Reimbursement of Employment-Related Expenses Is Not a “Wage and Hour” Claim Within the Meaning of EPLI Exclusion
A recent California appellate court decision found that a wage and hour exclusion in an Employment Practices Liability Insurance (“EPLI”) policy did not bar coverage for claims under California Labor Code sections 2800 and 2802 alleging failure to reimburse expenses. S. Cal. Pizza Co., LLC v. Certain Underwriters at Lloyd's, London Subscribing to Policy No. 11EPL-20208, Case No. G056243, 2019 WL 4572859 (Cal. Ct. App. Aug. 27, 2019), as modified on denial of reh'g (Sept. 20, 2019). This is a significant decision. It gives policyholders an argument that insurers must defend wage and hour suits that include covered allegations of failure to reimburse expenses, as the court in Southern California Pizza found.
The Lloyd’s of London policy granted coverage for “any failure to adopt, implement or enforce employment related policies or procedures…or…any other employment related workplace tort.” However, the policy also contained a wage and hour exclusion that eliminated coverage for any claim “based upon, arising out of, directly or indirectly connected or related to, or in any way alleging violation(s) of any foreign, federal, state, or local, wage and hour or overtime law(s).” The exclusion further contained an exception providing that the carrier would pay defense costs up to $250,000 for such claims, but without any liability to pay such sums that the insured becomes legally obligated to pay.