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No Coverage For Suit Alleging Breach Of Employment Agreement

After retiring, a lawyer sued his former firm claiming 90 weeks of unused vacation time and more than 322 days of unused sick leave in violation of the Illinois Wage Payment and Collection Act. The complaint alleged the defendants breached their employment agreement with him. The defendants tendered the defense to Hartford which denied coverage. Hartford then filed a declaratory judgment action seeking a determination it did not have to defend or indemnify the insureds. The trial court entered summary judgment for Hartford.

The Seventh Circuit affirmed. The policy limited coverage to "an injury that arises out of any negligent act, error or omission" in the administration of the insured’s employee benefits program. The former lawyer had a contractual claim to compensation for unpaid vacation time and sick leave in breach of his employment contract. The insureds were not insured against a breach of contract, and therefore, Hartford had no duty to defend or pay their insured’s litigation expenses. Hartford Cas. Ins. Co. v. Karlin, Fleisher & Falkenberg LLC, 822 F.3d 358 (7th Cir. 2016)

© 2020 Heyl, Royster, Voelker & Allen, P.C


About this Author

Success in litigating insurance coverage issues hinges on understanding both the interpretation of insurance policies and the handling of claims. These key elements pervade every phase of the business from taking the application, through underwriting, and policy issuance. The members of our firm's insurance coverage practice group understand these elements and the important role they play in risk management.