Why the law should stop treating discrimination and sexual assault as transferable risk when management commits, tolerates, or covers them up
There is a point at which insurance stops looking like risk management and starts looking like moral evasion.
That point is not theoretical. It is the moment an institution attempts to treat deliberate discrimination, retaliatory punishment, sexual coercion, or managerial concealment as though it were merely another claims event. It is the moment the language shifts from abuse of power to towers of coverage, defense costs, retentions, and loss allocation. It is the moment lawyers and executives stop talking about conduct done on purpose and start talking about whether a carrier will pick up the tab.
That is the line that matters.
Insurance has a legitimate role. It exists to spread risk. It exists to protect against contingent loss. It exists to reduce the judgment-proof problem and preserve a real source of compensation for injured people. But those premises do not authorize institutions to convert deliberate misconduct into ordinary insurable drift. They do not justify treating intentional discrimination like an administrative misfire. They do not justify allowing sexual assault, or the deliberate shielding of sexual predators, to disappear into the bureaucratic language of claims handling. The academic literature you provided makes clear that the problem is not imaginary: Meyers and Hersch explain that EPLI can be socially useful in many settings, but they identify a serious defect when policies protect employer-facilitated wrongs involving upper-management participation or cover-up; French, from another direction, explains that the conventional slogan that intentional torts are simply uninsurable does not accurately describe modern liability markets, which in many contexts already insure intentional wrongs.
Taken together, those two points force a harder conclusion. The real question is not whether insurance markets have found ways to cover intentional workplace wrongs. They have. The real question is whether law should permit insurance to function as a cleansing mechanism when the wrong is deliberate and the institution itself is part of the machinery.
It should not.
The Easy Slogans Miss the Real Line
Public discussion of this issue usually collapses into two bad simplifications. The first is the old doctrinal slogan that intentional misconduct is simply uninsurable. The second is the market-facing assumption that because Employment Practices Liability Insurance (EPLI) exists, discrimination, retaliation, harassment, and even institutionally enabled sexual abuse can be treated as ordinary employment risks, priced and transferred like any other workplace exposure. Neither simplification is serious enough for the problem.
Professor Christopher C. French’s article, Insuring Intentional Torts, is useful because it shows why the first slogan is too crude. French begins by describing the conventional insurance-law account: intentional torts are often said to lie outside the insurable core because insurance is traditionally tied to fortuitous loss, liability policies often contain expected-or-intended injury exclusions, the law resists allowing wrongdoers to benefit from their own deliberate misconduct, and public policy is said to favor punishment and deterrence of intentional wrongs. But French’s point is that the actual liability market does not fit that rhetoric nearly as neatly as the orthodoxy suggests. He explains that several liability products already cover categories of intentional wrongs, including EPLI for racial and sexual discrimination and specialized sexual-misconduct coverage for sexual assault and abuse, and he notes that courts have often upheld such coverage by invoking competing public policies such as contract enforcement and compensation of injured victims.
The Cornell Law Review article by Erin E. Meyers and Joni Hersch, Employment Practices Liability Insurance and Ex Post Moral Hazard, is useful for a different reason. Meyers and Hersch do not argue that EPLI is inherently illegitimate or that it should disappear. Their article examines the structure of the EPLI market and argues that most broad criticisms of EPLI miss the real problem. In their view, EPLI can serve legitimate functions: it can help compensate victims, reduce risk for businesses, and promote better workplace practices through insurer oversight and compliance incentives. But they identify one specific and acute danger in the current market. As they explain, EPLI policies often do not exclude intentional actions and may still respond even when upper management participated in the wrongful employment act or in its cover-up. They describe that category as involving employer-facilitated wrongs, and they argue that insuring those wrongs creates serious ex post moral hazard by encouraging decisionmakers to suppress, tolerate, or mishandle misconduct rather than confront it directly.
That is the distinction that should drive the piece. The real line is not between all insurance and no insurance. It is between ordinary contingent workplace exposure and deliberate, employer-facilitated wrongdoing. Once the institution’s decisionmakers become part of the wrong—by commission, ratification, tolerance, or concealment—the question is no longer whether the market can write coverage for the claim. The question is whether the law should allow insurance to dilute the consequences of misconduct carried out or protected from the top.
EPLI Is Not the Problem in the Abstract. Employer-Facilitated Wrongdoing Is.
