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AIG wins employment practices coverage dispute

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Ruling

An American International Group Inc. unit is not obligated to provide coverage to a medical group under its professional employer organization’s employment practices liability insurance policy because the group and the PEO did not have a valid contract, a federal appeals court said Wednesday, in affirming a lower court ruling.

In January 2017, Oviedo, Florida-based TMH Medical Services LLC began working with Synuity, a PEO whose entities included Fort Lauderdale, Florida-based Platinum-HR LLC, which provided payroll processing and tax remission and reporting services, according to the ruling by the 11th U.S. Circuit Court of Appeals in Atlanta in TMH Medical Services LLC v. National Union Fire Insurance Co. of Pittsburgh, Pa.

In February 2017, TMH received notice of workplace tort claims by two employees against it and tendered those claims to Synuity, seeking defense cost and indemnification under Synuity’s EPLI policy with AIG unit National Union, according to the ruling.

The policy provided EPLI coverage for specified claims against Synuity and its PEO clients under specified conditions, the ruling said.

National Union initially agreed to provide a defense for the claims against TMH subject to a reservation of rights, but ultimately decided the claims were not covered under the policy and refused to indemnify TMH or participate in the claims settlement.

TMH filed suit against National Union in U.S. District Court in Orlando, Florida, which granted National Union’s motion for summary judgment.

The ruling was unanimously affirmed by a three-judge appeals court panel. TMH “was entitled to indemnity for its employees’ claims only if — among other conditions — it leased the claimant-employees from Synuity through a written employee leasing agreement that was in effect at the time the claims were made,” said the ruling.

“Because TMH did not have such an agreement with Synuity when it received notice of the claims (or at any other time), the district court correctly determined that TMH was not entitled to coverage under the policy.”

The ruling said “TMH argues that a Synuity brochure that it received on an unspecified date, along with email correspondence and a letter from TMH to a third-party insurance company naming Synuity as its insurance agent, constituted a written agreement for PEO services,” said the ruling.

“But none of those writings referenced an employee leasing arrangement between Synuity and TMH or fulfilled the statutory requirements of an employee leasing agreement,” said the ruling.

Because TMH did not have such a valid written agreement to lease the employee -claimants from Synuity, “the employee’s claims against TMH were not covered under Synuity’s EPLI policy with National Union,” the ruling said, in affirming the lower court’s decision.

Attorneys in the case could not be reached for comment.

 

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