Oktibbeha County School v. Coregis Ins.
| Decision Date | 05 September 2001 |
| Docket Number | No. 1:99CV328-P-B.,1:99CV328-P-B. |
| Citation | 173 F.Supp.2d 541 |
| Parties | OKTIBBEHA COUNTY SCHOOL DISTRICT, Dorothy Carlisle, Charlotte Makamson, and All Others Similarly Situated Plaintiffs v. COREGIS INSURANCE COMPANY Defendant |
| Court | U.S. District Court — Northern District of Mississippi |
Samuel M. Brand, Jr., Jackson, MS, Jay Taylor Keehley, Starkville, MS, for Plaintiffs.
Louis B. Lancoux, John L. Low, IV, Watkins & Eager, Jackson, MS, Robert S. Marshall, Bollinger, Ruberry & Garvey, Chicago, IL, for Defendant.
Presently before the Court are two motions: plaintiffs' motion for summary judgment [7-1] and defendant's motion for summary judgment [12-1]. The Court, having considered the motions, the responses thereto, and the briefs and authorities cited, is prepared to rule. The Court finds as follows, to-wit:
FACTUAL BACKGROUND
Plaintiffs Dorothy Carlisle and Charlotte Makamson1 filed a lawsuit (hereinafter the "underlying action") against the Oktibbeha County School District in 1998, alleging that the school district wrongly classified them as exempt under the provisions of the Fair Labor Standards Act of 1938 (hereinafter "FLSA"). 29 U.S.C. § 216(b). According to the plaintiffs, the school board did not pay them for time and a half for all hours worked over forty in a given work week. An agreed order was entered in that lawsuit on September 24, 1999, stating that the plaintiffs were classified as non-exempt within the meaning and purposes of the FLSA. Thus, the plaintiffs, and others similarly situated, were entitled to overtime compensation.
Coregis Insurance Company issued an Educators Legal Liability Insurance Policy to the school district with a policy period of November 9, 1998, until November 9, 1999. On October 27, 1999, the school board, along with Makamson, Carlisle, and others similarly situated, filed the present complaint against Coregis Insurance Company, seeking a declaration that the insurance policy issued to the school district from Coregis indemnified the school district in the underlying action. Coregis strongly asserts that coverage should be denied for the underlying action, based on the language of the policy itself and public policy concerns. Both parties have moved for summary judgment.
The Coregis policy provides coverages as follows:
The Company will indemnify the Insureds for Loss as a result of civil Claims made against the Insureds by reason of a Wrongful Act, provided that Claim is first made during the Policy Period and written report of said Claim is received by the Company during the Policy Period or within sixty (60) days thereafter.
According to the policy, a "`Loss' means Money Damages which the Insured becomes legally obligated to pay by reason of a Wrongful Act." The policy defines "Wrongful Act" as "any act, error or omission of an Insured constituting a breach of a duty imposed by law or a breach of an Employment Contract."
The Court is of the opinion that the school district has not suffered a loss in accordance with the policy. The school district had a duty to pay overtime compensation because of the statutory requirements of the FSLA, not because of any wrongful act or omission of the school district. The school district had a pre-existing obligation to pay these employees for the overtime hours worked, an obligation that was created by the FLSA.
The policy states that coverage will issue only if the school district suffered a loss by reason of a wrongful act. The duty to pay overtime is a matter of statutory law, and the obligation to pay time and a half for every hour worked over a forty hour week arose when the employees worked overtime hours. The amount owed to these employees is not a loss, but rather it is a pre-existing debt or obligation.
Again, the FLSA created the obligation to pay these employees overtime, not any alleged wrongful act. Therefore, the underlying action does not meet the policy definition of loss, and no coverage exists.
In any event, section VI of the policy addresses claims that are excluded from the policy. According to Exclusion (A), "any Claim or Loss Arising Out of any Insured gaining profit, remuneration or advantage to which the Insured is not entitled" is specifically excluded from coverage. Clearly, the school district received a benefit when it allowed its employees to work overtime without paying them overtime hours in accordance with the FLSA. The school district gained profit, remuneration, or advantage by having its employees perform overtime work for the district and not paying them one and one-half times their normal rate of pay for work performed in excess of forty...
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