Going Separate Ways In a lawsuit, you and an employee could be sent down different paths.
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Consider this scenario: One of your employees assaults acustomer, and that customer sues the employee, the company and you.But your liability coverage excludes intentional bad acts. Doesthis mean you are on the hook for legal fees and damages? Notnecessarily, says attorney Richard Zevnik, an associate with BergerKahn in Irvine, California.
Most business policies contain a "severability" or"separation of insureds" clause, which means that ifthere are multiple defendants in a lawsuit, the insurance companycould deny or limit coverage on one and not on others. So you andthe company could be covered for vicarious liability, but theemployee who committed the assault may be denied coverage.
"You've got to analyze your coverage under the policyas to each insured who has been made a defendant in a lawsuit as ifthey were the only insured," says Zevnik.
A similar clause is standard in directors and officers (D&O)policies. The language protects innocent insureds if anotherdirector or officer made a misrepresentation on the application orengaged in wrongful conduct that would result in a denial ofcoverage.
Considering that most lawsuits these days include multipledefendants, a clear understanding of severability will help youmanage your risk more effectively.
Jacquelyn Lynn is a freelance business writer in Orlando,Florida.
