Insurance Coverage Playbook for Unions in the 21 st Century: Is There A Silver Lining

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1 Insurance Coverage Playbook for Unions in the 21 st Century: Is There A Silver Lining Jerold Oshinsky Kasowitz, Benson, Torres & Friedman LLP 2029 Century Park East, Suite 750 Los Angeles, CA Tel: (424) joshinsky@kasowitz.com Chet Kronenberg Simpson Thacher & Bartlett LLP 1999 Avenue of the Stars, 29 th Floor Los Angeles, CA Tel: (310) ckronenberg@stblaw.com

2 Biography Jerold Oshinsky has more than thirty-five years of experience litigating insurance recovery cases in federal and state courts throughout the country on behalf of a variety of Fortune 500 companies, unions and others in the chemical, pharmaceutical, financial, food, education and health industries. Chambers USA describes him as "the foremost practitioner at the policyholder Bar," designating him as the only lawyer to be accorded "Star" ranking in its national insurance category for four consecutive years. Additionally, in 2013 Mr. Oshinsky was the sole honoree of the prestigious Chambers "Lifetime Achievement Award." Mr. Oshinsky litigates some of the most significant, complex insurance coverage issues in the country, applying theories, which he developed, that have guided insurance recovery law since its inception. He also advises clients about how to maximize their insurance assets. In addition, he is frequently selected as a party-appointed arbitrator in complex insurance coverage disputes. Recently, he has been focusing on issues relating to cyber liability, intellectual property, antitrust and sexual abuse claims, as well as natural disaster cases related to earthquakes and events such as Hurricane Katrina and Superstorm Sandy Active /20/ :13:25 AM 2

3 Biography Chet Kronenberg, senior Los Angeles litigator, represents clients in a wide range of complex commercial litigation, including antitrust, consumer actions, corporate control, employment, general commercial disputes, insurance and securities. Chet has served as lead counsel for clients such as 500.com, Blackstone, Citibank, John Crane, LG Display, Lion Capital, Pinnacle Foods, SiriusXM Radio, Siris Capital, Vivint, Inc., Vivint Solar and Yingli. Chet was elected to membership in the Firm in He received his B.A. from Tufts University in 1990 and his J.D. from the New York University School of Law in Chet currently serves on the board of directors of the Girl Scouts of Greater Los Angeles, the Southern California Tennis Association and Stephen S. Wise Temple Active /20/ :13:25 AM 3

4 Overview of Presentation Employment Practice Liability Duty of Fair Representation Personal Injury Financial Management Cyber Liability Labor Leader Endorsement JATC Recent Insurance Coverage Case Involving Unions Active /20/ :13:25 AM 4

5 Employment Practice Liability Insurance 60% of total claims against unions are employment-related claims: Discrimination Sexual harassment Retaliation Active /20/ :13:25 AM 5

6 Employment Practice Liability Insurance Employment Practices Liability Insurance ( EPLI ) Stand-alone coverage Typically are claims-made rather than occurrence policies Active /20/ :13:25 AM 6

7 Employment Practice Liability Insurance Covered claims include: Wrongful dismissal, discharge or termination of employment Harassment claims, including sexual harassment and hostile work environment claims Discrimination claims, including claims based on age, gender, race, color, national origin, religion, sexual orientation or preference, pregnancy or disability Active /20/ :13:25 AM 7

8 Employment Practice Liability Insurance Covered claims include (cont d): Retaliation, including lockouts Employment-related misrepresentation(s) to an employee or applicant for employment with the union. Employment-related libel, slander, humiliation, defamation or invasion of privacy Wrongful failure to employ or promote Active /20/ :13:25 AM 8

9 Employment Practice Liability Insurance Covered claims include (cont d): Wrongful deprivation of career opportunity, wrongful demotion or negligent employee evaluation, including the giving of negative or defamatory statements in connection with an employee reference Wrongful discipline Failure to provide or enforce adequate or consistent policies and procedures relating to any wrongful employment practice Violation of individual s civil rights Active /20/ :13:25 AM 9

10 Employment Practice Liability Insurance Excluded claims include: Known claims Worker s compensation (e.g., wage and hour) Suits brought by or on behalf of or in the name or right of any union *Wage and hour coverage can be purchased separately. Such coverage typically covers defense costs only or defense costs plus small indemnity Active /20/ :13:25 AM 10

11 Employment Practice Liability Insurance Excluded claims include (cont d): Intentional wrongdoing California Insurance Code 533 provides that it is against public policy to allow indemnification coverage for claims charging the defendant with engaging in inherently wrongful or willful conduct, such as sexual harassment or molestation. Related wrongful acts Active /20/ :13:25 AM 11

12 Employment Practice Liability Insurance Notice Insureds must give notice of a claim. Policies often require notice to be given as soon as practicable or within the earlier of 90 days or by the end of the policy period Active /20/ :13:25 AM 12

13 Employment Practice Liability Insurance Defense Insurers reimburse defense costs in excess of self-insured retention Defense expenses count toward the total liability limit Insureds typically have the right to select counsel subject to the consent of the insurer and subject to the selected counsel s compliance with litigation management guidelines. Problems sometimes arise when insurance carriers have an approved list of law firms, many of which are corporate orientated with no knowledge of the unique nature of labor unions. It is better to have a carrier and policy that will agree to have the union select their own counsel or to have a select few law firms that are pre-approved Active /20/ :13:25 AM 13

