Twin City Fire Insurance Co. filed a lawsuit Tuesday seeking to avoid paying a $10 million punitive damage award to a former employee of the Society for Human Resource Management, claiming its insurance policy does not cover intentional acts of discrimination.
Twin City, a subsidiary of the Hartford Fire Insurance Co., argued that Virginia law prohibits the insuring of punitive damages awarded for intentional acts. The insurance company stated it made this limitation clear to SHRM when it initially agreed to defend the organization against the race bias claim, Mohamed v. SHRM, and in subsequent communications.
The lawsuit targets the $10 million portion of a larger jury verdict awarded to a former SHRM employee. In Mohamed, a plaintiff alleged she was excluded from meetings and fired after complaining about race bias in the workplace. The jury awarded her $1.5 million in compensatory damages and $10 million in punitive damages, finding the organization engaged in intentional race discrimination and retaliation.
A judge upheld the verdict in April, and SHRM subsequently began the appeals process. The organization requested a new trial earlier this year, arguing that a judge should have excluded evidence portraying SHRM as a “model employer,” among other issues.
Related: Managers Voice Must be Heard by Leaders
SHRM still believes the Mohamed claims are without merit and is “allowing the appellate process to proceed,” Eddie Burke, the organization’s director of media affairs, told HR Dive Wednesday. “Our insurer acknowledged and accepted coverage in writing, and we understand our policy fully covers SHRM,” he added. “We are confident in our position and expect the insurer to honor its contractual obligations.”
The insurer noted in its complaint that the parties have been unable to reach agreement regarding responsibility for funding the punitive damages award should it be affirmed on appeal. The coverage dispute affects the parties’ present conduct and requires immediate resolution, according to the document.
The organization has until Friday to file its Mohamed brief with the 10th U.S. Circuit Court of Appeals. The future of that appeal could be affected by the outcome of Tuesday’s EPLI lawsuit, Twin City Fire Insurance Co. v. Society for Human Resource Management.
For a group that advocates for fair employment practices, the financial fallout from a jury finding intentional bias creates a distinct challenge. The insurer’s refusal to pay punitive damages forces SHRM to handle a difficult legal and financial setting, where the organization must now pay a significant portion of the judgment itself while simultaneously arguing that the verdict was flawed on the merits.
Leave a Reply