SCI Liquidating Corp. v. Hartford Ins. Co.

Since sexual harassment does not arise out of employment, exclusion in employer's policy barring coverage for employee injuries arising out of and in the course of employment did not apply.

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Sunrise Carpet Industries “Sunrise”, now known as appellee SCI Liquidating Corp., filed suit in federal court seeking to recover from its insurance carriers, Hartford Fire Insurance Company “Hartford Fire” and appellant Hartford Casualty Insurance Company “Hartford Casualty”, the amount of a judgment entered against Sunrise in a Title VII sexual harassment suit filed by three former employees. Hartford Fire had insured Sunrise under a commercial general liability policy “CGL policy” and Hartford Casualty had issued an umbrella liability policy “umbrella policy” to Sunrise. Both insurers denied Sunrise’s claims for recovery under the policies. The U.S. District Court for the Northern District of Georgia found that the policies covered the employees’ sexual harassment claims against Sunrise and granted summary judgment to appellee.

On appeal, the U.S. Circuit Court of Appeals for the Eleventh Circuit, applying Georgia law to the diversity action, reversed the grant of summary judgment on the CGL policy. The appellate court determined that the umbrella policy’s “bodily injury” provision did not provide coverage to Sunrise for the underlying sexual harassment, but that the employees’ allegation of discrimination under Title VII appeared to be covered by the umbrella policy’s definition of “personal injury” and “occurrence.” Noting that the umbrella policy expressly excluded from coverage claims made by Sunrise employees for personal injury “arising out of and in the course of their employment,” the appellate court found the issue of whether a Title VII sexual harassment claim can be construed as “arising out of and in the course of employment” is unsettled under Georgia law. Accordingly, the Eleventh Circuit certified to this Court the following question for resolution:

SCI Liquidating Corp. v. Hartford Ins. Co.

Since sexual harassment does not arise out of employment, exclusion in employer's policy barring coverage for employee injuries arising out of and in the course of employment did not apply.

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