise to carefully consider the scope of coverage for discrimination claims when procuring EPLI insurance going forward and ensure that the policies ultimately procured contain clear, broad protection for discrimination claims based on sexual orientation as well as gender identity.