Insurance Coverage for Disgorgement or other Equitable Remedies

Posted By Stephen D. Rosenberg In Coverage Litigation , Employment Practices Liability Insurance , Exclusions
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You say disgorgement, I say damages. Sorry, I couldn’t, try as I might, make that fit into the old lyric “you say tomato, I say tomahto, lets call the whole thing off,” but the sentiment fits. In this recent Sixth Circuit decision, reported on here, the Court addressed the question of whether certain employment related damages could be considered disgorgement by the employer, which would not be covered under the employer’s insurance policy because it excluded disgorgement, or should instead be treated as traditional damages, which are covered. The Court concluded that the sums that were awarded could more fairly be described as damages owed to the claimants, and not as disgorgement of ill-gotten gains, and were therefore covered.

Its an interesting decision that raises two issues that companies that defend against employment related claims should always be aware of. First, that there is always room within their insurance policies to look for potential coverage, particularly given the growth of employment practices liability insurance over the past decade and more. Second, that the question of what constitutes disgorgement, or other equitable remedies which are also often not covered, can be a tricky question, and is not always obvious on first review. All sorts of policies limit coverage to awards that constitute damages as that term is understood in the law, often without defining the term, while excluding or otherwise precluding coverage for disgorgement or other types of losses that fall within the realm of equitable relief. It is important to make a thorough and accurate analysis of whether the sums at issue are properly construed as damages or instead as equitable relief in this realm, both for insurers deciding whether to provide coverage and for insureds electing whether to challenge a denial of coverage.
 

Then and Now: Proving a Duty to Defend By Using Evidence Outside of a Complaint

Posted By Stephen D. Rosenberg In Coverage Counsel , Duty to Defend , Employment Practices Liability Insurance , Exclusions
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You know, this is actually of more personal interest to me than it is probably of importance to insureds, insurers and their lawyers with regard to determining whether a duty to defend exists in a given case. That is because the rule reflected in the case I am about to tell you about is sensible, intuitive, and consistent with the direction that the case law has been trending for a number of years, and thus should be of no surprise to anyone working in the area of insurance coverage law. As this neat article, with its neat four paragraph synopsis of the case’s key holding, explains, the United States District Court here in Boston has issued a ruling holding that, where the facts between those alleged in the complaint against the insured and those offered to the insurer by the insured differ, the insurer must investigate those competing versions of events before deciding whether to deny a defense to the insured on the ground that the complaint only alleges an excluded claim. There is a practice tip in there, which is that, when representing an insured served with a complaint whose allegations are both inaccurate and uncovered, counsel for the insured should provide the insurer with evidence showing a different factual scenario, one which could be covered and which would at least trigger a duty to defend. There is nothing new in this, and the law in Massachusetts has provided this opening to creative coverage counsel for insureds for decades, going back at least as far as the question of insurance coverage for a dispute between Vanessa Redgrave and the Boston Symphony Orchestra in the 1980s. That said, though, I would suggest that for many years, lawyers for insureds did not come close to taking full advantage of that opportunity and tactic. This District Court case, Manganella v. Evanston Insurance, makes clear both that they should, and that the better lawyers now have begun fully exploiting that avenue for obtaining coverage.

I say this is of personal interest because, many years ago, I represented a party in a major coverage case involving whether particular allegations of sexual misconduct of an uncovered type alleged in a complaint, which were in turn denied by the insured, could be covered and require a defense. Courts at that time focused solely or at least heavily on the alleged misconduct in making that decision, and, as a general rule, would not have considered the insured’s argument or evidence that the truth was different than that alleged in the complaint in deciding the question. Manganella makes clear the extent to which the law has evolved since that time, as it reflects a belief that the actual facts, if different than that alleged in the complaint, should be considered by the insurer and then by the court in determining whether there is a duty to defend in that type of a situation.
 

Legal Services as Commodities, and the Role of Insurance in that Process

Posted By Stephen D. Rosenberg In Employment Practices Liability Insurance
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The macro view of trends is often fun, but detailed analysis of what is really going on is often more fruitful. A long, long time ago - in blog years, anyway, which given the youth of legal blogging is akin to dog years - I wrote this post about how the rise of employment practices liability insurance would inevitably lead to a certain level of price pressures, standardization and commoditization with regard to employment law services. This excellent article here details the underlying developments that drive this type of commoditization of legal services.

Employment Law and Insurance Defense

Posted By Stephen D. Rosenberg In Employment Practices Liability Insurance
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I made a prediction some years ago - long before I had a blog on which to note such things - that the rise of employment practices liability insurance (commonly known as EPLI), which covers employment related claims, would eventually transform the market for employment law services, moving it further away from a traditional corporate law firm specialty and closer to an insurance defense type specialty. It was not much of a prediction, and barely required an educated guess, but this article seems to record that this has in fact come to pass.