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Insurers Fight Over Paying Attorney Fees in Litigation

April 4, 2019 | Posted in : Coverage of Fees / Duty to Defend, Defense Fees / Costs, Fee Dispute

A recent Law 360 story by Frank Runyeon, “Equinox Gym Insurers Battle Over Sex Assault Suit Fees,” reports that one of Equinox Fitness’ insurers is not paying its fair share of the luxury gym’s legal fees in an ongoing sexual assault lawsuit involving two former employees, Beazley Insurance Co. alleged in a complaint filed in California federal court.  In its 21-page filing, Beazley said that National Casualty Co. stiffed the fitness company when a worker claimed in a Jane Doe suit in Los Angeles Superior Court that another employee assaulted her and that she was retaliated against when she complained.  When NCC failed to pay, Beazley was stuck with the bill, according to the suit.

“Without satisfactory explanation, consideration of the facts, or reliance on any legal authority, NCC wrongfully denied coverage for the Doe Lawsuit on a number of unsupportable bases,” Beazley said.  “A significant portion of the Doe Lawsuit falls squarely within the coverage provided by the NCC Policies.”

In the meantime, Beazley says it’s stuck paying advance legal fees for Equinox’s defense in a case where the central allegation — that an Equinox massage therapist sexually assaulted a Pilates instructor and others on the premises — fell under NCC’s coverage, but not Beazley’s.  Beazley argued that both NCC’s general liability and employment liability policies required it to provide coverage to Equinox for any damages or lawsuit seeking damages for bodily injury, which, it said, would include the alleged sexual assault.  Beazley said its policies did not provide coverage for sexual assault claims, but did provide coverage for other allegations in the suit.

“Beazley noted that the claims in the Doe Lawsuit for harassment, discrimination, retaliation, and wrongful termination appeared to involve covered Wrongful Acts, but the claims for assault, battery, and ratification did not,” the company said.  The sexual assault lawsuit was filed in Los Angeles Superior Court in 2017, seeking damages for 11 causes of action, including sexual assault and battery, sexual harassment, discrimination, retaliation, failure to investigate and wrongful termination.

In her complaint, the Pilates instructor said that she and the massage instructor were Equinox employees who traded services at the encouragement of the company.  After the massage instructor assaulted her after-hours on the premises, she said she reported the incident to a manager who told her that at least four employees and three clients had previously said they “felt uncomfortable during a massage” with the man.  Several women later told her “they, too, were victims,” she said.  The instructor accused the company of failing to warn its clients about the man and then firing her after she took a leave of absence.

The case is Beazley Insurance Company Inc. v. National Casualty Company, case number 2:19-cv-02175, in the U.S. District Court for the Central District of California.