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Truck Insurance Exchange v. Gagnon8/23/2001
t Stores, Inc., 1999-NMSC-013, 25-28, 127 N.M. 47, 976 P.2d 999, and Cox v. Chino Mines/Phelps Dodge, 115 N.M. 335, 337-38, 850 P.2d 1038, 1040-41 (Ct. App. 1993), then as a matter of law it does not "arise out of" employment for purposes of interpreting an insurance contract, and therefore, sexual harassment is not excluded from coverage. Other courts have rejected this argument, recognizing that the policies underlying workers' compensation law are different from those implicated in interpreting an insurance contract. Am. Motorists Ins. Co. declined to hold that "arising out of" for purposes of workers' compensation law, is the same as for an insurance policy. Id. The court found "More instructive is the clear weight of authority from other jurisdictions that favors enforcement of the employee exclusion to bar coverage for claims similar to that advanced by plaintiff." 713 A.2d at 1011. The court in Smith, 542 S.E.2d at 834-36, also rejected an argument that because sexual harassment did not "arise out of" employment for purposes of workers' compensation law, it could not "arise out of" employment for purposes of the employee exclusion of an insurance contract. Smith noted that "arising out of" should be treated differently in an insurance context from a workers' compensation context. Id. at 835. "The use of workers' compensation law to guide the interpretation of a contract not involving workers' compensation is inappropriate." Id. (quoting SCI Liquidating Corp., 526 S.E.2d at 557-58 (Fletcher, J., dissenting)). Smith expressly rejected the majority opinion in SCI Liquidating Corp..
We agree with the reasoning in both Am. Motorists Ins. Co. and Smith. By definition, sexual harassment occurs at work. See Meadowbrook, 559 N.W.2d at 420 ("It is incongruous to hold that such a claim [hostile work environment] can arise anywhere but in the course and scope of a plaintiffs' employment."). Moreover, to adopt Smith's argument, we would have to take a position contrary to the vast majority of courts, and hold that sexual harassment is covered by a general comprehensive liability policy. We decline to do so.
Our conclusion that "arising out of," as used in an employee exclusion in an insurance policy, need not be governed by the meaning of the phrase under the Workers' Compensation Act (WCA), and is also supported by Coates, which recognized that the workers' compensation scheme addresses concerns different from those addressed by federal civil rights acts. Coates refused to hold that the WCA provided the worker 's exclusive remedy for sexual harassment. Coates, 1999-NMSC-013, 26. Here, the insurance contract deals with different concerns and issues from those underlying the WCA, and we see no compelling reason to conclude that the phrase "arising out of employment" in an insurance policy must be interpreted identically to the phrase when it is used in a workers' compensation context.
We hold that the general comprehensive liability policy in this case excludes coverage for injuries to employees, and consequently does not cover sexual harassment of employees. We note that Employment Practices Liability Insurance policies that specifically cover sexual harassment, employment discrimination, and similar claims, are readily available to employers. See McLeod, 865 P.2d 1287.
C. Waiver
Smith has also argued that the insurance company may not deny coverage because a different policy, issued to a Tomato Café at another location, contained language specifically excluding sexual harassment from coverage. Smith argues that since the insurance company did not protect itself with similar language in the policy issued to the location in this case, the
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