GAUNTLETT v. ILLINOIS UNION INSURANCE COMPANY IUIC Denial Letter

8/7/2019 GAUNTLETT v. ILLINOIS UNION INSURANCE COMPANY IUIC Denial Letter

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Case5:11-cv-00455-LHK Document1-3 Filed01/28/11 Page1 of 8

O H A G A N

S P E N C E RLL C

September 27, 2007

VIA ELECTRONIC MAIL AND CERTIFIED MAIL([email protected] / [email protected]

David A. GauntlettSuzanne GauntlettGauntlett & Associates18400 Von Karman, Suite 300Irvine, CA 92612

Re: Policy No.: N01262658

Laura R. Zaroski

312-422-6142 - Direct312-422-6110- Fax

[[email protected] - E-mail

Insured:Claimant:

Employment Practices Liability InsuranceDavid A. Gauntlett; dba Gauntlett & Associates.Mariam Tarzi

Policy Period:as File No.:

July 10, 2006 to July 10,200720732

Dear Mr. & Mrs. Gauntlett:

As you know, this fu m represents the Insurer subscribing to the above-referencedEmployment Practices Liability Insurance Policy issued to David A. Gauntlett;. dba Gauntlett &Associates (the "Insured"). In this connection, we recently received notice of a civil lawsuit filedby Mariam Tarzi ("Claimant"). We have reviewed the material provided by the Insured, as wellas the above-referenced Policy.

Generally, we note that the Policy was effective July 10,2006 to July 10, 2007. ThePolicy has a Limit of Liability of$I,OOO,OOO for each First Party Insured Event and a $10,000Self Insured Retention for each Insured Event. The Se lf Insured Retention applies to coveredDefense Costs as well as any covered settlement or judgments. Covered Defense Costs includethe Limit of Liability and are subject to the $10,000 Self Insured Retention. Accordingly, theInsured is responsible for payment of the SelfInsured Retention, and the Insurer's obligation topa y applies only to the amount in excess of the Self Insured Retention.

EXHIBIT

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O'HAGAN SPENCER, LL C

David A GauntlettSuzanne GauntlettSeptember 27,2007

Page 2

Based upon the material provided, we understand that Claimant worked at the Insured'sfirm for over nine years as an Assistant Finn Administrator! Assistant to David Gauntlett: OnMa y 9, 2007, Claimant sent a letter to the Insured claiming that she was owed unpaid overtimewages, with interest. Thereafter, on May 14,2007, Claimant submitted her letter ofres iguationto the Insured. In response, the Insured sent a series ofletters dated May 16, 2007 and Ma y 25,2007, disputing Claimant's allegations. .

On August 16, 2007, Claimant filed a lawsuit in the California Superior Court, OrangeCounty, alleging that the Insured: (I ) failed to pay Claimant overtime wages; (2) failed to payClaimant wages due to her resiguation pursuant to Labor Code 201-203, 1199; (3) failed toprovide Claimant with rest breaks and meal periods; (4) knowingly and intentionally failed tocomply with itemized employee wage statement provisions (Lab. Code, 226(B)); and that theInsured violated the unfair competition law (Bus . Prof. Code, 17200-17208). The Insuredwas served notice of the civil complaint on or about August 16,2007. The Insured tenderednotice ofthe civil complaint to the Insurer on September 6, 2007.

Initially, we note that Section 1. of the Policy states:

I. COVERAGE: WHATJS COVERED

A. We will pay Loss amounts thatthe insured is legally obligated topay on account of a claim because of an Insured Event to whichthis policy applies. However, the amount we will pay is limited asdescribed in Section VI. COVERAGE LIMITS, Section IX. CO -PAYMENT .and Section VII. SELF-INSURED RETENTION ofthis policy.

B. This policy applies only if:

1. A Claim is first made against the insured in accordancewith Section Ill . WHEN COVERAGE IS PROVIDED;

2. The Claim is first reportedin

accordance with Section Ill.WHEN COVERAGE IS PROVIDED section and theCONDITIONS section X. A. Duties in the Event of aClaim; and

3. The Insured Event takes place within the CoverageTenitory;


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David A. GauntlettSuzanne GauntlettSeptember 27,2007Page 3

Section III.A. of the Policy provides:

III. WHEN COVERAGE IS. PROVIDED

A. This policy applies only to Claims arising out of an Insured Eventthat are first made or brought during the Policy Period and reportedduring the Policy Period or, if applicable, during the Limited or theExtended Reporting. Period. A Claim is considered to be firstmade on the date a Management or Supervising Employee isserved or first receives notice of a Claim. The date of Claimarising from a fact, situation or circumstance reported inaccordance with the Notice of Potential Claim Condition will bethe date notice is given under the policy.

