A federal court in Louisiana granted summary judgment in favor of an insurer where the court found the insured’s failure to pay overtime to its employees was a series of inter-related wrongful acts which first occurred prior to the insurer’s policy period. Treo Staffing, LLC v. Axis Surplus Ins. Co., 2016 WL 3876433 (M.D. La. July 15, 2016).
The insured, a business which supplied employees to its clients, improperly calculated and failed to pay overtime to its employees under the Fair Labor Standards Act. The Department of Labor demanded payment of, and the insured agreed to pay, the overtime wages, and the insured sought coverage from its insurer. The policy required a “wrongful act” to occur during the policy period and stated that “all related Wrongful Acts or series of interrelated Wrongful Acts shall be deemed to be one Wrongful Act and shall be deemed to have occurred when the first of such Wrongful Acts occurred.” In a motion for summary judgment, the insurer argued the insured’s wrongful act was not covered because it did not first occur within the policy period.
The court found that the failure to properly pay overtime was a series of interrelated wrongful acts, and the policy clearly and unambiguously deemed that failure to be one wrongful act. The court stated that the policy period began nearly two years after the insured commenced its series of inter-related wrongful acts, and therefore coverage was precluded under the policy. The court also rejected the insured’s argument that a policy exclusion of coverage for wrongful acts occurring prior to the effective date “if on or before the policy effective date, you knew or could have reasonably foreseen that such Wrongful Act … could give rise to a Claim” created enough ambiguity to preclude summary judgment.