Insurer’s EPL Policy Limits Upheld in Coverage Suit Over New York Wage-and-Hour Claims
Case Study

Insurer’s EPL Policy Limits Upheld in Coverage Suit Over New York Wage-and-Hour Claims

Mount Vernon Fire Insurance Company, a Goldberg Segalla client represented by Todd R. Harris and Patrick J. Mulqueen, prevailed on a motion for summary judgment to dismiss with prejudice an insured’s suit over policy limits regarding employment practices liability (EPL) coverage for an underlying New York wage-and-hour lawsuit.

Mount Vernon issued an employment practices liability policy, with liability limits of $1 million per claim, to a food packaging company based in Suffolk County, New York. The policy’s main coverage form was modified by an endorsement that provided coverage to the insured for claims alleging violations of the federal Fair Labor Standards Act (FLSA) or “any similar federal, state or local law regulating minimum wage, working hours, overtime … and other matters regulated under the [FLSA]”—but only up to a sublimit of $100,000 inclusive of defense and indemnity costs. Several former employees of the insured brought a suit alleging it had engaged in various illegal payment practices in violation of the FLSA as well as New York wage-and-hour laws. Mount Vernon agreed to defend the insured for the lawsuit, subject to the $100,000 sublimit, as all of the underlying claims asserted violations of the FLSA and “similar” New York laws.

In response, the insured filed a coverage action against Mount Vernon seeking a declaration that the endorsement’s $100,000 sublimit applied only to the underlying claims based on the FLSA and not to the claims brought under New York law, and as a result, that Mount Vernon was obligated to provide coverage up to the policy’s general $1 million limit. The insured contended that the New York statutes and regulations it allegedly violated concerned matters not specifically covered by the FLSA, and thus these New York provisions were not state laws “similar” to the FLSA. After the parties filed cross-motions for summary judgment, the district court granted Mount Vernon’s motion and denied the insured’s cross-motion, and dismissed the insured’s complaint with prejudice. The court agreed with Mount Vernon that all of the underlying claims were subject to the $100,000 sublimit, finding that endorsement’s use of the word “similar” did not mean “identical,” and the plain language of the endorsement clearly “encompass[ed] all of the various federal, state and local laws that, like the FLSA, impose wage-and-hour requirements.” Accordingly, the court concluded that the insured was only entitled to $100,000 in defense and indemnity coverage for the underlying suit, and dismissed the coverage action with prejudice.


 

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Todd, a partner based in the firm’s Garden City and Newark offices, and Patrick, an associate based in Newark, are members of Goldberg Segalla’s  Global Insurance Services practice. The 75-lawyer group, which Law360 ranks among the largest in the United States, exists to serve insurers, reinsurers, and all others operating in the insurance arena. It features both statewide insurance teams and policy- and issue-specific subgroups. Todd also serves on the leadership committee for Goldberg Segalla’s Retail and Hospitality practice.