EPL Class Action / Duty to Defend

9th Cir (CA) Potential for coverage triggers defense duty.

The Ninth Circuit, applying California law, upheld the grant of summary judgment in favor of the policyholder, finding the district court properly held that a class action complaint alleged discrimination in a manner that triggered the insurer’s duty to defend.

PHP Group, Inc.’s (“PHP”) employees sued PHP for violating the California Labor Code.  Specifically, the complaint alleged that “PHP employees were ‘predominantly Vietnamese-speaking individuals’ that PHP ‘purposefully hire[d] recent immigrant workers to improperly take advantage of their lack of knowledge regarding labor and employment rights,’ and that employees were forced to ‘change their Vietnamese names to American names ….”

Greenwich Insurance Company (“Greenwich”) issued an “Employment Practices Liability Insurance Policy” (“EPL Policy”) to PHP during the relevant time period.  According to Greenwich, the district court erroneously held that the allegations of discrimination and harassment in the class action complaint were potentially covered under the EPL Policy.

The Ninth Circuit disagreed.  The EPL Policy covered “discrimination” due to the ‘segregation, classification or modification of any term or condition of employment of an Employee…because of race [or] national origin.”  Under California law, “[t]he duty to defend does not usually turn on whether facts supporting a covered claim predominate or generate the claim.  Instead, California courts have repeatedly found that remote facts buried within causes of action that may potentially give rise to coverage are sufficient to invoke the defense duty.”  Because the allegations in the complaint “may fall within policy coverage,” Greenwich had a duty to defend.  PHP Ins. Service, Inc. v. Greenwich Ins. Co., 5:15-cv-00435 (9th Cir. Jan. 17, 2018).