Significant Cases

Dismissal Secured Upon Finding No Duty to Indemnify Company’s Willful Fraud Claim in California

Attorneys Al Alikin, Will Hadikusumo, and Nick Directo secure a dismissal with prejudice on behalf of their client Hiscox Insurance Company in California federal court. In the underlying action, a former employee alleged his employer fraudulently promised…

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Attorneys Al Alikin, Will Hadikusumo, and Nick Directo secure a dismissal with prejudice on behalf of their client Hiscox Insurance Company in California federal court. In the underlying action, a former employee alleged his employer fraudulently promised him an equity stake in the company if he would stay. Upon separating from employment nearly six years later, the employee demanded his equity stake, and the employer disavowed ever making the promise of equity. The matter proceeded to arbitration, which resulted in an $850,000 award in favor of the employee and against the employer, based on a finding of fraud.

The employer then sued Hiscox in federal court seeking indemnity for the award, arguing that its promises to grant equity were “employment-related misrepresentations” which should be covered under the employer’s insurance policy. FMG filed a motion to dismiss the employer’s complaint on the basis that the company never intended to grant equity in the first place and that it was a “laughable idea,” but willfully and intentionally engaged in fraud to induce the employee to stay with the company and forgo other competing offers. FMG also argued that public policy interests and California Insurance Code § 533 expressly prohibit an insurer from indemnifying the insured for its intentional and willful acts including fraud. The federal court ultimately agreed with FMG’s arguments and found that there “are no two ways about it”: Section 533 prohibited indemnification for fraud and granted the dismissal of the complaint with prejudice, without the need for oral argument.

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