Court: Race Discrimination Allegations Create Duty To Defend

Sometimes I wish I had more time to find out what really happened in a case, like General Direct Marketing, Inc. v. Lexington Ins. Co., 2006 WL 148884 (M.D. Penn. January 19, 2006). In that case, a resort in North Myrtle Beach, South Carolina, was sued for race discrimination under 42 USC Section 1981, one of the post-Civil War statutes designed to bring civil rights to freed slaves. Section 1981 forbids discrimination in the making and enforcement of contracts.
The case originated in something called Black Bike Week, a motorcycle rally for African-Americans in nearby Atlantic Beach, and an apparent alternative to Harley Week, a primarily white biker rally held at a different time of year in the area. The NAACP sued the Shawnee Resort under federal and state statutes, alleging it raised prices during Black Bike Week, required black bikers to sign special guest contracts not required of white bikers, and so forth. The resort tendered the defense of the lawsuit to its general liability insurer, which denied the duty to defend, and the resort sued.
In a fairly sophisticated analysis, the court found the insurer had a duty to defend. First, although professional services are often not covered by a CGL, the resort had purchased a special professional services endorsement. The alleged failure to provide legally required professional hotel services to black bikers implicated the endorsement, the court said. Second, the policy’s exclusion for intentional discrimination did not preclude coverage for allegations the resort was vicariously liable for the discrimination of its employees. Presumably, direct liability of the resort for its own alleged intentional discrimination would be excluded, however.

Comments Off on Court: Race Discrimination Allegations Create Duty To Defend

Filed under Duty to Defend, Liability Policies

Comments are closed.