Tuesday, May 16, 2006

Fourth Circuit Attempts to Sort Out Messy Insurance Coverage Issue Left Over From Perdue Farms Wage Litigation

In December 1999 several Perdue employees sued the company for (1) wage and hour violations; and (2) ERISA violations (for failing to contribute to a retirement plan). After obtaining class certification, in 2002 the plaintiffs settled with Perdue for $10 million.

Perdue had an insurance policy with Travelers casualty that covered ERSIA claims but not wage and hour claims. Travelers picked up period's defense costs -- to the tune of $4.4 million. Travelers however refused to indemnify Perdue for the $10 million settlement it paid to the workers.

Travelers' refusal to indemnify Perdue is what led to Perdue Farms, Inc. v. Travelers Casualty and Surety Company of America. A Maryland District Court ruled that Travelers had to indemnify Perdue for nearly the entire settlement amount. On appeal, the Fourth Circuit reversed and directed the District Court to apportion the settlement between covered (ERISA) claims and non-covered (wage and hour) claims.

It looks like this dispute will continue.

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