Republic Franklin Insurance v. Albemarle County School Board
670 F.3d 563
4th Cir.2012Background
- Six School Board employees filed a January 2010 FLSA action alleging unpaid wages and overtime pay.
- By July 2010, about 90 present and former employees had joined the action.
- School Board tendered defense to Republic Franklin Insurance, which issued a commercial package policy.
- Franklin sought a declaratory judgment that it had no duty to defend or indemnify the School Board.
- The district court held the failure to pay wages was not a wrongful act and that liquidated damages/attorneys’ fees were not losses.
- The Fourth Circuit reversed, holding that wrongful acts were alleged and that liquidated damages/attorneys’ fees could be covered losses under the policy.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the FLSA complaint allege a wrongful act? | Franklin: no wrongful act due to preexisting duty | School Board: FLSA breaches are wrongful acts under the policy | Yes, underlying acts are wrongful acts under the policy |
| Are liquidated damages and attorneys’ fees losses covered by the policy? | Liquidated damages/fees are not damages or are tied to back wages | Those amounts arise from wrongful acts and are losses | Yes, liquidated damages and attorneys’ fees are covered losses under the policy |
Key Cases Cited
- Pacific Ins. Co. v. Eaton Vance Mgmt., 369 F.3d 584 (1st Cir. 2004) (preexisting duty defeats loss; loss must arise from wrongful act)
- May Department Stores v. Fed. Ins. Co., 305 F.3d 597 (7th Cir. 2002) (obligation to pay benefits from preexisting duty; not the wrongful act itself)
- Oktibbeha Cnty. Sch. Dist. v. Coregis Ins. Co., 173 F.Supp.2d 541 (N.D. Miss. 2001) (back wages not a loss caused by wrongful act; preexisting duty)
- Brooklyn Sav. Bank v. O'Neil, 324 U.S. 697 (1945) (liquidated damages are compensatory, not punitive)
- Snapp v. Unlimited Concepts, Inc., 208 F.3d 928 (11th Cir. 2000) (§ 216(b) remedies are compensatory)
- Lanza v. Sugarland Run Homeowners’ Ass’n, 97 F. Supp. 2d 737 (E.D. Va. 2000) (§ 216(b) compensatory damages in equity context)
- Noxubee County School District v. United National Insurance Co., 883 So.2d 1159 (Miss. 2004) (preexisting duty analysis in FLSA context)