Thursday, June 25, 2009, 11:14 AM

No Insurance Coverage for OT Suits? Lawsuits Against Insurers Look to Be on the Rise

Posted by Kim Licata
Vozzcom, Inc., a cable and electrical contracting services provider based in Florida, has sued its insurance carrier, Great American Insurance Co. of New York, to determine the insurer's obligation to defend and indemnify Vozzcom in a putative collective action filed by an employee asserting wage and hour violations. The suit was filed in the U.S. District Court for the Southern District of Florida.

Vozzcom is no stranger to wage and hour suits having defended itself from several claims over the past few years. Vozzcom had previously been sued by an employee for wage and hour violations in 2007. At the time of the first wage and hour suit against Vozzcom, Vozzcom was not insured by Great American. Vozzcom's insurer at the time of the first wage and hour suit defended and settled the suit for Vozzcom. In 2008 (and continuing through the present time), Vozzcom purchased a claims-made employment practices claims policy from Great American for calendar years 2008 and 2009. A second wage and hour suit commenced against Vozzcom in 2008 that resulted in a court award of nominal back wages for the plaintiff although the court ruled that Vozzcom met its burden of acting in good faith and with reasonable grounds to believe its wage and hour practices were compliant. The second suit led to a dispute between Great American and Vozzcom's prior insurer as to who might be liable for defense costs and indemnity. Ultimately, a court ruled that the prior insurer was liable because the suit arose from the first wage and hour suit.

Once again in January 2009 (while the Great American policy remained in effect), a third wage and hour suit was filed against Vozzcom. Vozzcom requested Great American to defend and indemnify Vozzcom in the third suit. Great American denied the claim as part of the same single claim as the prior two wage and hour lawsuits. Whether Great American can successfully avoid coverage remains to be seen, but the case raises interesting issues for employers reviewing their current and past insurance coverage. This suit serves as a reminder to an employer to check insurance policies and, in the case of multiple suits over similar practices, assess which policy or policies may cover a wage and hour suit.

To read the complaint in the Great American suit, please click here.

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