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'But I Have Insurance to Cover that Claim!'

By Kevin C. McCormick
February 27, 2007

As many of you know, there are various insurance policies available to protect against employment-related claims. Although some policies, such as employment practices liability (EPL) policies, cover a variety of claims, many cover only specific claims to the exclusion of all others. A recent decision from the U.S. Court of Appeals for the Fourth Circuit highlights some of the interesting issues that can arise in resolving employment claims covered by an insurance policy. Perdue Farms, Inc., v. Travelers Casualty and Surety Company of America, No. 04-228 (4th Cir., decided May 16, 2006).

Background

In December 1999, Leona Trotter and several other current and former employees of Perdue Farms, Inc., filed suit against Perdue in federal court, challenging as unlawful Perdue's compensation and record-keeping practices. According to Trotter, Perdue's statutory violations stemmed from its practices of not paying hourly chicken processing line workers for time spent putting on, taking off and cleaning protective sanitary clothing and equipment; not paying some chicken processing line workers for some work after the line card for their department had been clocked out; not keeping a record of hours worked, but not paid for, preventing some employees from becoming eligible for retirement benefits; and not contributing to the Perdue supplemental retirement plan for the pay that the employees would have earned had they been paid properly.

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