A federal judge in Philadelphia has let a suit proceed between one of the nation's largest dealership groups and DaimlerChrysler Insurance Co. over coverage of employment-related discrimination claims under an umbrella policy.
U.S. District Judge Lowell Reed Jr. rejected the insurer's bid to dismiss parts of a suit by Asbury Automotive Group, of Stamford, Conn.
The suit seeks to hold DaimlerChrysler Insurance liable for indemnification against employment-discrimination claims under an umbrella policy and alleges bad faith, negligent misrepresentation and fraud.
The insurance company is a wholly owned subsidiary of DaimlerChrysler Services North America LLC.
According to the opinion, Asbury's primary policy for one year starting in February 1999 included employment practices liability, with a $2 million limit. Asbury's suit asserts that insurance company representatives told the dealership group that all coverage included in the primary policy also was included in a $25 million umbrella policy negotiated at the same time.
But the insurer contends the umbrella policy didn't apply to employment practices claims.
The issue arose after current and former employees of an Asbury subsidiary in Oregon filed discrimination complaints in 1999 and 2000, according to the opinion. The Oregonian newspaper reported that the complaints came from Thomason Auto Group employees, who alleged racial, religious and sexual harassment. In 1998, Asbury bought a majority stake in Thomason, the largest dealership in the Northwest.
According to the opinion, the insurer's spending on defense and settlement costs for the employment practices claims exhausted the $2 million primary coverage limit by September 2000. Asbury contends it didn't learn there was no excess coverage until it received a copy of the policy in July 2000, 17 months after it took effect.
In essence, the suit attempts to hold the insurer liable for expenses above the $2 million primary limit.
In his decision, the judge said Asbury alleged enough facts to let the suit proceed. "The improbability that a sophisticated business organization would negotiate and accept an umbrella insurance policy that failed to cover the same areas of liability as the primary insurance policy lends credence to Asbury's allegations of wrongdoing.
"Similarly, the allegation of the lengthy delay in (Daimler)Chrysler's delivery of the relevant insurance policies to Asbury gives rise to a permissible inference of fraud," he said.
Elliott Fertik of Philadelphia, a lawyer for Asbury, said, "It's the case of an insurer that promised to give one type of coverage and didn't give it."
But defense lawyer Stephen Harvey of Philadelphia said, "We don't agree that the facts alleged in the complaint are correct" and added that his client believes it will be vindicated at trial.
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