By Al Haverkamp of Lucas & Haverkamp
1Question: This quiz involves a type of Employee Benefit Liability coverage. Perdue Farms was sued via class action by some current and former employees for alleged violations of ERISA (payment of employee benefits) and state wage and hour laws. Travelers insured Perdue via a Pension Fiduciary Responsibility policy with a $10M limit. Perdue and Travelers agreed the policy covered the ERISA claims but did not cover the wage and hour claims. Travelers paid $4.4M to defend the case but refused to pay anything to settle. Perdue paid $10M to settle and then sued Travelers. Travelers then countersued to recover a portion of the $4.4M in defense costs. Is there coverage for the settlement? Is Travelers entitled to any reimbursement of defense costs?
Answer: There is coverage for the $10M settlement to the extent that Perdue can roughly establish what portion of the settlement can be attributed to the covered ERISA claims. With respect to the defense costs, the Court found extensive overlap in defending against the covered ERISA claims and the uncovered wage and hour claims such that Travelers was not entitled to any reimbursement. See Perdue Farms v Travelers (2006) 448 F.3d 252.