One of the strongest parts of Meyers and Hersch’s analysis is that it refuses the performative answer. They do not say that every employment claim should be uninsured simply because employment law serves deterrent goals. Instead, they explain that in many cases EPLI performs familiar insurance functions. It can protect against catastrophic liability based on negligence or vicarious liability, help address the problem of judgment-proof defendants, and improve workplace practices through insurer monitoring, training, pricing, deductibles, and loss-control programs. They specifically say that nothing exceptional stands out in the EPLI market with respect to ex ante moral hazard when compared with other forms of commercial liability insurance.
That point matters because not every employment case is a story of executive bad faith. Not every act of discrimination or harassment is authored by the people who control institutional decisions. Sometimes firms are sued because a lower-level employee acted wrongfully and upper management neither directed nor knowingly tolerated the misconduct. From the standpoint of the enterprise, that kind of exposure can look like the sort of contingent risk liability insurance is meant to address. Meyers and Hersch expressly recognize that category and, in substance, treat it as the part of the market where EPLI resembles other commercial insurance.
But that is not where the danger sits.
The danger arises when the people who make decisions for the institution become part of the wrong. Meyers and Hersch identify that setting with precision. They describe the troubling subset of EPLI coverage as the one that responds even when upper management participated in the prohibited employment action from the outset or as part of a cover-up. They point to the Harvey Weinstein matter as an example illustrating their concern and state that, in the EPLI context, the market appears to be operating under the assumption that businesses’ intentional, criminal, or fraudulent acts, along with punitive damages, are insurable. They argue that because EPLI policies often cover punitive damages and rarely preclude intentional acts, the market is operating in a state of largely unrestrained ex post moral hazard.
That is the real problem. Insurance does not only influence prevention. It influences reaction. It influences what management does after it knows. If upper management can still externalize substantial financial consequences to a carrier even after participating in discrimination, tolerating harassment, shielding a serial abuser, retaliating against a complainant, or suppressing reporting, then insurance is no longer merely transferring risk. It is changing the cost structure of concealment.
That is not risk management. That is consequence management for bad faith.
Employment Law Does Not Only Compensate. It Also Tries to Discipline Power.
Meyers and Hersch ground their analysis in the two familiar goals of employment law: compensation and deterrence. They explain that employment law relies heavily on private enforcement, and that damages—back pay, front pay, compensatory damages, punitive damages, and attorneys’ fees—are designed not only to make victims whole, but also to induce businesses to prevent wrongful employment acts and to respond appropriately once those acts occur. They distinguish ex ante deterrence from ex post deterrence. The first concerns whether businesses invest in culture, training, and accountability systems before misconduct occurs. The second concerns whether they address wrongdoing head-on instead of ignoring it, hiding it, or structuring themselves so they never have to “know” about it.
That second deterrence function is where the insurance issue becomes most morally revealing. The law does not merely ask whether a company eventually pays. It asks how the company behaves once misconduct is reported. Does it investigate? Does it stop the abuse? Does it protect the complainant? Does it discipline the wrongdoer? Or does it do what too many powerful institutions do when the abuser is profitable, politically connected, or personally important to leadership—delay, minimize, isolate, deny, and attempt to outlast the victim?
If insurance responds the same way whether management promptly addressed the wrong or helped bury it, then the legal system is flattening the very distinction it should be sharpening.
That is why Meyers and Hersch’s proposed reforms matter. They do not advocate abolishing EPLI. They advocate restructuring it where upper-management bad faith is involved. They propose mandatory proportional risk sharing or insurer subrogation in cases of employer-facilitated wrongs, and they further propose uninsurable regulatory fines that agencies such as the EEOC and corresponding state and local agencies could pursue in egregious cases. Their explicit aim is to increase the expected cost associated with employer-facilitated wrongs while preserving victim compensation.
That is a far better framework than the usual empty talk about “coverage for bad acts.” It targets the problem where it actually lives: inside managerial decisionmaking.
Fortuity Is Not a Magic Word, and It Does Not Rescue Deliberate Discrimination or Sexual Assault
French’s discussion of fortuity is useful because it clarifies what the doctrine actually does. He explains that the fortuity doctrine means insurance is supposed to cover losses dependent on chance, not losses that have already occurred, are certain to occur, or are intentionally caused by the insured. He also explains that under the dominant approach the key inquiry is not whether the insured merely intended the act, but whether the insured subjectively expected or intended the injury. That distinction matters because many actions that later cause harm are intentional in the ordinary sense: people intentionally drive, intentionally publish, intentionally manage, intentionally speak. That does not mean they intended the resulting injury.
But that nuance does no real work for deliberate discrimination or sexual assault.
