Courts Find Cracks in “Wage and Hour” Exclusions
What if a claim typically capable of being asserted in most cases where there has been a wrongful classification of an employee or other failure that technically violated wage and hour law could be covered under standard Employment Practices Liability Insurance (“EPLI”) policies? And, more critically, what if the insurance coverage would not be within the sublimit for a wage and hour claim, but subject to the full policy benefits. That would be a game changer. That is precisely what a recent decision from a California Court of Appeal concluded may be possible.
California Courts Cannot Base Coverage Analysis on Arbitration Results
In most states, an arbitrator’s conclusions can be used by insurers as the basis of a coverage denial. California, however, represents an exception to that general rule. In Vandenberg v. Superior Court, 21 Cal. 4th 815, 836–37 (1999), the California Supreme Court determined that arbitration results should not be usable by non-parties unless both arbitrating parties specifically agree otherwise. The impact of this decision should not be underestimated, particularly in the context of Employment Practices Liability Insurance (“EPLI”) coverage where employer-employee disputes so often turn to arbitration as a first option for a resolution.
Alternative Approaches to Stays of Coverage Suits and Underlying Actions
Our previous blog focused on the California approach to this issue, which stems from the California Supreme Court case Montrose Chemical Corp. v. Superior Court. The Montrose ruling permits policyholders to avoid the complications that would arise if the merits of the claims against them were litigated. Coverage benefits are not impaired by requiring the policyholder to forfeit its rights to protect its defense to the claims asserted against it in the underlying action.
Several states have adopted similar policies. Others have taken the exact opposite stance. They opt instead to grant stays in the underlying action, allowing the coverage suit to be resolved first. Additional factors are also implicated in the common scenario where a coverage suit for Declaratory Relief brought in federal court to address the insurer’s obligations to defend a policyholder in an underlying state court action.
Stay of a Coverage Suit Due to Overlapping Facts
California courts have recognized that where the underlying action and coverage action both address the same “substantive issues,” a duty to defend, delaying the adjudication of the coverage issues by issuing a stay is appropriate. In the case of Aspen American Insurance Co. v. Harry William Ou, the court employed this doctrine to stay the coverage case addressing the plaintiff’s right to independent counsel due to the overlap of facts that could prove the plaintiff’s liability with those that might prove the applicability of a policy exclusion.
Ten Misconceptions Re Insurance Coverage for Employment-Related Claims
MISCONCEPTION 1.
No effective coverage for employment practice claims is available outside of employment practice liability insurance policies.
REALITY:
Commercial General Liability (“CGL”), Employee Benefits Liability, Errors and Omissions (“E&O”), Directors & Officers (“D&O”), as well as Fiduciary Liability policies have all been held to trigger a duty to reimburse defense fees in employment related disputes.
Preferred General Partnership Liability ("GPL") Policies for Private Equity Firms
Private equity firms could be spending to much money on their D&O policies to cover their partnerships. Or, they could be leaving considerable gaps in their D&O policies to claims arising out of partnerships. A GPL policy can change all that, saving private equities money and providing critical coverage appropriate for private equity partnerships.
Insurance Coverage for COVID-19 Infection Claims by Employees Returning to Work
Businesses are beginning to re-open and their employees are returning to work. Employers need to be prepared for the evolving threat of COVID-19 infection and employee infection claims. Learn more about how to find insurance coverage when workers’ compensation may not be not enough.
Narrow, Narrower and Narrowest: The Insurer's Playbook to Avoid Coverage
A recurring theme in Commercial General Liability (“CGL”) policy forms is that there has been an ongoing narrowing of “personal injury”/ “advertising injury” coverage provisions.
Ten Tips on Employment Practice Liability Insurance Coverage
Only EPL policies can reliably shield businesses from employment practice claims. Other common business insurance policies have been found to burden the policyholder with a duty to reimburse an insurer’s defense fees in employment-related disputes, including policies for Commercial General Liability (“CGL”), Employment Benefits Liability, Errors and Omissions, Directors and Officers (“D&O”), and Fiduciary Liability.