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Court rules for insurer over deductibles in harassment claims


A Zurich Insurance Group unit has prevailed in litigation over the settlement of sexual harassment litigation, with a court concluding its policyholder must pay three deductibles, not one, in connection with cases involving three door-to-door vacuum cleaner saleswomen who had been harassed by a co-worker.

The three employees of The Scott Fetzer Co. alleged in a lawsuit filed against the Cleveland-based firm that they had been sexually harassed and assaulted by a co-worker while selling vacuums door to door. 

Among other charges, the women said the firm had failed to inform them of the harasser’s criminal history and “sexually deviant activities” with other employees.

Scott Fetzer and its insurer, Schaumburg, Illinois-based Zurich American Insurance Co., settled the three cases. One of the settlements reached or exceeded the company’s deductible, and Zurich paid a portion of that settlement.

But it did not reimburse Scott Fetzer for the other two settlements because it applied new deductibles, treating each plaintiff’s claim as a separate occurrence.

Scott Fetzer filed suit in U.S. District Court in Cleveland charging Zurich with breach of contract and bad faith, stating Zurich should have applied one deductible, not three.

The court ruled in Zurich’s favor, based on a magistrate judge’s report. The magistrate judge “correctly determined” that the claims in the underlying complaint “show that the negligence of Fetzer with respect to each plaintiff constitutes three separate occurrences under the policies,” said Monday’s ruling.

Each plaintiff “was assaulted under different circumstances, at different locations, at different times, and sometimes in different policy years,” said the ruling.

It is clear that the magistrate judge’s findings “are consistent with the language of the policies at issue and with applicable law.”