Insurer Sues to Avoid Paying Nonprofit Accused of Retaliation

An RLI Corp. insurance unit is seeking to avoid paying the legal defense costs for an Arizona nonprofit accused of discriminating and retaliating against a former employee.

A supervisor at Chicanos Por La Causa raped an employee and another supervisor retaliated against her after she reported the incident to the organization, according to a February complaint she filed in Texas federal court. Chicanos fired her without explanation and caused another employer to withhold a job offer, the complaint said.

Illinois-based RLI Insurance Co. provided a directors and officers insurance policy to Chicanos, but it excludes “wrongful employment acts” such as sexual harassment and wrongful termination of employment, RLI said in a suit filed Thursday in the US District Court for the District of Arizona. The exclusion means RLI is off the hook for defense costs and any damages Chicanos is ordered to pay the former employee in her lawsuit, the insurer said.

RLI’s policy also excludes from coverage injury, including mental and physical injury and shock, caused by Chicanos, according to the complaint. RLI said the claims in the former employee’s lawsuit arise from such injury and aren’t covered.

Chicanos provides programs to help people own a home, grow a small business, and improve their health.

Chicanos didn’t immediately respond to a request for comment.

RLI is represented by Cavanagh Law Firm PA.

The case is RLI Ins. Co. v. Chicanos Por La Causa Inc., D. Ariz., Docket No. 2:24-cv-01765-CDB, 7/18/24.