Insurance Coverage at Issue

Can you make your insurance carrier defend your FLSA collective action? That was the tantalizing possibility presented by Dickstein Shapiro insurance coverage attorney Kenneth Remson at a meeting of the National Employment Lawyers Association - an organization of plaintiffs' attorneys, not to be confused with the "bipartisan" National Employment Law Institute - in a June 27 speech, "Using Defendants' Insurance Against Them." Click here to read more.

According to Mr. Remson, despite the exclusion in most Employment Practices Liability Insurance policies for Fair Labor Standards Act claims, some practices which may become issues in wage-hour litigation, such as misrepresentations (misclassifying employees, refusals to pay for time spent donning and doffing, assertions that the employer's practices are legal, for example), as well as providing inaccurate wage statements or failing to develop and apply policies and procedures, may put the insurer on the hook so long as the employer provides prompt notice and doesn't take "no" for an answer.

These arguments may be more persuasive where state law analogs of the FLSA are in question. This subject is discussed in a 2007 Dickstein Shapiro publication, "Insurance Coverage for Wage-Hour and Labor Code Class Action Lawsuits" (free subscription only - click here and go to "White Papers"). The white paper deals principally with the California Labor Code's dramatic differences from the FLSA itself.

At any rate, Mr. Remson advises plaintiffs' counsel to push the employer into insurance coverage consideration as early in the case as possible - preferably even before suit has been filed. Although this may trigger yet another round of litigation, it's certainly something that employers should evaluate as a potential weapon which can be used defensively as well as offensively.