Opinion ID: 377137
Heading Depth: 3
Heading Rank: 5

Heading: Discharging women in retaliation for exercising protected rights under Title VII.

Text: 32 (Emphasis supplied). 33 Reasoning that the extent of its obligation to defend should be measured by a comparison of the policy and the underlying complaint, Federal then argues that the act of the insured which is the subject of the suit must be an occurrence. Because the policy defines an occurrence insofar as is relevant to this litigation as one which unintentionally results in personal injury . . . (emphasis supplied), Federal therefore insists that the inclusion of the word intentionally in the underlying complaint negated coverage and relieved it of its duty to provide a defense. We do not agree. 34 While it is true that an insurance company's obligation to defend depends upon the underlying complaint against its insured, this obligation, as noted previously, is present whenever there appears to be a potential for coverage under the policy. Colton v. Swain, 527 F.2d 296, 302 (7th Cir. 1975) (applying Illinois law); Maryland Casualty Co. v. Peppers, 64 Ill.2d 187, 355 N.E.2d 24 (1976); Weed v. Ohio Farmer's Insurance Co., 53 Ill.App.3d 826, 11 Ill.Dec. 564, 368 N.E.2d 1310 (1977). Where, under the allegations of the pleadings against the insured, an insured's liability exists on one theory as well as another and one of them brings the liability within coverage, we think the insured may avail himself of the insurance protection. United States Steel Corporation v. Hartford Accident & Indemnity Co., 511 F.2d 96, 99 (7th Cir. 1975) (emphasis supplied) (applying Illinois law). Especially since the advent of notice pleading, in a case where there is doubt as to whether a theory of recovery within the policy coverage has been pleaded in the underlying complaint, the insurer must defend, and its defense obligations will continue until such time as the claim against the insured is confined to a recovery that the policy does not cover. Carboline Company v. Home Indemnity Company, 522 F.2d 363, 366-367 (7th Cir. 1975) (analyzing Illinois law). 35 To hold otherwise would be to place upon the insured the burden of demonstrating in advance of the underlying litigation which of the competing theories of recovery against it was applicable for purposes of insurance, thereby frustrating one of the basic purposes of such a clause in the insurance contract protection of the insured from the expenses of litigation. Aetna Casualty & Surety Co. v. Coronet Insurance Co., 44 Ill.App.3d 744, 3 Ill.Dec. 371, 358 N.E.2d 914 (1976). 36 The underlying complaint filed against Solo by the EEOC seemingly alleges a full panoply of offenses under Title VII. Although based upon a promotional claim filed by a single employee, it includes class allegations 5 of sex based discrimination in compensation, promotional opportunities, and job placement, as well as general allegations of discrimination in terms and conditions of employment. 37 A Title VII plaintiff may establish a violation under either the disparate treatment or the disparate impact theory. As the Supreme Court observed in International Brotherhood of Teamsters v. United States, 431 U.S. 324, 335-36 n.15, 97 S.Ct. 1843, 1854 n.15, 52 L.Ed.2d 396 (1977): 38 Disparate treatment . . . is the most easily understood type of discrimination. The employer simply treats some people less favorably than others because of their race, color, religion, sex, or national origin. . . . 39 Claims of disparate treatment may be distinguished from claims that stress disparate impact. The latter involve employment practices that are facially neutral in their treatment of different groups but that in fact fall more harshly on one group than another and cannot be justified by business necessity. . . . 40 Id. 41 In our opinion, the allegations in the underlying EEOC complaint were so general that the EEOC would in all likelihood have been permitted to proceed under either theory. An analysis of the question of whether a disparate treatment claim would have been within the coverage of the policy necessitates an examination of the burdens of proof articulated for that type of action in McDonnell Douglas Corp. v. Green, 411 U.S. 792, 802, 93 S.Ct. 1817, 1824, 36 L.Ed.2d 668 (1973), and its progeny. In order to establish a prima facie case under the disparate treatment theory, a plaintiff is required to show the following: (1) that he or she belongs to a protected group under the statute; (2) that he or she applied and was qualified for the job or promotion for which the employer was considering applicants; (3) that despite his or her qualifications, the applicant was rejected or was not promoted; and (4) that after the plaintiff's rejection, the employer continued to seek or consider applicants of the plaintiff's qualifications. 