Insurer Says Virginia Law Blocks Payment of $10M Punitive Damages for ‘Intentional’ Acts

Twin City Fire Insurance Co. says it is not obligated to cover a Virginia employer’s $10 million punitive damages penalty for racial bias because the company’s behavior was found by a jury to be intentional.

The employer, Society for Human Resource Management (SHRM, is seeking to trigger the employment practices liability (EPL) insurance coverage in its Twin City policy. Twin City is seeking a judicial declaration that it is not obligated to indemnify SHRM.

The insurer, a member of the Hartford Fire and Casualty Group, argues that its policy specifies that insurability of punitive damages shall be governed by the laws in Virginia, which is where the employer is located. It further argues that while Virginia Code § 38.2-227 establishes that purchasing insurance coverage for punitive damages arising from personal injury or death is consistent with state public policy, the law explicitly does not allow insurance protection for deliberate or intentional harm.

The underlying case took place in federal court in Colorado. Twin City agreed to defend SHRM subject to a reservation of rights, including with respect to the policy’s definition of damages.

In December 2025, the Colorado jury awarded $1,500,000 in compensatory damages and another $10,000,000 in punitive damages to former SHRM employee Rehab Mohamed, who claimed that SHRM engaged in race discrimination and retaliation that ended with her termination in violation of federal civil rights law (42 U.S.C. § 1981).

According to Twin City’s complaint, the jury instructions in Colorado expressly required that the jury could award punitive damages only after finding that SHRM “intentionally discriminated or retaliated against Ms. Mohamed” and acted “with malice or with reckless indifference” to her right to be free from intentional discrimination and retaliation.

The punitive damages award was not, therefore, the result of negligence, gross negligence or any other non-intentional conduct, Twin City maintains.

Twin City said it filed its bid for a declaratory judgment in federal court in Alexandria, Virginia because that is where SHRM’s principal office, the insurance broker, and the insured risk location are.

SHRM has appealed the judgment and posted a bond.

Twin City told the court that the coverage dispute affects the parties’ present conduct and requires immediate resolution.

SHRM has not yet filed answer to Twin City’s filing.