Dueling lawsuits between an unmarried couple and a manager of a cafe that one member of the couple owned resulted in the manager suing both of them for malicious prosecution. When the insurance carrier provided defense for one partner but not the other, they sued the carrier and their insurance agent.
The couple were in a long-term exclusive relationship and resided together. She was the sole owner of a restaurant; he was an attorney and apparently handled the restaurant’s payroll processing. In particular, his law firm issued the salary payments to the restaurant’s manager.
During one specific policy term, a local insurance agent obtained a Businessowners Policy (BOP) for the restaurant in the name of the owner doing business as the restaurant’s name. The BOP provided property and liability coverage and included Employment Practices Liability Insurance (EPLI) coverage. Notably, she was the only named insured. The court’s opinion stated, “Neither (partner) requested that (the agent) add (him) to the policy as a named insured.” Nor did either of them ask the agent to add him as an additional insured.
In addition to handling the couple’s business insurance, the agent also obtained their home and auto insurance. The couple later claimed that this proved the agent was aware of their relationship.
At some point, the restaurant manager filed a complaint with the state labor commission, claiming that the owner owed him unpaid wages. The commission later awarded him a portion of those wages. The owner did not take this well. She sued the manager and his spouse for $250,000 plus punitive damages for numerous accusations, including drug use on the job, selling drugs from the restaurant, falsifying records, theft, sexual misconduct, lying about his experience, and incompetence. The court ruled against her and in favor of the manager and his spouse.
The manager and spouse then upped the ante by suing the owner and her partner for malicious prosecution. With regard to the attorney partner, they alleged that he threatened the manager that he would “be sorry” if he did not accept a low settlement of the unpaid wages claim. They also pointed to evidence that he was an investor in the restaurant.
When the owner submitted the EPLI claim to the insurance carrier, they provided her with legal defense but declined to do so for her partner. The couple then sued the carrier and agent and asked the court to force the carrier to defend him. They argued that they were essentially married and that the agent knew as much, having obtained their personal insurance and attended events at their home. Under the terms of the policy, if the named insured is an individual, that person’s spouse is also an insured. Failing that, they also argued that he was an employee and an insured under the policy’s terms.
The trial court concluded:
- The owner’s partner was not an employee.
- The agent had no duty to determine who should be identified as an insured.
The couple appealed and lost. The appellate court found no evidence that the attorney was an employee of the restaurant. Regarding their marital status, the court ruled that the fact that they were both named insureds on the Homeowners policy irrelevant to the business policy and the carrier never had to treat them as if they were married. Regarding the agent, the court found simply that he never received a request to add the attorney as an insured to the BOP, nor did he have any reason to know of the attorney’s involvement in the business. Under state law, he had no duty to ask whether other individuals should be insureds.
It sounds like this agent had careful records documenting coverage discussions with his client. Had there been any dispute about the truth, the courts would have ordered a trial. However, both courts found no evidence of a coverage request, which means that the agent had evidence proving his point.
This couple made some bad decisions and tried to make the agent pay for them. He had the documents to successfully defeat that attempt. Every agency should do the same.
