Insurance Coverage for Wage and Hour Claims

Insurance Coverage for Wage and Hour Claims

By David A. Gauntlett, Principal, Gauntlett & Associates

Litigation contending wage and hour law violations has escalated rapidly in recent years.  Virtually every business, especially those in California, is susceptible to claims by an increasingly vigorous plaintiff’s bar, including a plethora of class action lawsuits.  Employment Practice Liability Insurance (“EPLI”) policies, both with and without Wage & Hour exclusions from coverage, continue to spawn coverage litigation nationally.

This commentary notes that new insurance products to protect employers exist, and will continue to evolve. The commentary looks at such policies. For example, AON is offering a new Wage & Hour policy which could serve as a model for future products from syndicates such as Beazley which now include sublimits but reach a broader audience.

EPLI coverage has been the traditional resource to address such claims, but even where wage and hour claims are conjoined with other claims that typically trigger EPLI coverage, availability of that resource has diminished in recent years.  Increasingly, major insurers have included sublimits for wage and hour claims, which apply to defense only, not indemnity, with limits ranging from $150,000 to $350,000.

Undoubtedly, given the prevalence of wage and hour claims and their significant cost, especially where they are pursued as class actions, insurers will continue to tussle over whether a variety of policies can afford coverage for these matters.

As claimant’s counsel seek to access insurance proceeds to facilitate settlements, they also will become more attuned to what provisions in available policies are likely to respond favorably to claims that could implicate coverage.  Indeed, it is not hard to envision a dialogue, not unlike that occurring for blast fax claims, where statutory violations under the Telephone Consumer Protection Act have been expressly excluded in commercial general liability (“CGL”) policies since approximately 2002 by ISO forms. The commentary points out that plaintiffs have, nonetheless, recognized that common law privacy invasion claims may surmount these exclusions and create potential exposure, albeit at the cost of a loss of statutory damages.

This commentary analyzes selected coverage cases categorized by the distinct kind of policies for which insureds have pursued coverage. The commentary provides insight into where coverage arguments may arise for “wage and hour” claims.

    David A. Gauntlett received his B.A. Magna Cum Laude from the University of California, Irvine 1976 and his J.D. from the University of California, Berkeley 1979 where he served as an editor of the California Law Review.

Mr. Gauntlett is the principal of Gauntlett & Associates in Irvine, California and focuses on the litigation of insurance claims under directors & officers (D&O) policies.  Defendant companies can use their existing D&O insurance policies to pay for litigation expenses under some circumstances. He has represented a number of Fortune 1000 companies in negotiation and review of D&O and EPLI policies, securing favorable results in D&O and EPLI matters that are not public and did not require litigation.

He is the author of Insurance Coverage for Patent Infringement Lawsuits Under Errors & Omissions and Directors & Officers Policies [Licensing Journal Vol. 29 No. 6] (2009), Insurance Coverage for Employment Claims: An Overview (2008), Recent Case Law: A Tale of Three Policies: Courts Split on Whether Distinct Factual Scenarios Trigger Coverage Under Directors & Officers/Cybernet/Commercial Liability Policies [Licensing Journal Vol. 28, No. 10] (2008), and Independent Director Exposure To Post Sarbanes-Oxley Claims Requires Revisiting Of Directors & Officers Insurance Coverage [Licensing Journal Vol. 24, No. 5] (May 2004). 

He has also presented on such topics as Creative Approaches to Getting Insurance Coverage for Wage & Hour and Trade Secret Cases (Fisher & Phillips Seminar, December 19, 2012 – Irvine, CA), Insurance Coverage for Business Torts EPL & IP Disputes – (OCBA Insurance Law Section Meeting, March 25, 2011), and Employment Insurance Coverage Opportunities: EPLI Policies And Beyond (Fisher & Philips Seminar, July 29, 2008 – Irvine, CA).

Mr. Gauntlett is listed in the Bar Register of Preeminent Lawyers by Martindale-Hubbell, is a California Super Lawyer in the area of Insurance Law, and is rated “AV Preeminent” by Martindale-Hubbell.

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