West Marine Prods., Inc. v. Nat’l Union Fire Ins. Co. of Pittsburgh, PA, No. 5:21-cv-01940-EJD (N.D. Cal. Nov. 22, 2021)

A boating supply company sought coverage under its employment practices liability (“EPL”) insurance policy for two lawsuits alleging failure to pay overtime and provide meal breaks, as well as violations of wage and hour statutes.

The EPL insurer declined to cover both matters on the basis that neither suit alleged an “Employment Practices Violation” as required by the policy, but instead, were predicated on wage and hour violations, which were expressly excluded from coverage. 

Coverage litigation ensued and the court found the insurer did not owe its insured coverage for the two suits. The policy defined “Employment Practices Violation,” in part, as any actual or alleged “wrongful dismissal, discharge or termination (either actual or constructive) of employment, including breach of an implied contract” or “employment-related misrepresentation(s) to an Employee of any Organization.” According to the court, the underlying suits were not “Employment Practices Violations” and were subject to exclusions in the policy for claims arising out of violations of the Fair Labor Standards Act (“FLSA”) or similar state laws.


The Takeway

Wage and hour claims such as those alleging violations of California’s Private Attorneys General Act (“PAGA”), FLSA, or similar statutes regarding employee pay, overtime, and breaks are not covered under a standard EPL policy. However, wage and hour coverage is available and can be purchased separately or endorsed onto a standard EPL policy, but it often comes with a hefty price tag. Whether or not such coverage is purchased, it is nevertheless crucial to review wage and hour claims for reporting under an EPL policy in case there are any potentially covered allegations or the potential for covered allegations to arise in the future.



Knox, et al. v. Ironshore Indem. Inc., No. 21-cv-6321 (S.D.N.Y. Dec. 13, 2021)

In the underlying litigation, a class of female employees filed suit against a now bankrupt clothing retailer alleging the company’s policy of providing a clothing allowance to male sales employees, but not female employees, violated federal and state pay discrimination laws. 

The female employees prevailed at trial and sought to collect the judgment from the company’s employment practices liability (“EPL”) insurer.  


The insurer denied coverage under the policy’s Prior Acts Exclusion and argued that because the company adopted the allegedly discriminatory clothing allowance policy prior to the applicable prior acts date, all subsequent “tweaks” to the clothing allowance policy constituted “Related Wrongful Acts” and were also excluded. The employees argued the nature of the alleged “Wrongful Acts” changed over time. Specifically, the company modified the parameters of the overall clothing allowance policy by adding a discount program for female employees. According to the employees, since the company’s alleged “Wrongful Acts” were not “entirely consistent or repeated identically” from time period to time period, such subsequent acts were new and different, and not the “same or continuous,” as required by the relevant exclusionary language.   


The court disagreed with the employees, however, and held it was “indisputable” that the company’s earlier policy of denying a clothing allowance to its female employees was “related” to or arose from a “common nucleus of facts” as the subsequent, modified policy that granted female employees a discount program. Specifically, the court found the employees suffered the “same harms” of discriminatory conduct both before and after the prior acts date, and the “underlying nucleus of facts” that gave rise to the underlying suit existed both before and after that date.

The Takeaway

Interrelatedness inquiries are highly dependent on the specific facts and circumstances at issue. In the case at hand, the court broadly applied the EPL policy’s “Related Wrongful Act” language, to the detriment of those seeking coverage.