In a classic intentional discrimination case, the injury is not collateral to the act. The injury is the discriminatory treatment itself. In retaliation, the injury is the punitive employment action taken because protected conduct occurred. In sexual assault, the injury is not some accidental byproduct of an intentional act. The injury is the non-consensual act itself. Once the theory of liability rests on conscious discriminatory targeting, retaliatory punishment, or sexual coercion, fortuity stops being a serious conceptual refuge.
That is why relabeling efforts are so revealing. Institutions instinctively try to soften the conduct. Discrimination becomes a misunderstanding. Retaliation becomes a business judgment. Sexual coercion becomes a personal relationship. Institutional concealment becomes negligent supervision. But courts are not required to mistake relabeling for analysis. If the conduct alleged is deliberate, the accident framework loses its grip.
The recent Meta coverage decision helps illustrate the insurance principle in concrete terms. Meta sought a defense from its insurers in the social-media addiction litigation, arguing in substance that the claims should be treated as covered because the company did not intend the specific harms alleged by the plaintiffs, such as addiction, depression, and related mental-health injuries. The Delaware court rejected that framing. It held that the insurers had no duty to defend because the underlying complaints alleged that Meta made deliberate design choices—intentional conduct—not accidental events or covered “occurrences” under the policies. The court further made clear that this conclusion did not change simply because the underlying plaintiffs also used negligence language. In the court’s view, the substance of the allegations still described purposeful conduct rather than an accident. Just as importantly, the ruling underscores a timing point that matters in coverage litigation: the duty to defend is assessed at the outset of the case, on the face of the pleadings, and where those allegations do not present a covered accident or occurrence, an insurer is not required to remain in the case merely to wait for discovery to confirm what the complaint already alleges.
That reasoning exposes the weakness in efforts to transform deliberate workplace wrongdoing into insurable drift merely by changing the adjectives.
Discrimination Is Not a Business Mishap
This is where insurance discourse often becomes intellectually dishonest.
Disparate treatment is not an accident. Retaliation is not an accident. A company does not accidentally punish an employee because she complained. A supervisor does not accidentally use workplace power to coerce submission. Leadership does not accidentally protect a profitable harasser while isolating the complainant. Those are not contingent enterprise events. They are choices made by people with authority.
Once that point is kept in focus, the coverage issue becomes much clearer. The law may decide, for compensation reasons, to tolerate some insurance response in some institutional settings. But it should not pretend that deliberate discrimination is conceptually the same as an ordinary management error.
French’s article is especially useful here because it prevents lazy overstatement while still strengthening the normative argument. He acknowledges that insurers do in fact write EPLI policies to cover claims such as discrimination, retaliation, workplace harassment, and wrongful termination, and he notes that some courts allow such policies to cover injuries resulting from intentionally injurious conduct. That is precisely why the policy question is unavoidable. The market is already doing this. The issue is whether law should permit that response without differentiation when the wrongdoing is deliberate and management-facilitated.
Meyers and Hersch answer that question in the right place. Their concern is not that every discrimination claim implicates intolerable moral hazard. Their concern is that when decisionmakers commit, tolerate, or cover up the wrong, full insurance response softens the very incentives that employment law is supposed to harden.
That is the concrete point. The problem is not that insurance exists. The problem is that, in the wrong hands and in the wrong cases, it can operate as a subsidy for institutional bad faith.
Sexual Assault Marks the Hard Edge of the Analysis
If intentional discrimination creates a serious insurance problem, sexual assault creates the clearest one.
French notes that the market already includes sexual-misconduct insurance covering claims for sexual assault and abuse. He offers that as part of his broader challenge to the orthodox view that intentional torts are generally outside the insurance system. He also argues that the public policies favoring compensation of innocent victims and enforcement of contracts often outweigh the limited deterrent value of categorical anti-coverage rules, and he proposes a default rule under which intentional torts are presumptively insurable absent compelling reasons otherwise, combined with limited subrogation rights against insureds.
That descriptive point matters because it forces honesty. The market is not morally tidy. It has already found ways to insure conduct that most people assume lies outside the insurable core.
But once that reality is admitted, the normative question becomes unavoidable. Should the law permit a direct sexual wrongdoer, or an institution whose leadership knowingly tolerated or concealed sexual abuse, to treat the resulting civil exposure as transferable risk?
No.
Sexual assault is not just intentional in the abstract. It is among the clearest exercises of domination the civil and criminal law confront. When management participates in it, shields it, or structures the institution to avoid real accountability, the wrong is no longer just the act of one offender. It becomes a governance failure with deliberate human agency behind it. That is why the managerial distinction in Meyers and Hersch matters so much. The issue is not merely whether an employee acted intentionally. The issue is whether those charged with institutional responsibility became part of the causal chain.
