A unit of Liberty Mutual Insurance Co. does not have to pay a verdict against a clothing retailer that is now bankrupt based on a previous exclusion of documents in its coverage, a federal appellate court said on Wednesday, confirming a lower court decision.
As of 2005, male salespeople, but not female employees, at New York-based retailer John Varvatos Retailers Inc. were required to wear Varvatos clothing at work and were entitled to $ 12,000 in Varvatos clothing annually, according to the judgment of the 2nd U.S. Circuit Court of Appeals in New York i Tessa Knox et al. v. Ironshore Indemnity Inc.
In 2015, Varvatos also started offering its female sellers a discount in a related store if they bought clothes with their own money.
The female employees sued the company and were fined $ 2,862,407.41, but since Varvatos filed for bankruptcy, they received only $ 193,145.53.
They brought an action against Varvatos‘ insurer, Liberty Mutual unit Ironshore Indemnity, based on an insurance law in New York that gives injured parties a direct cause of action against a tortfeasor’s insurer.
The U.S. District Court in New York ruled against the workers, based on an exception to previous documents in the insurer’s policy that excluded coverage for wrongful acts that occurred before April 30, 2012.
Its decision was upheld by a unanimous three-judge appeals court panel. The district court “rightly found that the exclusion of previous documents unequivocally precludes coverage of the underlying judgment against Varvatos because Varvatos introduced the discriminatory clothing allowance before 30 April 2012 and maintained it after that date,” the panel said.
Varvato’s introduction of the discount offer to female employees in 2015 does not change this conclusion, because, as the parties admit, nothing has changed in the compensation to male employees and, as the appellant successfully claimed in the district court, the discount offered to female employees was not comparable in value to the male the clothing allowance, ”said the panel, to confirm the lower court’s decision.
Insurance Attorney Luigi Spadafora, of the Winget, Spadafora & Schwartzburg LLP in New York, said in a statement: “We are very pleased with the second circle that maintains the write-off of this case.” The plaintiff’s representative did not respond to a request for comment.