Employment Practices Liability

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The U.S. Supreme Court’s ruling in Dobbs v. Jackson Women’s Health Organization and its progeny have sparked confusion and uncertainty for individuals, medical providers, and employers with respect to the consequences of providing, seeking, or facilitating abortion care. Moreover, for both medical providers and employers, questions arose as to whether and how liability insurance might help alleviate these risks.

Now that a year has passed since the Dobbs decision, it is worth revisiting the liability landscape, as well as the question of how insurance coverage might play a role in providing relief with respect to the ongoing risk of litigation.

Background

The Dobbs decision, which held that access to abortion care is no longer a constitutionally protected right, raised a host of questions as to whether medical providers and employers might face civil or criminal liability for facilitating access to abortions, particularly in states that responded by enacting a panoply of restrictions in response to Dobbs. This uncertainty was heightened by inevitable litigation concerning the viability of the new statutes and has led to widespread confusion in many states. This confusion has been exacerbated by the Centers for Medicare & Medicaid Services (“CMS”), which initiated investigations into hospitals in Missouri and Kansas, asserting that they were in violation of the law by failing to offer necessary, life-saving abortion services.Continue Reading One year after Dobbs: Are medical providers and employers still at risk for lawsuits stemming from abortion access, and should they consider the role of liability coverage?

The landscape of biometric privacy litigation already has changed dramatically in 2023. Last month, the Illinois Supreme Court ruled in Tims v. Black Horse Carriers, Inc., 2023 IL 127801, that claims for violations of the Illinois Biometric Information Privacy Act (BIPA) (which allows individuals to sue companies directly for the wrongful collection or disclosure of their biometric data) are subject to a five-year statute of limitations. Later that month, in Cothron v. White Castle System, Inc., 2023 IL 128004, the court ruled that a BIPA violation accrues each time an individual’s data is improperly collected or shared, not merely the first time. Taken together, these rulings significantly broaden the scope of claims facing companies that have violated BIPA and the damages flowing from such violations.

In recognition of the dystopian risks presented by the rampant, unlawful sharing of biometric data, several more states are jumping on Illinois’ bandwagon, attempting to pass BIPA-like laws. According to Bloomberg, legislation proposed in nine other states also would grant a private right of action to individuals whose biometric data was wrongly collected or shared.

Despite the growing threat of civil litigation related to the mishandling of biometric data, there is a silver lining for corporate policyholders: the opportunity to obtain insurance coverage for biometric privacy liability has never been greater.Continue Reading Key considerations for policyholders after landmark biometric privacy decisions reshape insurance landscape

Although the policyholder bar has previously had success obtaining coverage for Biometric Information Privacy Act (BIPA) litigation under an employment practices liability (EPL) policy, insurers recently notched a win by convincing a court to deny EPL coverage for an employee-based BIPA class action.  In Church Mutual Insurance Company v. Prairie Village Supportive Living, LLC, the insured’s former employee brought a class action alleging the insured unlawfully collected, used, and disseminated employee biometric identifiers (fingerprints) in violation of BIPA, and the insured sought coverage from its insurer under its general liability (GL) and EPL policies.  No. 21 C 3752, 2022 U.S. Dist. LEXIS 143495 (N.D. Ill. Aug. 11, 2022).  Based on a unique combination of policy provisions not previously addressed in BIPA coverage litigation, the court declined to find coverage under either policy.  Rather than be discouraged from pursuing coverage for BIPA class actions involving employee biometrics, however, there are some important lessons policyholders can glean from this opinion.

The unique terms of the insured’s EPL policy precluded coverage under all policies

The combination of policy terms at issue in Church Mutual was quite unique and does not appear to be typical of those found in most insureds’ policies.  As an initial matter, although the insured had purchased both GL and EPL coverage, the EPL coverage form stated:  “Except for the insurance provided by this coverage form, the policy to which this coverage form is attached does not apply to any claim or ‘suit’ seeking damages arising out of any ‘wrongful employment practice.’”  Right off the bat, therefore, the insured was limited to seeking EPL coverage because it did not dispute that it was seeking coverage for a “wrongful employment practice” as defined in its EPL policy.  Any coverage that may have existed under the insured’s GL policy was irrelevant.

