Directors and officers insurers backdating claims face
Judge Stearns said that “Talbots makes no compelling argument for why this distinction matters when interpreting the scope of the exclusionary clause in the insurance policy.” Count 10 of the underlying complaint, Judge Stearns noted alleges that Talbots gained an unfair advantage over other businesses “solely because of the employment-related violations enumerated in Counts 1-9,” and therefore merely represents “an alternative theory of recover for the same alleged injuries to Talbots’ employees” – injuries that arose out of the company’s employment and labor practices.
Judge Stearns concluded that “all of the claims made against Talbots …
Most management liability insurance policies contain exclusionary provisions of the kind that came into play here.
Indeed, most insurers intend to try to preclude coverage for wage and hour claims from coverage.
Stearns granted the defendant insurer’s motion to dismiss.
In reaching this conclusion, Judge Stearns ruled that there was no coverage under either the insurance policy’s D&O coverage part or its EPL coverage part for any of the ten claims asserted in the underlying complaint.
1 which specified that the insurer is not liable for Loss in connection with any Claim for violation of the Fair Labor Standards Act or any similar federal, state, local or foreign statutory or common law, including, without limitation, any Claims based upon, attributable to, the refusal or failure to pay wages or overtime pay; improper deductions from pay; or the failure to enforce legally required meal or rest break period.
In a September 29, 2017 opinion applying Massachusetts law (here), District of Massachusetts Judge Richard G.
The kinds of claims advanced in Counts 5-9, Judge Stearns also said, are not included in the definition of Employment Practice Violation, and therefore are not covered by the EPL coverage part. Talbots argued that this claim cannot be considered an employment-related claim but rather represents a statutory unfair practices claim.
Both the policy language at issue and the outcome of the Talbots insurance coverage dispute arguably are unremarkable.
However, the outcome does raise questions about whether there might be ways for policyholders at least to obtain effective defense cost coverage for these kinds of claims.
In the current litigation environment, employers face an ongoing threat of claims brought by employees alleging violations of wage and hour laws, often filed as class actions.
These kinds of lawsuits can be expensive to defend and to resolve.
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Talbots submitted the lawsuit to its management liability insurer, which denied coverage for the claim.