Once they do, insurance carries the wrong message. It no longer merely prevents an empty judgment. It tells leadership that even if they suppress complaints, protect the offender, and let the conduct continue, the carrier may still absorb much of the financial consequence.
That is not just a market flaw. It is a legal failure.
Victim Compensation Is Real, but It Is Not the Whole Answer
French is right to insist that victim compensation cannot be brushed aside. He emphasizes that contract enforcement and compensation of innocent tort victims are major public policies favoring coverage, and he argues that many tort claims would be worth little in practical terms absent insurance because many tortfeasors lack sufficient assets to satisfy judgments. That is a serious point. An uncompensated judgment is often little more than a symbolic victory.
That has to be taken seriously. Real victims need real funds. Empty victories do not pay for litigation, therapy, lost wages, or the extended personal and professional costs that intentional discrimination and sexual abuse inflict.
But compensation cannot be the only value in the room.
A regime that compensates victims while leaving direct wrongdoers and management-level facilitators financially insulated is not fully serious about deterrence. It may pay, but it does not discipline power where power actually sits. That is why the best solutions in the literature do not converge on abolition of coverage across the board. They converge on separation. Victims should be compensated. Direct wrongdoers and management-level facilitators should remain financially exposed. Carriers should have subrogation rights or the insured should be required to share risk through meaningful coinsurance when upper-management bad faith is involved. Public agencies should have uninsurable fines available in egregious cases.
That is not a compromise born of weakness. It is a more precise way of preserving compensation without subsidizing institutional concealment.
Public Employers Are Not an Exception. They Are Often the More Dangerous Version of the Same Problem
This issue does not stop with private employers.
Public employers complicate the analysis because the insulating mechanism is often not ordinary EPLI in the same form. It may be indemnification, government-funded defense, taxpayer-backed settlements, municipal representation decisions, or internal public finance structures that perform the same function as insurance even where a commercial carrier is not the central actor. But the functional problem is the same: deliberate misconduct gets financially externalized.
That matters because the accountability problem is more severe in the public sector. When a private institution shifts the cost of deliberate misconduct to a carrier, the critique is about distorted incentives, weakened deterrence, and moral hazard. When a public employer does the functional equivalent, the critique is also civic. The public is compelled to finance the institutional response to discrimination, retaliation, and sexual abuse carried out under color of public authority. Taxpayers become involuntary underwriters of official misconduct.
That does not mean public employees or agencies should be left categorically undefended. It means the same line should apply with even greater force. Government should not be allowed to treat deliberate discrimination, retaliatory abuse of office, or sexual predation within public institutions as ordinary public expense without differentiated accountability mechanisms. If the public employer, like the private employer, can externalize the cost even where supervisors or senior officials commit, tolerate, or cover up the wrong, then the deterrent signal to those wielding public power is dangerously weak.
The structure differs. The consequence-softening function does not.
Punitive Exposure Should Not Be Softened Into a Transferable Expense
Meyers and Hersch make another point that courts and policymakers should take far more seriously than they do. They explain that the concern is aggravated because EPLI policies often cover punitive damages and rarely exclude intentional acts, creating largely unrestrained ex post moral hazard.
That matters because punitive damages are not just another damages bucket. Their purpose is to punish aggravated wrongdoing and deter repetition. If the institution can broadly transfer even punitive exposure to a carrier while management itself was part of the wrongdoing or the concealment, the expressive force of the law starts to hollow out. The institution may still be condemned in an opinion, settlement statement, or verdict form, but the financial sting becomes negotiable in ways that weaken its intended effect.
That changes incentives at the top. A system that allows broad insurance response even after managerial participation or concealment teaches exactly the wrong lesson: treat the misconduct as a litigation problem instead of a governance failure, and let the claims architecture absorb as much cost as it can.
That is not deterrence. That is managed degradation.
The Better Rule Is Not “No Insurance.” It Is “No Cleansing of Employer-Facilitated Intentional Wrongdoing.”
The literature, read honestly, points toward a more disciplined rule than either side’s slogans usually offer.
French is right that insurers already cover more intentional conduct than orthodox rhetoric admits. Meyers and Hersch are right that the real defect in the current EPLI market is not insurance in the abstract, but insurance that protects employer-facilitated intentional wrongdoing.
Put concretely, the law should distinguish among at least three categories.
