Employment Practice Suit Not Covered Under Policy Due to Late Notice
ADI Worldlink, a global technology firm, was facing two lawsuits from its employees.
The workers alleged the company failed to pay overtime wages to its nonexempt employees. The first claim against Worldlink came in August 2014, in which all of its employment practices came into question.
The second claim from Worldlink employees was filed in April 2015.
Worldlink, in turn, notified its insurer of the interrelated claims in September 2015. But the insurer denied coverage.
Worldlink held a D&O liability policy through RSUI Indemnity Company. The 2014 policy covered incidents from December 2013 to December 2014. A 2015 policy extended coverage through January 2016.
In each policy, significant provisions were added, stating that RSUI had an obligation to pay “all Loss [Worldlink] is legally obligated to pay” in relation to “a Claim for Wrongful Act … first made against [Worldlink] during the Policy Period.”
According to RSUI, Worldlink failed to notify its insurer of the initial claim made against the company. RSUI agreed the claims were interrelated, however, the initial suit came under the 2014 policy. The insurer was not made aware to any such claims until the 2015 policy.
In court, Worldlink sought declaratory judgment and damages for breach of contract. A district court, however, granted summary judgment for RSUI, agreeing that a timely notice of the 2014 claim was not given.
Worldlink appealed. It countered that, because the two claims were interrelated, notice was given in a timely manner.
To support its argument, Worldlink pointed to another provision within both policies: “All Claims based on, arising out of, directly or indirectly resulting from … the same or related facts, circumstances, situations, transactions or events … shall be deemed to be a single Claim for all purposes under this policy.”
RSUI reminded Worldlink to review the final clause of that second provision: Interrelated claims “shall be deemed first made when the earliest of such Claims is first.”
Scorecard: The appeals court affirmed the district court ruling. Worldlink did not provide timely reporting of the claims.
Takeaway: When facing potential claims, even seemingly minor ones, notifying an insurer as soon as possible is in the best interests of everyone involved. &