Ninth Circuit Affirms Allegations of Discrimination and Harassment Triggered Duty to Defend Class Action for California Labor Code Violations

The United States Court of Appeals for the Ninth Circuit has held that an employment practices liability insurer had a duty to defend a class action complaint alleging various California Labor Code violations based on the presence of potentially covered allegations of discrimination and harassment.  PHP Ins. Serv., Inc. et al. v. Greenwich Ins. Co., 2018 WL 455915 (9th Cir. Jan. 17, 2018).

The underlying employee class action alleged violations of California state labor regulations, including the failure to provide accurate itemized wage statements and other wage and hour violations.  Although the gravamen of the complaint was for wage and hour violations, plaintiffs also asserted general allegations of discrimination on the basis of race and ethnicity.

The employer sought coverage for the class action under its employment practices liability policy, which provided coverage for covered “Wrongful Employment Acts,” including discrimination or harassment.  The policy also contained an exclusion for wage and hour claims.  The insurer denied coverage for the underlying action, and the insured employer filed a coverage action.  On cross motions for summary judgment, the district court granted the insured’s motion for summary judgment, holding that the insurer had a duty to defend the class action even though the wage and hour claims were not covered under the policy because the allegations of discrimination and harassment triggered potential coverage.

On appeal, the Ninth Circuit affirmed the district court decision, holding that the allegations of discrimination and harassment were sufficient to trigger a duty to defend, noting that “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.”  Id. (quoting Pension Tr. Fund for Operating Eng’rs v. Fed. Ins. Co., 307 F.3d 944, 951 (9th Cir. 2002)).