We note the Policy' s defmition of Claim is as follows:

A. CIaim(s) means:

1. A written demand for monetary damages;

2. A civil proceeding commenced by the service of acomplaint or similar pleading;

3. An arbitration proceeding to which the insured must submitor to which an insured submits with our consent.

4. A fonnal administrative or regtilatory adjudicatory orinvestigative proceeding cOlmnenced by the filing of anotice of charge, formal investigative order or similardocument; or

5. A fonnal civil, criminal, administrative or regulatory

investigation commenced by the service upon or otherreceipt by the insured of a written notice or subpoena fromthe investigating authority identifying the insured as aperson against whom a formal proceeding may becommenced;

against any insured, including any appeal therefrom; however, aClaim shall not include a labor or grievance proceeding which ispursuant to a collective bargaining agreement.


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O'HAGAN SPENCER, LLC

David A. GauntlettSuzanne Gauntlett

. September 27, 2007

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* * *

C. Employment-related Discrimination means tehnination of theemployment relationship, a demotion, a failure or refusal to hire orpromote, denial of an employment benefit or the taking of anyadverse or differential employment action because of race, color,religion, age, sex, disability, pregnancy, sexual orientation,national origin, or any other basis prohibited by federal, state orlocal law, including but not limited to the Family Medical Leave

Act, Age Discrimination in Employment Act, Americans withDisabilities Act, the Fair Labor Standards Act and the UnifonnedServices Employment and Reemployment Rights Act.

* * * *

F. . First Party Insured Event means actual or alleged acts ofEmployment-related Discrimination, Employment-relatedHarassment, or Inappropriate Employment Conduct by an insuredagainst an Employee, fonner Employee or applicant foremployment with an insured entity.

G. Inappropriate Employment Conduct means any actual oralleged;

1. Wrongful dismissal or discharge or tennination ofemployment, whether actual or constructive;

2. Wrongful demotion, wrongful discipline or retaliatorydischarge;

3. Employment-related lnisrepresentation to, humiliation of,or retaliation against an Employee, a former Employee oran applicant for employn:ient;

4. Employment-related wrongful infliction of emotionaldistress or mental anguish upon an Employee, a fonner

Employee or an applicant for employment;5. False imprisomnent, false arrest, detention or malicious

prosecution of an Employee, a fonner Employee or anapplicant for employment; or

6. Employment-related libel, slander, defamation of characteror any invasion of right of privacy of an Employee, afonner Employee or an applicant for employment.


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David A. GauntlettSuzanne Gauntlett.September 27,2007

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Inappropriate Employment Conduct shall no t include any act orfailure to act except as set forth above.

* * * *

1. Loss

1. Loss means:

a. The amount the insureds become legally obligatedto pay on account of each Claim and for all Claimsin the policy period and the Limited or ExtendedReporting Periods, i f exercised, made against themfor Employment-related Discrimination,Employment-related Harassment, and InappropriateEmployment Conduct for which coverage applies,including, but not limited to, damages, back pay andfront pay, judgments, any award of pre-judgmentand post-judgment interest, settlements and DefenseCosts; and

b. The amount the insureds become legally obligatedto pay on account of each Claim and for all Claimsin the Policy Period and the Limited or ExtendedReporting Periods, if exercised, made against themfor Third Par ty Discrimination Or Third PartyHarassment for which coverage applies, including,but not limited to, damages judgments, any awardof pre-judgment and post -judgment interest,settlements and Defense Costs.

2. Loss does not include:

a. Taxes, civil or criminal fines orpenalties imposedby law;

b. Any amount for which the insureds are absolvedfrom payment;

c. The mUltiple portion of any multiplied damageaward;

d. Non-monetary rel ief (this provision does notapply to Defense Costs);


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O'HAGAN SPENCER, LL C .