42 In Furnco Construction Corp. v. Waters, 438 U.S. 567, 98 S.Ct. 2943, 57 L.Ed.2d 957 (1978), the Court defined the exact scope of the prima facie case, noting that it was not the equivalent of a finding of discrimination, but rather raises an inference that the defendant's acts, if not otherwise explained, were more likely than not based on a consideration of impermissible factors. The burden that shifts thereafter to the employer is consequently one of articulating a legitimate, nondiscriminatory reason for its employment decision. Board of Trustees of Keene State College v. Sweeney, 439 U.S. 24, 99 S.Ct. 295, 58 L.Ed.2d 216 (1978). If the employer meets this burden, the plaintiff will then be given an opportunity to introduce evidence that the employer's proffered justification is a mere pretext for discrimination. 43 What emerges from an overview of the above burdens is that proof of discriminatory motive is critical in a disparate treatment action. International Brotherhood of Teamsters v. United States, supra, 431 U.S. at 335-36 n.15, 97 S.Ct. at 1854 n.15. The establishment of a case under McDonnell Douglas is equated with proof of motive because 44 we know from our experience that more often than not people do not act in a totally arbitrary manner, without any underlying reasons, especially in a business setting. Thus, when all legitimate reasons for rejecting an applicant have been eliminated as possible reasons for the employer's actions, it is more likely than not the employer, whom we generally assume acts only with some reason, based his decision on an impermissible consideration. 45 Furnco Construction Corp. v. Waters, supra, at 577, 98 S.Ct. at 2950. 46 While the concepts of motive and intent are not identical, we think in the narrow context of determining the scope of coverage under this insurance policy, there is a similarity. The policy definition of an insured occurrence would extend only to a liability incurred by reason of Solo's unintentionally exposing women to discriminatory conditions. The extent of this coverage is therefore inconsistent with liability predicated on the disparate treatment theory since such a liability would necessarily involve a determination that Solo acted with a discriminatory motive or purpose. 47 We reach the opposite conclusion, however, with respect to the disparate impact theory, which is employed to analyze the validity of employment practices which are fair and neutral in form, but discriminatory in operation. The basic legal standards utilized in a disparate impact analysis were developed in Griggs v. Duke Power Co., 401 U.S. 424, 91 S.Ct. 849, 28 L.Ed.2d 158 (1971), and amplified in Albemarle Paper Co. v. Moody, 422 U.S. 405, 95 S.Ct. 2362, 45 L.Ed.2d 280 (1975). Proof of motive is not required. International Brotherhood of Teamsters v. United States, supra, 431 U.S. at 335-36 n.15, 97 S.Ct. at 1854 n.15. 48 In order to make out a prima facie case of discrimination under the disparate impact theory, the plaintiff is required to show only that the employer utilized a facially neutral criterion which resulted in selecting applicants for hire or promotion in a significantly discriminatory pattern. Once the employment standard is so shown to be discriminatory in effect, the employer then must meet the burden of showing that its standard bears a manifest relation to the job in question. If the employer can demonstrate the job relatedness of its standard, the plaintiff may then show that other selection devices without a similarly discriminatory effect will also serve the employer's interest in maintaining an efficient workforce. 49 Solo contended at argument that the basis of the underlying claim against it was in fact a disparate impact claim based on its policy of requiring sales experience as a prerequisite for certain promotions. This policy, according to Solo's summary of the EEOC's position in the underlying action, disqualified disproportionate numbers of women, who, as a group, tended not to have the required experience. 