Employment Disputes And Insurance Are Among Our Favorite Things

| William A. Schreiner, Jr.

"Times Square"

When the dog bites

When the bee stings

When I'm feeling sad

I simply remember my favorite things

And then I don't feel so bad.

Just from looking at the lyrics, your mind will automatically add in the tune.  Rodgers & Hammerstein wrote it, Mary Martin, Julie Andrews, and even Carrie Underwood have performed it: the classic song “My Favorite Things” from The Sound of Music (which for mysterious reasons is now associated with Christmas, even though the musical isn’t about Christmas at all). 

But I bet few people know how I interpret the song.  I’m an insurance coverage lawyer – so my favorite things aren’t brown paper packages tied up with string or schnitzel or bright copper kettles.  My favorite things (or, at least, the things I use every day) include principles that – if some thought is given to them before a claim comes about, or in presenting the claim when it happens – can help executives and the companies that hire and fire them have access to the right insurance for the disputes that develop between them.  So, in that spirit, this post looks at some of those executive-employment-related insurance issues that we’ve reviewed throughout this year. They’re all things that business leaders should think on as they consider a company’s insurance strategy.  You could think of it as a cream-colored pony with an insurance treatise on its back.  But I’ll make it much more appealing than some book – more like a crisp apple streudel.  

  • Let’s start with the basics: Employment Practices Liability Insurance, or “EPLI.”  In February, we looked at the core principles of this type of insurance – which is designed to let businesses contract away many (but not all) of the risks associated with hiring, firing, and managing people.  Many of the things we write about on this blog – discrimination suits, wrongful termination suits, and similar events – can be covered under a carefully-crafted EPLI program, but business leaders need to think about who is covered, what type of claims are covered, and the limits of coverage that make sense for their business.  If you’re reading this blog, you have some interest in executive employment issues – and EPLI is, or can be, a part of many of those disputes.  It may be worth reviewing our two-part series here and here, and finding out how your company stands with its EPLI.                
  • The month of March saw us write about Jerry Sandusky’s quest to have his defense bills in the legal actions stemming from the sexual abuse allegations against him paid under directors and officers’ (“D&O”) and EPLI policies that covered his charitable foundation.  In a two-part series, we explored the dispute and a court’s conclusion that the insurer didn’t have to pay for his defense because the allegations against Sandusky didn’t arise out of the scope of his employment with the foundation.  
  • In November, we looked at a curious question that came out of the liquidation of a large Philadelphia law firm: would the firm’s fiduciary liability insurance policy cover a settlement that the firm had reached with a departing partner, when the firm was no longer able to make the settlement payments due to its liquidation?  The insurer argued there was no coverage because the firm’s failure to pay wasn’t due to a “Wrongful Act” as defined in the policy; it also contended the settlement with the partner wasn’t an ERISA-related “Sponsored Plan” and therefore the fiduciary insurance (which covers risks associated with managing a retirement plan) wasn’t triggered.  We discussed this case here; since then, the firm has settled its dispute with the partner, but the coverage lawsuit between the firm and its insurer continues in federal court in Pennsylvania; at this point, the insurer has moved to remand the suit to state court.   
  • And in August, we covered something that is the insurance coverage lawyer’s equivalent of whiskers on kittens and/or snowflakes staying on our nose and eyelashes: a case involving whether two executives’ claims for bonus pay and breach of contract damages are covered “loss” in a D&O policy.  This sort of dispute is part of the intriguing word game that makes up much of insurance law, and we wrote about this lawsuit – in which a mortgage company sought coverage of the underlying disagreement with its executives – here.  We didn’t predict the winner of the suit, but said each side had some reasonable arguments.  The case was voluntarily dismissed in October, which suggests that a settlement was ultimately reached. 

While we’re not an insurance-based blog, we’ll continue to write periodically about how insurance works into executive disputes the way that, er, raindrops land on roses.