The New Jersey Supreme Court in a unanimous decision ruled that claims of workplace sexual harassment, when the harassment results in bodily injury, could not be excluded by insurance carriers under the employer's liability section of a workers' compensation policy. Lisa Schmidt filed a claim against her employer, Personalized Audio Visual, Inc. and against the president of the company, Dennis Smith, for sexual harassment in violation of New Jersey's Law Against Discrimination (LAD), assault, battery, invasion of privacy and intentional infliction of emotional distress.
The Supreme Court declared that workers' compensation policies must cover not only claims for compensation prosecuted in the workers' compensation court but also claims for work-related injuries that are prosecuted in the court of common law. The reason that the employer's liability coverage is written in conjunction with the workers' compensation policy is its intent to serve as a "gap-filler" providing coverage to the employer in situations where an employee has the right to bring a common law action despite the exclusivity provisions of the Workers' Compensation Act. An additional benefit of bringing the action under the umbrella of the workers' compensation policy would presumably be a reduced monetary award payable to the victim when compared to that which might be realized under the tort system. Schmidt v. Dennis Smith, et al, No. A-24, 1998 WL 329267 (N.J., June 15, 1998).