Ohio Federal Judge Rules in Favor of Insurer in Sex Harassment Case

Last month, a federal judge in Ohio’s Northern District Court ruled in favor of Zurich American Insurance Company, granting the insurer’s motion for summary judgment in a case involving a dispute over payment of two sexual harassment claims.

Scott Fetzer Company filed a claim for declaratory judgment and breach of contract and bad faith against Zurich after the insurer failed to pay two of three sexual harassment claims.

In the underlying case, Kristi Thompson, et al., v. The Scott Fetzer Company d/b/a The Kirby Company, et. al., three women filed suit in a Missouri state court in 2015 alleging they were sexually harassed and assaulted by a co-worker, John Fields, while selling Kirby vacuums door to door for Scott Fetzer Company. Three claims were asserted by the plaintiffs. The first was a claim for fraudulent misrepresentation indicating the company was vicariously liable for John Fields’ false promises when he induced the plaintiffs to work with him. The second claim alleged fraudulent concealment and asserted both direct and vicarious liability allegations. The plaintiffs asserted negligence as the third claim, alleging that Scott Fetzer negligently hired, retained and supervised Fields.

According to court documents, Zurich accepted coverage under the policies for the case.

Scott Fetzer was insured under two general liability policies issued by Zurich for the policy terms of January 1, 2012 to January 1, 2013, and the second for the term of January 1, 2013 to January 1, 2014. The ruling noted the policy language in each was identical.

Scott Fetzer and Zurich settled the claims for different amounts, but under the same agreement. One settlement exceeded the deductible amount set by the policies and Zurich paid for a portion of that settlement. Zurich did not reimburse Fetzer for the settlement amounts paid on the two other cases, because the insurer reasoned that each claim was a separate occurrence.

In response, Scott Fetzer filed an instant action against its insurer alleging Zurich breached the policies by applying three deductibles instead of one. The company alleged damages included the sum of the two settlements plus interest. Scott Fetzer also alleged bad faith. The bad faith claim was bifurcated and discovery stayed, pending the resolution of the first claim. Zurich and Fetzer both filed MSJs.

Scott Fetzer argued the Missouri lawsuit and subsequent settlements arose from one occurrence: “the purported negligence of Scott Fetzer in connection with the hiring, retention and supervision of Mr. Fields”. On the other hand, Zurich maintained the Missouri lawsuit involved three separate occurrences because each of the claims involved a different plaintiff, location, situation and policy year.

After reviewing the case, the judge in the case granted the insurer’s MSJ and denied Scott Fetzer’s partial MSJ. The company’s motion to lift the stay on the bad faith claim was also denied.