What’s this “third-party discrimination” coverage I’ve purchased under our Employment Practices Liability Insurance Policy?
On August 27, 2018 the United States Court of Appeals for the Seventh Circuit held that the owner/operator of a retirement community, or under the terminology of the Fair Housing Act (“FHA”), the “landlord,” was liable under the FHA for failing to take appropriate remedial action in response to the harassment of a lesbian tenant by fellow tenants. Wetzel v. Glen St. Andrew Living Community, LLC, 901 F.3d 856 (7th Cir. 2018). Wetzel is the first U.S. Circuit Court of Appeals decision holding that the FHA “creates liability against a landlord that has actual notice of tenant-on-tenant harassment based on a protected status, yet chooses not to take any reasonable steps within its control to stop that harassment.” Id. at *1. But Wetzel is all the more notable because the Seventh Circuit found liability under the FHA based on sexual orientation discrimination less than a year after the court found that sexual orientation discrimination was, in fact, legally prohibited discrimination under Title VII of the Civil Rights Act of 1964 (Hively v. Ivy Tech Community College of Indiana, 853 F.3d 339 (7th Cir. 2017) (en banc)).
While Wetzel may be groundbreaking, it also provides an example of a type of exposure that may be insured, although under a policy that seemingly would not apply. Many Employment Practices Liability Insurance Policies contain a separate coverage for “third-party discrimination.” This coverage applies when, like Wetzel, a non-employee brings a lawsuit against a business based on allegations of “discrimination.” While Wetzel involved a claim brought by a tenant, third-party discrimination coverage under an EPLI Policy more typically applies to claims of discrimination brought by customers, clients and vendors.
While third-party discrimination coverage is widely available in connection with EPLI coverage, it is not uniformly available. Moreover, when it is available as part of an EPLI Policy, it is usually optional coverage. Whether the coverage option is reflected in the policy form or in an add-on endorsement, it is typically only made effective upon payment of additional premium. The bottom line is that third-party discrimination coverage is useful coverage that is widely available, but an interested policyholder will likely need to take extra steps to ensure the coverage is available from any particular insurer and, if available, is made effective.