After limiting its analysis to whether EPL coverage existed, the court then focused on an exclusion in the EPL policy entitled “Violation of Laws Applicable to Employers.” Pursuant to that exclusion, the policy precluded coverage for, in relevant part:

“Any claim based on, attributable to, or arising out of any violation of any insured’s responsibilities or duties required by any other federal, state, or local statutes, rules, or regulations, and any rules or regulations promulgated therefor or amendments thereto. However this exclusion does not apply to: Title VII of the Civil Rights Act of 1964, the Americans With Disabilities Act, the Age Discrimination in Employment Act, the Equal Pay Act, the Pregnancy Discrimination Act of 1978, the Immigration Reform and Control Act of 1986, the Family and Medical Leave Act of 1993, and the Genetic Information Nondiscrimination Act of 2008 or to any rules or regulations promulgated under any of the foregoing and amendments thereto or any similar provisions of any federal, state, or local law.”Continue Reading Court’s denial of employment liability coverage for Biometric Information Privacy Act litigation should not discourage policyholders

Since the Illinois Supreme Court’s ruling that class actions alleging violations of the Illinois Biometric Information Privacy Act (“BIPA”) trigger general liability coverage, the focus of BIPA coverage litigation has shifted to the applicability of three exclusions often found in general liability policies: (1) the Employment Related Practices exclusion, (2) the Violation of Statutes exclusion, and (3) the Access or Disclosure exclusion.  Although the first quarter of 2022 brought a mixed bag of opinions, with four out of seven resulting in a finding of coverage, the scorecard with respect to each specific exclusion tells a different story that generally favors the policyholders.  As outlined in this blog post, insureds facing BIPA lawsuits therefore have plenty of reason to continue pressing their insurers for coverage.

Employment-related practices exclusions

The Employment-Related Practices exclusion bars coverage for bodily injury or personal and advertising injury to a person arising out of any of the following:

  • Refusal to employ that person
  • Termination of that person’s employment
  • Employment-related practices, policies, acts or omissions, such as coercion, demotion, evaluation, reassignment, discipline, defamation, harassment, humiliation, or discrimination directed at that person

In coverage disputes arising out of employment-based BIPA class actions, the issue is whether the conduct at issue is an employment-related practice that falls within the third prong of the exclusion.

As outlined in a previous blog post, there is case law outside of the BIPA context standing for the proposition that the phrase “employment-related” has a narrow meaning and only refers to matters that concern the employment relationship itself. According to this line of case law, where the conduct at issue in a lawsuit does not arise out of personnel management or employee discipline (i.e., the employment relationship), but instead merely happens to involve an employee, the third prong of the exclusion does not bar coverage.Continue Reading Recent opinions provide support for insureds seeking coverage for BIPA claims

If an insurance company owes a duty to defend, the dispute should be decided promptly, on the pleadings. Any delay undermines the duty to defend. The scope of the duty to defend should be adjudicated on the pleadings as quickly as possible to give policyholders the true value of their policies and the benefit of their contracts.

The value and purpose of the duty to defend

The duty to defend is one of the most valuable components of an insurance policy. Like it or not, American society is litigious. Companies cannot prevent lawsuits through good conduct, laudable intentions, or strong compliance programs.  Refuting liability and damages is expensive even if the core facts are undisputed or the case is frivolous.

For a single company or individual, the frequency and size of litigation generally is unpredictable, making budgeting for defense costs a difficult task.  In any single year, the risk of litigation is low, but when a claim does come in, defense costs can be significant.  This litigation landscape is a problem for legal departments trying to budget or reserve for litigation costs.

The duty to defend addresses this problem using the principles of risk transfer and risk pooling.

  • Risk transfer: the risk and costs of defending litigation is transferred to the insurance company in exchange for a premium payment.
  • Risk pooling: the insurance company takes the collective risks of litigation against all policyholders in a pool large enough that aggregate defense costs can be statistically analyzed and predicted on an annual basis.