14 Employment Practice Liability Insurance Settlement The insurer, with the consent of the insured, may settle a claim The insured shall not unreasonably withhold consent If the insured withholds consent, the insurer s liability shall not exceed the amount of the offer the insurer proposed to settle any claim plus defense costs as of the date the insured refused to consent The insured may not settle any claim without the insurer s consent Active /20/ :13:25 AM 14

15 Employment Practice Liability Insurance Claim Scenario A state s Professional Firefighters association fires an administrative assistant for absenteeism. The administrative assistant claims wrongful termination, gender discrimination and sexual harassment. The claim settles before trial as the reputational damage of the ensuing lawsuit would be disastrous for the association, given the state s negative environment for public safety unions at the time Active /20/ :13:25 AM 15

16 Duty of Fair Representation Coverage exists for the union and its leaders for duty of fair representation claims. Examples of fair representation claims include: A union refuses to pursue a member s grievance without reason. A union refuses to pursue the grievances of certain workers due to discrimination. A union official fails to respond to a member s complain because he/she does not like the member Active /20/ :13:25 AM 16

17 Duty of Fair Representation Claim Scenario A municipality deems two firefighters not psychologically fit to be arson investigators. Their union fails to file a grievance against the municipality. The two firefighters sue their union for breach of duty of fair representation Active /20/ :13:25 AM 17

18 Personal Injury Covered claims typically include: False arrest, wrongful detention or imprisonment or malicious prosecution Libel, slander or defamation of character Wrongful entry or eviction or other invasion of the right to private occupancy Infringement of copyright or trademark or unauthorized use of title Plagiarism or misappropriation of ideas Defamation of character arising out of union publications (in certain circumstances) Active /20/ :13:25 AM 18

19 Personal Injury Claim Scenario An administrative assistant forwards a research publication to the association s executive board each morning for a year. According to their contract with the publication, the association only has two subscriptions. The publication tracks her subscription and demands payment for each forwarded Active /20/ :13:25 AM 19

20 Financial Management Coverage exists to protect against claims for mismanagement of union assets Active /20/ :13:25 AM 20

21 Cyber Liability Claims Trust funds and unions have access to the personal information, such as social security numbers and home addresses, of their participants and members. If this data is lost, most states mandate that the entity must respond in a timely manner by notifying potentially affected individuals, regulators, and the press. In addition, lawsuits can be brought by affected individuals Active /20/ :13:25 AM 21

22 Specialty cyber liability insurance may protect against various risks, including: Hacking/Electronic Theft Network Security Liability Privacy Injury (disclosure of personal info) Content Injury (IP infringement, defamation, or unfair competition based on same) Regulatory Liability Public Relations Expenses Cyber Liability Claims Active /20/ :13:25 AM 22

23 Specialty coverage highlights include: Privacy liability Breach notification with data breach counsel and data breach network of experts Multimedia liability coverage Cyber threats and extortions Cyber Liability Claims System damage and business interruption Active /20/ :13:25 AM 23

24 Specialty coverage highlights include (cont d): Regulatory actions coverage for civil regulatory actions, expenses related to information requests, compensatory awards, and regulatory penalties and fines to the extent permitted by law PCI fines Cyber Liability Claims Limits range from $250,000 to $2M with higher limits available upon request Active /20/ :13:25 AM 24

25 Cyber Liability Claims Claim Scenario The director of a joint apprenticeship training committee (JATC) sells old campus furniture, not realizing that student forms were still filed in a cabinet. These forms include the names, addresses and social security numbers of previous students. The JATC has to notify and monitor the credit of all the affected individuals Active /20/ :13:25 AM 25

26 Individual Labor Leader Endorsement Separate coverage purchased by labor leaders The union cannot include this type of individual coverage in its base policy because courts, interpreting the LMRDA, have prohibited unions from funding the defense of allegations for intentional acts such as personal profit, fraud, or conflict of interest Active /20/ :13:25 AM 26

27 Individual Labor Leader Endorsement Annual Premium Individual Coverage Limits Policy Aggregate $25 $25,000 $250,000 $50 $50,000 $250,000 $75 $75,000 $250,000 $100 $100,000 $250,000 $125 $200,000 $450,000 $150 $250,000 $450, Active /20/ :13:25 AM 27

28 Joint Apprenticeship Training Committee (JATC) This endorsement provides additional coverage specifically for JATCs called educator s liability, which covers the risk that JATCs face when their graduates utilize their job and safety training in the workforce. E.g., failure to educate. Coverage also exists with respect to suits by trainees (e.g. firing after failed drug test) Active /20/ :13:25 AM 28

29 Recent Insurance Coverage Case Involving Unions International Union of Operating Engineers v. Illinois National Insurance Company The action concerned IUOE s request for coverage for four lawsuits brought against it by members of Locals 501, 12 and 3. Key coverage issues were: Specific Entity Exclusion Related Case Issues On October 6, 2014, summary judgment was granted in favor of IUOE Active /20/ :13:25 AM 29

30 Q&A Active /20/ :13:25 AM 30