The Public Policy Exclusion and Insurance for Intentional Employment Discrimination

This Note argues that courts choosing to apply the public policy exclusion to insurance for intentional employment discrimination liability should nevertheless permit employers to enforce insurance covering negligent supervision liability and liability imputed to an employer as a result of the intentional discrimination committed by its employees. Part I establishes a framework for understanding the cases in which courts have invoked public policy to refuse enforcement of insurance contracts, arguing that the rationale behind the public policy exclusion is utilitarian and that courts refuse to enforce insurance for liability arising out of intentional wrongdoing on the grounds that such insurance detracts from the deterrent effect of civil liability. Applying this framework, Part I also explores the rationale behind the exceptions to the public policy exclusion that some courts have created to permit employers to insure against imputed liability arising out of intentional torts committed by employees and against negligent supervision liability. Part II summarizes the position taken by the courts that have applied the public policy exclusion to refuse enforcement of coverage for intentional employment discrimination. Part II then contrasts this position with the position taken by courts that have refused to adopt a public policy exclusion and by courts that have applied the negligent supervision exception to enforce insurance for sexual harassment liability. Part III relies on the analytic framework of Part I and the case discussion of Part II to suggest a three-part test for applying the negligent supervision and imputed liability exceptions to insurance for intentional employment discrimination. Part IV considers and rejects the contention that courts should not enforce coverage for intentional employment discrimination liability on the grounds the enforcement of such coverage would be inconsistent with the expressive function of Title VII liability. This Note concludes that courts applying the public policy exclusion to insurance for intentional employment discrimination should, in some circumstances, permit employers to enforce insurance policies that cover imputed liability and negligent supervision liability incurred as a result of intentional discrimination committed by employees.