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Liberty Mutual units may not have adequately investigated claims

Liberty Mutual

A New Mexico federal court has ruled that while Liberty Mutual Insurance Group units had no duty to defend a pub in a wage violation case, they may have failed to adequately investigate its insureds’ claims.

In April 2016, former employees of Kelly’s Brew Pub and Restaurant in Albuquerque, New Mexico, filed suit against the pub alleging it had violated Albuquerque’s minimum wage ordinance by withholding or requiring servers to pay back their earned tips, not paying servers the correct minimum wage and failing to keep required payroll records, according to Thursday’s ruling by the U.S. District Court in Las Cruces, New Mexico, in West American Insurance Co. and Peerless Indemnity Insurance Co. v. Hailey Atyani, et al.

The pub and a related entity unsuccessfully sought defense costs on the theory the claims alleged property damage covered by the policies. West American and Peerless, which are Liberty Mutual units, filed suit in the district court seeking a declaratory judgment they had no duty to defend nor indemnify the defendants.

The insurers were countersued on grounds they had breached their contract by refusing to defend and indemnify the pub and had acted in bad faith.

The ruling said New Mexico law is unclear as to whether there is property damage under the policies. However, “New Mexico law is clear that the ‘expected or intended injury’ policy exclusions removes the underlying claims from coverage,” the ruling said.

But, “there appears to be a genuine factual dispute, at the very least, as to whether the insurers sufficiently investigated claims, communicated with policyholders, and implemented reasonable standards for handling claims,” said the decision, in ruling in part for both sides in the case.

Liberty Mutual Insurance Co. has agreed to pay the Diocese of Duluth, Minnesota, $6.5 million to settle litigation over insurance coverage for child sexual abuse claims.



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