In Coleman v. School Bd. of Richland Parish, Richland Parish School Board was insured by Mid-Continent Casualty Insurance Company against various risks, including loss resulting from claims based on actual or alleged racial discrimination, racial harassment, and breach of contract. The policy contained a provision excluding coverage for loss resulting from any claim "brought about or contributed to in fact by any dishonest, fraudulent or criminal wrongful act or by any wrongful act committed with actual knowledge of its wrongful nature or with intent to cause damage." 2005 WL 1714369 (5th Cir. 2005). In Coleman, an African-American woman brought suit against Richland alleging claims under Title VII for intentional racial discrimination. The insurance company refused to defend the suit on the grounds that the policy excluded from coverage acts committed with knowledge of their wrongful nature.
The Plaintiff in Coleman claimed that she was awarded a newly-created associate principal position as a concession by white members of the School Board after African-American members agreed to campaign with the African-American community on behalf of a school bond proposal to be voted on in the near future. After the bond proposal passed, Coleman was terminated. The Fifth Circuit held that the policy did not provide coverage for claims alleging acts of intentional racial discrimination. The Court later went on to state that, looking at the "clear and explicit language of the policy, there is no dispute that the policy indicated coverage was available for acts of racial discrimination or harassment only if they were committed by an insured without actual knowledge of their wrongful nature."
Accordingly, employers should contact their insurance carriers and carefully review their insurance policies, in particular noting the language of the policy on discrimination.
Published May 1, 2006.