July 19, 2024, by Kyle Langan

$5 million award for victim of perpetrator who abused teen girl co-workers at Wendys 

QUESTION

Which commercial insurance contract responds to this type of loss?

Failure #1: Thorough pre-hire background check

The lawsuit alleges that the company hired the perpetrator in October 2016, despite his previous convictions in Missouri of rape and first-degree sexual abuse cases. [1] These did not appear on Case.net, which provides access to the Missouri state courts’ automated case management system. Perhaps Missouri could make changes to make data like this more easily accessible for the public.

Wendy’s corporate media team said “the franchise owner is an independent business owner and thus is responsible for all employment functions.” While it may seem like a deflection, this response is inherently true. Wendy’s transferred this risk to the franchise owner. However, separately, and difficult to quantify, this loss could cause reputational damage for Wendy’s. As part of its response, it said “The Wendy’s Company takes the safety and well-being of our employees very seriously and we have a zero-tolerance policy for this type of behavior.” [2]

Failure #2: Response, investigation into the issue once presented with the facts

According to the lawsuit, the anonymous teen and her mother reported the inappropriate behavior to upper management, but they failed to investigate the issue. [3] The franchise owner should have terminated the perpetrator and banned him from the premises. Instead, the franchise failed again to mitigate and respond to severe employment-related claims. This part was likely the key contributing factor to the $5 million award.

ANSWER

The commercial insurance contract that responds to this type of loss is Employment Practices Liability Insurance (EPL or EPLI), which deals with wrongful termination and other employment-related wrongful acts, like discrimination and sexual harassment. It can address the increasing tendency of aggrieved parties to turn to courts for the settlement of disputes. Insurers exclude these types of losses from General Liability policies.

References

[1]–[3]

Rieck, D. (2024, July 12). Wendy’s, store manager to pay $5 million in sexual assault lawsuit filed by former Teen Worker. STLtoday.com.

<https://www.stltoday.com/news/local/crime-courts/wendys-store-manager-to-pay-5-million-in-sexual-assault-lawsuit-filed-by-former-teen/article_80750590-4057-11ef-8f09 07e18738e771.html#:~:text=ST.,her%20while%20she%20was%20working.>