The first is ordinary contingent enterprise exposure: cases in which a business is sued because of employee conduct that management neither directed nor knowingly tolerated. Insurance has a legitimate conventional role there.
The second is institutional negligence without upper-management bad faith: cases involving inadequate systems, weak reporting structures, or poor compliance that may justify coverage, but should be priced and conditioned in ways that force reform.
The third is employer-facilitated intentional wrongdoing: management-directed discrimination, retaliation from the top, sexual assault or harassment known and tolerated by leadership, and cover-ups designed to suppress accountability rather than stop abuse. That is where full insurance protection should fracture. That is where meaningful coinsurance, self-insured exposure, subrogation against responsible actors or entities, and uninsurable public fines stop being optional policy ideas and become necessary legal architecture.
That rule is better than a blanket anti-coverage slogan because it is descriptively honest. It is also better than the market’s current drift because it refuses to equate victim compensation with wrongdoer insulation.
Conclusion
What emerges from the literature is not a contradiction, but a line that the law has failed to police with enough discipline.
Meyers and Hersch show that the central defect in the current EPLI market is not the mere existence of employment-liability coverage. Their point is narrower and more important. The real danger arises when EPLI protects employer-facilitated wrongs—cases in which upper management participates in the discrimination or harassment, knowingly fails to respond, or helps conceal the misconduct after the fact. In that setting, insurance does more than spread risk. It creates ex post moral hazard by softening the financial consequences of bad-faith institutional choices and weakening the deterrent force employment law is supposed to exert on decisionmakers.
French, in turn, shows why the issue cannot be resolved by repeating the old slogan that intentional wrongs simply fall outside insurance. His article demonstrates that the actual liability market is already more permissive than that orthodoxy suggests. Intentional torts are insured in multiple contexts, including discrimination claims under EPLI and sexual misconduct under specialized coverage forms, often justified by the competing public policies of contract enforcement and victim compensation. The recent Meta coverage ruling illustrates the opposite principle from a current coverage dispute: when the pleadings describe deliberate conduct rather than an accident or occurrence, a court may conclude at the outset that no defense is owed under the policy.
Taken together, those points lead to a more precise conclusion than either side’s slogan usually offers. The problem is not simply that insurance exists in the employment context, and it is not simply that the market has found ways to insure some intentional wrongs. The deeper problem is that current insurance structures can allow institutions to treat deliberate discrimination, retaliation, and even sexual abuse as transferable financial exposure when the people running the institution were themselves part of the wrongdoing or its concealment.
That is where the law should draw a harder boundary. Victim compensation remains essential, and nothing in a serious reform framework should treat compensation as expendable. But compensation does not require full financial insulation for management-level bad faith. A system that allows an institution to externalize the cost of deliberate misconduct even after its decisionmakers committed, tolerated, or covered up the wrong is not merely compensating victims; it is diluting accountability where accountability matters most.
The better rule is not categorical abolition of coverage, and it is not complacent acceptance of the market as it currently operates. It is a more disciplined separation between contingent workplace exposure and employer-facilitated intentional wrongdoing. Where the institution faces ordinary vicarious exposure without upper-management bad faith, insurance can perform its conventional role. Where decisionmakers themselves become part of the misconduct—through commission, ratification, tolerance, or concealment—the law should not permit insurance to function as a cleansing mechanism. In that category of cases, meaningful risk sharing, subrogation, and other forms of direct financial accountability are not peripheral reforms. They are necessary if employment law is to remain serious about deterrence as well as compensation.
That is the point this debate too often avoids. Insurance is supposed to protect against risk. It is not supposed to convert deliberate abuse of power into an ordinary cost of doing business.
About the Author
Eric Sanders is the owner and president of The Sanders Firm, P.C., a New York-based law firm concentrating on civil rights and high-stakes litigation. A retired NYPD officer, Eric brings a unique, “inside-the-gate” perspective to the intersection of law enforcement and constitutional accountability.
Over a career spanning more than twenty years, he has counseled thousands of clients in complex matters involving police use of force, sexual harassment, and systemic discrimination. Eric graduated with high honors from Adelphi University before earning his Juris Doctor from St. John’s University School of Law. He is licensed to practice in New York State and the Federal Courts for the Eastern, Northern, and Southern Districts of New York.
A recipient of the NAACP—New York Branch Dr. Benjamin L. Hooks “Keeper of the Flame” Award and the St. John’s University School of Law BLSA Alumni Service Award, Eric is recognized as a leading voice in the fight for evidence-based policing and fiscal accountability in public institutions.