David A. GauntlettSuzanne GauntlettSeptember 27,2007

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e. Liquidated damages where there is a fmding ofwillfillness;

f. Payment of insurance plan benefits by or on. behalf of retired Employees or that to which aclaimant would have been entitled as anEmp loyee had the insured provided the claimantwith a continuation of insunince;

g. Costs incurred by an insured to modify or adaptany building or property in order to make suchbuilding or property more accessible oraccommodating to any disabled person;

h. Matters which may be deemed uninsurableaccording to the law under which this policy isconstrued;

i. Amounts owed under federal, state, Or local wagean d hour laws;

j . Commissions, bonuses, profit sharing or benefitspursuant to a contract of employment; or

k. Damages arising from any written or expresscontract of employment or obligation to malcepayments, including but not limited to severancepayments in the event of the tennination ofemployment. (emphasis added)

Claimant's civil complaint alleges failure to pay certain wages owed. Under the abovePolicy, Cla imant 's allegations do not fall within the Policy 's definition of covered "Loss."Accordingly, the Insurer is constrained to advise that there is no coverage for this matter.

Additionally, we note Section II. ofthe Policy entitled EXCLUSIONS: WHAT IS NOTCOVERED, which provides as the follows:

II. EXCLUSIONS: WHAT IS NO T COVERED

J. Gain or Prof it. This policy does not cover any Loss based upon,arising out of, or attributable to an insured gaining in fact anyprofit, remuneration or fmancial advantage to which such insuredwas not legally entitled.

* * * * *


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David A. Gauntlett. Suzanne Gauntlett

September 27,2007

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L. Compensation Earned or Due. This policy does not covercompensation earned by or due to the claimant in the course ofemployment but not paid, including any unpaid salary, bonus,hourly pay, overtime pay, severance pay, retirement benefits,vacation days or sick days; but tllis exclusion shall not apply to anyback payor front payor any additional compensation allegedly dueas a result of Employment-related Discrimination.

M. Empioyment Contracts. This policy does not cover amountsdetermined to be payable under an express written contract with orexpress wlitten severance obligation of the insured; but this .exclusion shall not apply i f and to the extent that liability wouldhave attached to the insured in the absence of the written contractwith or obligation of the insured.

At noted above, Claimant is seeking to be reimbursed for unpaid overtime and otherwages that were allegedly withheld. The Exclusions section of the Policy specifically excludescoverage for wages owed. Accordingly, we again must advise that there is no coverage.

The Insurer's enmneration of specific coverage issues in no way serves to waive or limitthe rights that the Insurer has, or may obtain. Further, the Insurer reserves the light tosupplement and/or amend this letter to address additional coverage issues as they may arise,including rescission and rights under Buss v. Transamerica, based upon all of the provisions,terms, conditions, exclusions, endorsements, and definitions found in the Policy and additionalfacts tliat may.come to the Insurer's attention. Please adviSe us immediately if you believe youhave infonnation that may change the above coverage detennination .. Nothing stated herein andno further action taken by the Insurer or on its behal f should be construed as a waiver of any ofits rights under ilie Policy, at law or in equity. On the contrary, by providing this or any priorcorrespondence to the Insured, engaging in any prior or future discussions with the Insured, orpaying or agreeing to pay any amount to or on behalf of the Insured, the Insurer does not waiveany rights that it has under the Policy, at law or in equity.

Please be advised tl,at pursuant to regulations promulgated under the California InsuranceCode, if you believe that this Claim has been wrongfully denied or rejected, in whole or in part,you ma y have the matter reviewed by the California Department of Insurance. The CaliforniaDepartment of Insurance can be contacted at California Department of Insurance Claim ServicesBureau, 11ili Floor, 300 South Spling Street, Los Angeles, California 90013, (213) 897-5961.

t = V


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David A. GauntlettSuzanne GauntlettSeptember 27,2007Page 8

If you have any questions regarding the above, please do not hesitate to contact me.

Very truly yours.

LRZIMDM/dp

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/ ; I J l ) ~ ~ P ) ) jaR.zM\ . J

cc: Rob Yonowitz, Esq. (Via Electron ic Mail- [email protected])Fisher & Phillips LLC

Matthew D. May (Via Electronic Mail)O'Hagan Spencer LLC

GAUNTLETT v. ILLINOIS UNION INSURANCE COMPANY IUIC Denial Letter

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