50 While there is nothing in the record below to enable us to make a clear determination of whether the EEOC's complaint was in fact aimed at such a policy, we cannot, as noted previously, hold that the EEOC complaint did not contain a potential disparate impact claim. Since disparate impact liability does not require proof of discriminatory motive, and since Federal has, moreover, conceded that the policy covers at least some types of disparate impact claims, 6 we therefore hold that the disparate impact claim which could have been proved under the allegations of the underlying complaint was a claim potentially within the coverage of the policy. Consequently, under Illinois law, Federal has breached its duty to defend its insured in the action. See generally Maryland Casualty Co. v. Peppers, supra, 355 N.E.2d at 28. 51 The final issue to be considered with respect to the EEOC claim is whether our construction of the policy to include coverage of disparate impact liability would, as Federal contends, render the insurance contract violative of the public policy against employment discrimination embodied in Title VII. It is well settled that (a) contract of insurance to indemnify a person for damages resulting from his own intentional misconduct is void as against public policy and the courts will not construe a contract to provide such coverage. Industrial Sugars, Inc. v. Standard Accident Insurance Co., 338 F.2d 673, 676 (7th Cir. 1964). This rule is based on the simple principle long ago stated by Judge Cardozo, that no one shall be permitted to take advantage of his own wrong. Messersmith v. American Fidelity Co., 232 N.Y. 161, 133 N.E. 432 (1921). Placing a limitation on the clear meaning of an insurance contract due to policy considerations, is, however, a restraint on the rights of private parties to fashion their own contract, Union Camp Corp. v. Continental Casualty Co., 452 F.Supp. 565, 568 (S.D.Ga.1978), and is a step which courts have taken only where contracts were argued to extend coverage to the knowledgeable and intentional, or the criminal wrongdoer. Hartford Life Insurance Co. v. Title Guarantee Co., 520 F.2d 1170 (D.C.Cir.1975); 1 Couch on Insurance 2d § 1.36 (1959 & Supp.1978). 52 Because we have construed the policy to exclude coverage of disparate treatment liabilities, we do not consider whether the degree of motive which must be proved in that type of action would be equivalent to a knowledgeable and intentional wrong such as would void policy provisions purporting to cover those claims. 53 With respect to the coverage of disparate impact liabilities, there is clearly no basis for voiding or limiting the contract. An insured may incur liability or become involved in litigation under that theory as a result of its utilization of any of a variety of seemingly neutral selection criteria. We note our agreement with the opinion of the Court of Appeals for the Sixth Circuit in L'Orange v. Medical Protective Company, 394 F.2d 57, 60 (6th Cir. 1968), where that court, interpreting Ohio law, observed that the violation of public policy is measured by the tendency of the contract to injure the public good rather than by actual injury under the particular circumstances.We do not think that allowing an employer to insure itself against losses incurred by reason of disparate impact liabilities will tend in any way to injure the public good, which we equate here with that equality of employment opportunity mandated by Title VII. To the contrary, the fact of insurance may be helpful toward achieving the desirable goal of voluntary compliance with the Act. The statistical proofs in disparate impact actions, most particularly those involving employment testing, have become increasingly complex and employers now often retain batteries of experts to validate their selection criteria. Such complex analyses of employment standards, while apparently necessary in order to ensure that an employer's policies do not needlessly place a stumbling block in the way of women or minorities, may well become, as a practical matter, beyond the financial capabilities of all but the largest employers. The involvement of insurance in the field might, however, ease the burden on smaller employers by making claim prevention services available on a cost effective basis to help employers evaluate their employment standards. Workmen's compensation insurers have, by way of analogy, no doubt helped prevent numerous employee injuries, and it is not undesirable, nor inconceivable, that discrimination insurers might aid in preventing the injury of discrimination as well. 54 Because we have held that Federal breached its duty to defend its insured in an action which was potentially within the coverage of its policy, and because there is no public policy reason for limiting the contract, Solo is entitled under Illinois law to damages in the amount of the costs and fees involved in defending the action, and the sums paid in settlement of the claim, less the policy deductible.