This way no one has to assess the risk that any individual company is sued or anticipate those defense costs. Policyholders can include insurance premium costs in their legal budgets, and shift covered defense costs onto the insurer. The insurance company underwriters can evaluate the aggregate defense spend at a gross systemic level and charge premiums to cover those costs (with a healthy profit margin).Continue Reading The duty to defend requires an early judgment

As a recent decision from the Eleventh Circuit highlights, when purchasing insurance for workplace bodily injuries, policyholders need to be mindful of how all of their policies fit together, keeping an eye out for policy language that insurers may exploit to manufacture unexpected and unintended gaps in coverage.

Covering the workplace

Typically, employers seek three types of coverage to manage liabilities arising from accidents in the workplace: workers’ compensation coverage, employer’s liability coverage, and comprehensive general liability (“CGL”) coverage. These three types of policies are designed to work together, with workers’ compensation coverage providing protection against most bodily injury claims sustained by employees while working; CGL coverage providing protection against most bodily injury claims asserted by third parties; and employer’s liability coverage filling in any coverage gaps for bodily injury claims brought by employees. To avoid duplicative coverage, employer’s liability policies typically include a workers’ compensation exclusion and CGL policies typically include both a workers’ compensation exclusion and an employer’s liability exclusion.

The intent of these coverages (and exclusions) is to meet the twin goals of ensuring seamless coverage to the employer without having to pay for needless overlapping of coverage. As one treatise explains:

The intent of the employment exclusion [in a CGL policy] appears to be to avoid duplication of coverage provided under Workers’ Compensation and Employers Liability policies.  Accordingly, any interpretation of the commercial general liability exclusion that bars coverage for claims not covered under a Workers’ Compensation and Employers Liability policy would appear to deny coverage erroneously and to create a gap in coverage that almost surely was not intended by the policyholder.

See 21-132 Appleman on Insurance Law & Practice Archive § 132.5 (2nd 2011).

Unfortunately, such intentions may not always align with its insurer’s resolve to avoid paying claims. Just last month, the Eleventh Circuit rejected an insurer’s attempt to improperly expand the scope of a CGL policy’s employer’s liability exclusion. That decision provides helpful ammunition for policyholders to resist similar efforts, and serves as a useful reminder to avoid complacency and watch out for potential ambiguities when purchasing coverage.Continue Reading “Mind the gap”: Guarding against unintended gaps in coverages

In West Bend Mutual Insurance Co. v. Krishna Schaumburg Tan, Inc., 2021 IL 125978, the Supreme Court of Illinois held that coverage existed for a class action alleging violations of the Illinois Biometric Information Privacy Act (BIPA) under the terms of a general liability policy. Although a win for the policyholder bar, the precedential value of Krishna was arguably limited by the fact that the underlying class action targeted the insured’s use of customer biometrics. Where the use of employee biometrics is at issue instead, policyholders are likely to face unique coverage issues left open by Krishna, such as the applicability of certain exclusions that bar coverage for injuries arising out of the employment relationship. This blog post provides a brief overview of the employment-related practices (ERP) exclusion and explains why it should not apply to preclude coverage for employment-based BIPA class actions.

Employment-related practices exclusions

The ERP exclusion is a common provision in commercial general liability policies. As it is usually drafted, the exclusion bars coverage for bodily injury or personal and advertising injury to a person arising out of any of the following:

  • Refusal to employ that person
  • Termination of that person’s employment
  • Employment-related practices, policies, acts or omissions, such as coercion, demotion, evaluation, reassignment, discipline, defamation, harassment, humiliation, or discrimination directed at that person

In coverage disputes arising out of employment-based BIPA class actions, the issue will be whether the conduct at issue is an employment-related practice that falls within the third prong of the exclusion.

