Employment-Related Practices Exclusion Precluded Coverage, Indiana District Court Says

September 21, 2016 | Insurance Coverage

A federal district court in Indiana has ruled that an employment-related practices exclusion in a commercial general liability (“CGL”) insurance policy precluded coverage of claims brought by the insured company’s former chief executive officer (“CEO”) against officers and directors of the company.

The Case

After Global Caravan Technologies, Inc. (“GCT”) was formed and began operating, disputes arose among some of the company’s officers and directors, leading to the removal of the company’s CEO and to his decision to file a state court lawsuit.

GCT and the defendants named in the CEO’s lawsuit asked Cincinnati Insurance Company to provide defense and indemnification under the CGL insurance policy that Cincinnati had issued to GCT.

Cincinnati filed a declaratory judgment action, seeking a declaration of its rights and legal obligations under the CGL policy and a determination of whether it had to defend and indemnify the defendants in the CEO’s action.

The parties moved for summary judgment.

The District Court’s Decision

The district court granted Cincinnati’s summary judgment motion, finding that the policy’s unambiguous employment-related practices exclusion negated any duty Cincinnati might have had to defend or indemnify the defendants in the CEO’s state court lawsuit.

The district court explained that the CEO’s allegations arose out of the parties’ employment relationship and that they “would not have occurred but for the relationship.” The district court added that the Cincinnati policy was designed to protect GCT in lawsuits brought by third parties and not in lawsuits arising out of internal, business-related disagreements.

Accordingly, the district court concluded the employment-related practices exclusion applied to the CEO’s defamation allegations and that Cincinnati had no duty to defend or indemnify the defendants in the CEO’s lawsuit.

The case is Cincinnati Ins. Co. v. Global Caravan Technologies, Inc., No. 1:14-cv-01643-TWP-DML (S.D. Ind. Aug. 8, 2016).

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  • Robert Tugander

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