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Archive for November, 2015

Does Insurer Have Duty to Defend Non-Covered Lawsuit When Insured Proclaims Innocence?

Posted on: November 23rd, 2015

By: Bill Buechner

An insurer’s duty to defend is generally determined by comparing the allegations in the complaint to the insurance policy.  If the allegations in the complaint arguably or potentially bring the claim within coverage, the insurer has a duty to defend the lawsuit, even if the allegations are false or unfounded.  Conversely, if the allegations in the complaint unambiguously demonstrate that the claims asserted are not covered under the policy, then the insurer does not owe a duty to defend.  Many states, including Georgia, provide for an exception to this rule when the insured informs the insurer of “true facts” that would bring a claim within the scope of coverage.  In that situation, the insurer has an obligation to conduct a reasonable investigation into the insured’s contentions and then determine whether there is a potential for coverage, in which case a duty to defend is triggered.   See, e.g., Colonial Oil Industries, Inc. v. Underwriters Subscribing to Policy Nos. T031504670 and T031504671, 268 Ga. 561, 491 S.E.2d 337 (1997).

When confronted with a lawsuit for which there is no coverage on its face, an insured sometimes will attempt to obtain a defense by informing the insurer that it denies the allegations in the complaint that are outside of coverage and then claim that the “true facts” therefore demonstrate that it is entitled to a defense.  Such an argument has some appeal on the surface, and a federal court in Georgia recently found a duty to defend in part on this basis.

Although there is relatively little case law directly addressing this issue, the logical conclusion of such an argument is that any insured could claim an entitlement to a defense in a lawsuit asserting only non-covered claims simply by denying the allegations in the lawsuit and demanding that the insurer provide a defense based on these “true facts.”   Obviously, that is not the intent of the typical insurance policy.  At least one court has rejected this “I didn’t do it” theory for a duty to defend a lawsuit asserting only non-covered claims. Nationwide Property & Cas. Ins. Co. v. O’Neill, 2013 WL 5972471, at *1 n.1 (M.D. Ga. 2013).

When confronted with such a tactic, an insurer should confer with coverage counsel before deciding whether to continue disclaiming coverage or whether to defend under a reservation of rights and then file a declaratory judgment action.

Arbitration Agreements Cannot Change the Rules for Judicial Review of a Final Award

Posted on: November 18th, 2015

By: Bart Gary

Agreements to arbitrate are now uniformly enforceable throughout the country. While some states have shown reluctance to enforce arbitration agreements because they are seen as ousting the courts of jurisdictions, an agreement that evidences commerce among the states is controlled by the federal arbitration act. Almost any contract has some effect on interstate commerce. The federal law favors arbitration agreements and trumps any state or local law that conflict with the general enforceability of the agreement. The parties may freely agree upon the details about the conduct of the arbitration, including such terms as the location of the hearing, the arbitrator or how the arbitrator will be selected, the number of arbitrators, and whether and to what extent prehearing discovery will be allowed. Most agreements incorporate a set of rules that describe the process of the arbitration, and such agreements are also enforceable.

            Arbitration awards are usually final and binding and may be enforced in the courts by a procedure called confirmation, which is intended to be a quick and inexpensive way to convert the award to a judgment. Most statutes, including the federal act, allow limited grounds to challenge or vacate an award in court, usually for some egregious misconduct by a party or an arbitrator, such as fraud. Challenging the award is the one area where the courts restrict the parties’ freedom to contract. Efforts to expand the grounds to challenge the award have been uniformly unsuccessful, because those efforts would frustrate the policy of finality to the arbitration process. Parties have also attempted to avoid any judicial review of the award, for example with language in the arbitration agreement that the parties “hereby expressly agree not to challenge the validity of the arbitration or the award.” Recently the Georgia Court of Appeals held that such a term was against public policy and not enforceable. The court reasoned that just as parties may not by agreement expand the grounds to challenge an award, they may not by agreement “waive or eliminate a party’s right to apply to a court to vacate or modify an award on the statutory grounds.”

Atlanta Flooring Design Centers, Inc. v. R.G.Williams Constr. Inc., 333 Ga. App. 528 (2015).

Houston Voters Reject Sexual Orientation and Gender Identity Antidiscrimination Law

Posted on: November 18th, 2015

By: Tim Holdsworth

In one of the most closely watched votes on Election Day 2015, citizens of Houston overwhelmingly voted to repeal the Houston Equal Rights Ordinance (“HERO”).  Passed by the city council last year, the ordinance augmented federal and state laws by prohibiting discrimination against employees on the basis of sexual orientation or transgender status.  The HERO referendum drew the attention of numerous high-profile individuals.  Those supporting the ordinance included President Obama, Hillary Clinton, and actress Sally Field.  Those opposing it included Texas Governor Greg Abbott, Lieutenant Governor Dan Patrick, and former Houston Astro Lance Berkman.  Berkman, whom you may remember as a star on Astros teams during the last decade and whose baseball cards are hopefully collecting value in my parents’ basement, even shot a divisive commercial in opposition to the ordinance.

Whatever your view on HERO or the vote’s outcome, employers should be aware that Houston voters’ rejection of HERO runs against the current trend in employment law.  A number of states prohibit discrimination on the basis of sexual orientation and gender identity.  So, too, do many cities, including several major cities in Texas.  In fact, while Georgia does not prohibit discrimination on these bases, the relevant city of Atlanta ordinance on private employment enumerates both sexual orientation and gender identity as protected classes.