Case law analyzing employment-related practices exclusions

Several courts that have analyzed the scope of the ERP exclusion have concluded that it should be interpreted narrowly. For instance, in Peterborough Oil Co. v. Great American Insurance Co., after the insured fired an employee for theft and pressed charges, the employee sued the insured for malicious prosecution and intentional infliction of emotional distress. 397 F. Supp. 2d 230, 234 (D. Mass. 2005). The insured tendered the lawsuit under its commercial general liability policy, and the insurer denied coverage in reliance on the policy’s ERP exclusion. Id. at 235. The insured filed a coverage action and argued that the exclusion did not apply. Id.Continue Reading Employment-related practices exclusions and Biometric Information Privacy Act litigation

Faced with mounting claims for insurance coverage as a result of the novel coronavirus (COVID-19) outbreak, commercial insurers are likely to search for any policy provision that they think will enable them to avoid paying virus-related claims.  One provision that insurers ultimately may invoke in an attempt to deny such claims is the so-called “pollution exclusion” – an exclusion that can be found in both commercial general liability (CGL) insurance policies and property insurance policies.  Policyholders should anticipate such an argument and should not walk away from insurance claims just because of it.  Although the exclusion is often broadly worded, there is generally good reason not to read it to preclude coverage for third-party claims and/or first-party losses involving viruses, including COVID-19.

While the exact language of the pollution exclusion may differ from one policy to another, it typically provides that there is no insurance for “bodily injury” and/or “property damage” that “would not have occurred in whole or in part but for the actual, alleged, or threatened discharge, dispersal, seepage, migration, release, or escape of ‘pollutants’ at any time.”  Again, while its precise definition can vary among policies, “pollutant” is typically defined as “any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals, and waste.”Continue Reading Pollution exclusion should not preclude coverage for virus-related claims

It has long been acknowledged that typical Employment Practices Liability Insurance (EPLI) policies exclude coverage for “wage and hour” claims.[1] [2]  However, a recent California Court of Appeal decision, Southern California Pizza Co., LLC v. Certain Underwriters at Lloyd’s, London Subscribing to Policy Number 11EPL-20208,[3] narrows the definition of what is a wage and hour claim, and improves the possibility of obtaining coverage for broad-brush wage and hour claims that tack on claims for failure to reimburse employees for business-related expenses.

In Southern California Pizza, the Court of Appeal held that claims brought under California Labor Code Sections 2800 and 2802 for failure to reimburse employee expenses did not fall within the wage and hour exclusion in a Lloyd’s of London EPLI policy that excluded coverage for claims “based upon, arising out of, directly or indirectly connected to or related to, or in any way alleging violations of any foreign, federal, state, or local, wage and hour or overtime law(s), including, without limitation, the Fair Labor Standards Act.”  In doing so, the Court reversed the lower court’s dismissal of the insured’s coverage case and rejected prior federal court decisions that had denied coverage for Labor Code Sections 2800 and 2802 claims under similar exclusionary language, stating that the California Courts of Appeal are “not bound by those federal decisions, nor do we find them persuasive.”[4]

Accordingly, policyholders who previously would not have had coverage for these types of reimbursement-related claims may now be able to trigger an insurer’s broad defense obligations and also obtain indemnification for some claims, depending on the language of their EPLI policy.Continue Reading Will your EPLI policy cover “wage and hour” claims in the wake of the California Court of Appeal’s decision in Southern California Pizza?

On Monday, June 4, 2018, the California Supreme Court ruled that an insurance company must provide liability coverage to its corporate insured against claims of negligent hiring, retention, and supervision of its employee, who allegedly sexually assaulted a 13-year-old child. The case is Liberty Surplus Ins. Corp. v. Ledesma & Meyer Construction Co., Inc., Case No. S236765 (June 4, 2018). This decision is “of exceptional importance to injured parties, employers, and insurance companies doing business in California,” wrote the U.S. Court of Appeals for the Ninth Circuit, in an order certifying the issue to the California Supreme Court.

In 2002, Ledesma & Meyer Construction Co. (L&M) entered into a contract with the San Bernadino School District for a construction project at a local middle school. L&M hired Darold Hecht to work on the project. In 2010, a 13-year-old student at the school (Jane Doe), filed suit asserting numerous claims against L&M, alleging that she was sexually abused by Hecht. One of Doe’s claims against L&M alleged negligent hiring, retention, and supervision of Hecht. L&M’s insurer, Liberty Surplus Insurance Corporation, agreed to defend L&M under a reservation of rights.Continue Reading California Supreme Court rules broadly in favor of insureds