An employee at a Pennsylvania McDonald’s franchise sexually assaulted two fellow employees who were under age 18. The franchise sued its insurer and two wholesale brokers after the insurer denied Directors and Officers Liability (D&O) Insurance and Employment Practices Liability Insurance (EPLI) Coverage for the loss.
The employees filed their lawsuits against the franchise within two months of each other in late 2023 and early 2024. One of them was still a minor, so her guardian filed the suit. The other had turned 18 but alleged that the assault occurred when she was 17. Both alleged that, throughout their employment at the store, one individual repeatedly “sexually harassed and sexually assaulted (them), and threatened (them) if (they) exposed this behavior to others.” There was also an allegation of statutory rape. Both women claimed that they reported this person’s behavior to their superiors, “and they did not adequately address them.” The court opinion did not state the amounts of damages sought. However, it is easy to imagine that claims involving sexual abuse of minors running into seven figures.
Before filing the lawsuits, both women submitted separate charges against the franchise with the U.S. Equal Employment Opportunity Commission (EEOC).
The franchise had purchased D&O and EPLI policies that were in force when the allegations were made. A national insurance brokerage obtained the policies through two other brokerages.
However, when the insurer learned of the charges filed with the EEOC, it denied coverage for the lawsuits and refused to provide a defense. The policy included a comprehensively worded exclusion that eliminated coverage for any claim “in any way involving, in whole or in part, any forcible physical or sexual assault, battery or molestation, including rape, statutory rape or any sexual assault or rape claim that in any way involves any sexual harassment claim or allegations of sexual harassment.”
The insurer stood by this denial despite repeated demands for coverage from both the insureds and the counsel representing the victims.
The insureds sued the insurer and the two wholesale insurance brokers involved in obtaining the coverage in May 2024. For reasons the court opinion did not explain, the insureds’ did not name their own broker in the suit. It is possible that they took a separate action against them; there is no public record of such an action, but the broker and its Errors and Omissions (E&O) Liability Insurance carrier may have settled it without litigation.
The following January, the defendants asked the court to dismiss the suit. In March 2026, the judge did so, agreeing that the brokers were not negligent and did not owe the insureds a fiduciary duty. “Plaintiffs allege nothing to suggest that Broker Defendants ever took a role in explaining the nature of its policies to Plaintiffs,” he wrote, “either at the outset of coverage or during policy renewal. In fact, Plaintiffs were completely unaware of Broker Defendants until the litigation emerged.” Remember, these were the wholesale brokers. For the same reason, he dismissed the breach of fiduciary duty claim.
The judge rendered this decision at the end of March 2026. As of this writing, there is no record of an appeal.
There does not appear to be much the two wholesalers could have done to prevent this suit. It is unsurprising that an EPLI policy issued to a restaurant would exclude coverage for claims like these. Workplace sexual harassment is a persistent problem in this industry. As wholesalers, they had no direct contact with the client. If anyone was responsible for setting the insureds’ expectations, it was their retail agent who was not a party to this lawsuit.
The lesson here, once again, is that clear communication with insureds about what a policy does and does not cover is essential. Wholesalers do not communicate with insureds and, unfortunately, may be dragged into litigation just the same.
