EPL CORNER

BIPA LAWSUITS TRIGGER DUTY TO DEFEND UNDER EPL COVERAGE

Twin City Fire Ins. Co. v. Vonachen Servs., No. 20-cv-1150-JES-JEH (C.D. Ill. Oct. 19, 2021)

Current and former employees of a janitorial company filed two separate class action lawsuits alleging their employer had been using, collecting, and indefinitely storing their fingerprints without informed consent. 

The employees alleged the company violated the Illinois Biometric Information Privacy Act (“BIPA”) by not providing the specific purpose and length of time for which the biometric information would be collected, stored, and used. 

 

The company requested defense and indemnity for the complaints under the directors and officers liability (“D&O”) and employment practices liability (“EPL”) coverage sections of its management liability insurance policy. The insurer, however, declined coverage under both coverage parts and sought a judicial declaration that it owed no insurance obligation under the policy. 

 

The court found that while the insurer did not have defense obligations under the D&O coverage, it did have a duty to defend under the EPL coverage. In its analysis under the D&O coverage part, the court reviewed the invasion of privacy exclusion. Even though the complaints did not specifically allege invasion of privacy, the court concluded the exclusion applied to preclude coverage for the entire matter as there is an abundance of case-law that has found a BIPA violation amounts to an invasion of privacy. Given that the invasion of privacy exclusion in the policy contained broad, catch-all language, the court determined the exclusion was broad enough to preclude coverage under the D&O. 

 

Moving to its analysis of the EPL coverage, the court noted the policy defined “employment practices wrongful act” as “breach of any oral, written, or implied employment contact, including without limitation, any obligation arising from a personnel manual, employee handbook or policy statement.” Since the company’s employee handbook required employees to use the timekeeping system and the company was obligated to comply with all laws associated with that system, including BIPA, the court found the insurer’s duty to defend had been triggered. The court also noted that the allegations fit within the definitions of an “employment-related invasion of privacy’ and “Employee Data Privacy Wrongful Act.” Accordingly, the court held the insurer had a duty to defend under the EPL coverage part of the policy.

The Takeway

Several courts have ruled on coverage for BIPA claims under commercial general liability (“CGL”) policies, but the court here was the first to rule on whether policyholders can seek indemnification under their EPL policies. In the event of a BIPA claim, coverage should be examined under all potentially applicable policies, including, but not limited to, D&O, EPL, cyber, and CGL. 

 

FORMER EMPLOYEE AWARDED $137 MILLION IN RACIAL DISCRIMINATION SUIT

Diaz, et al. v. Tesla Inc., et al., No. 3:17-cv-06748 (N.D. Cal. Oct. 4, 2021)

A former employee of an electric vehicle manufacturer was recently awarded $137 million in a racial discrimination suit heard in a California federal court. 

This case arose after the former employee sued the company, alleging his time working at one of its factories was a “scene straight from the Jim Crow era.” 

 

Among other practices, the jury found the manufacturer’s negligent supervision and the continued employment of a coworker who posted a discriminatory drawing subjected the former employee to a racially hostile work environment, as did a lack of procedure to resolve complaints of racial discrimination in the workplace. A significant portion of the hefty $137 million award was punitive damages, which the jury awarded after finding the manufacturer’s conduct was malicious, oppressive, or reckless.

COMPANY SETTLES WITH EEOC OVER SEXUAL HARASSMENT AND DISCRIMINATION SUIT 

EEOC v. Activision Blizzard, Inc., et al., No. 2:21-cv-07682 (C.D. Cal.)

Following a nearly three-year investigation, the U.S. Equal Employment Opportunity Commission (“EEOC”) brought a complaint against a company that creates and distributes video games, alleging widespread discrimination, harassment, and retaliation on the basis of gender. 

The company, which had been facing a host of legal challenges stemming from its alleged culture of workplace discrimination and harassment, had recently suffered several high-profile departures; notably, its entertainment president and chief legal officer. Thereafter, investigations were initiated by the U.S. Securities and Exchange Commission and the National Labor Relations Board stemming from the company’s disclosures regarding employment matters as well as alleged intimidation tactics against employees who complained. 

 

As a result of the EEOC’s lawsuit, the company proposed a settlement that would include an $18 million fund to provide restitution to female employees. The company also agreed to update its practices and hire an outside consultant to monitor its compliance.