Additionally, the EEOC takes the position, and held in a recent ruling more thoroughly discussed here, that Title VII’s sex discrimination provision prohibits discrimination against employees on the basis of sexual orientation and gender identity.  Some federal courts have followed the EEOC’s position and allowed sex discrimination suits to be brought on these bases.  Furthermore, despite opponents of HERO arguing that the ordinance would potentially endanger women and children to sexual predators because it allowed men dressed as women to enter women’s bathrooms, we have already discussed the EEOC’s ruling that denying a transgender employee the right to use a bathroom that is consistent with their gender identity constitutes sex discrimination under federal law.

Employers should be modifying their employment policies as necessary to comply with any local, state, or federal legislation in this trending area of the law.  In fact, the EEOC declared that “coverage of lesbian, gay, bisexual and transgender individuals under Title VII’s sex discrimination provisions ” is an “enforcement priority for FY2013-2016.”

Please contact us with any questions you may have about these issues or their effect on your employment policies.



Straight from the Horse’s Mouth: Final Changes to FLSA are Moving Slowly

Posted on: November 16th, 2015

By: Marty Heller

So it turns out that the changes to the minimum salary level for exempt positions may not be changing as quickly as many thought. Linked here is a great article from HR Morning about comments made by Department of Labor Solicitor Patricia Smith at a recent American Bar Association conference. At the conference, Ms. Smith said that the DOL does not expect to issue a final rule until “late 2016,” which for anyone who follows government deadlines, likely means 2017. Prior to this comment, pundits repeatedly have surmised that the final rule would be issued in early 2016, likely January or February. The cause of the delay is unclear, however, it is possible that changes are being made to the proposed rule as a result of the record number of comments from employers during the comment period. As the article points out, it also is possible that this delay tactic has political purposes.











U.S. Supreme Court Reverses Fifth Circuit on Whether Officer is Entitled to Qualified Immunity

Posted on: November 16th, 2015

By: Coleen Hosack

         On November 9, 2015, the Supreme Court reversed the Fifth Circuit’s decision to uphold a district court ruling denying summary judgment to Texas Department of Public Safety Trooper Chadrin Mullenix, the sole issue being whether Mullenix was entitled to qualified immunity under circumstances where he used his rifle to disable a vehicle driven by a fleeing felon. Mullinex v. Luna, 577 U.S. (2015). The Court held that central to the qualified immunity analysis is how the court frames the “clearly established rule.”  The relevant inquiry “is whether existing precedent placed the conclusion that Mullenix acted unreasonably in these circumstances ‘beyond debate.’”  Mullinex, p. 7 slip opinion.  Framing the rule too generally like the Fifth Circuit did (i.e. that deadly force requires a sufficient threat) is inadequate because answering the general question fails to settle the matter of immunity, particularly in light of Brosseau v. Haugen, 125 S. Ct. 596, 599 (2004), a case also involving the shooting of a suspect fleeing in a car.  In Brosseau, the Court rejected the general test and explained that the correct inquiry was whether it was clearly established that the Fourth Amendment prohibited the officer’s conduct in the situation that the Brosseau officer confronted, which was whether to shoot a disturbed felon, set on avoiding capture through vehicular flight, when persons in the immediate area are at risk from that flight.

         As for Mullinex, the context in which the “clearly established rule” should have been analyzed was within the framework that he confronted a reported intoxicated fugitive, set on avoiding capture through high-speed vehicular flight, who twice during his flight had threatened to shoot police officers, and who was moments away from encountering an officer at Cemetery Road. Mullinex, p. 7 slip opinion. The circumstances that Mullinex faced were more unpredictable and more dangerous than those circumstances faced by the Brosseau officer, who was entitled to qualified immunity.  Unlike Mullinex, who knew officers were on foot in the immediate area, the Brosseau officer only believed officers on foot were in the immediate area and that others persons might be in the area.  Mullinex’s actual knowledge of officers on the ground coupled with the actual threats Leija made and the possibility that Leija was intoxicated made the case for qualified immunity even stronger for Mullinex as compared to the Brosseau officer.

         The Court argued that if the use of deadly force in connection with dangerous car chases like those circumstances found in Scott v. Harris, 127 S. Ct. 1769 (2007) and Plumhoff v. Rickard, 134 S. Ct. 2012 (2014) does not violate the Fourth Amendment; then it surely cannot be the basis for denying qualified immunity. The Court rejected the dissent’s criticism of Mullinex’ not waiting to see if the spike strips worked first before attempting to disable the vehicle by other means. There is no clearly established law that says an officer must select one dangerous alternative over another in high speed chases. Further, relying on an Amici Curiae brief written by the National Association of Police Organizations, spike strips suffer from their own set of problems, including that they are not always reliable and they too are inherently dangerous to use. Finally, the Court was satisfied with the governmental interest that justified the shooting because of Mullinex’s testimony that he feared Leija may run over the officers manning the spike strips.  Aside from Mullinex being immune from suit, the take away from this case against the back-drop of Brosseau, Scott, and Plumhoff, is that the Supreme Court has sent another strong message that the use of deadly force to end a dangerous high speed pursuit is permissible under the Fourth Amendment.