Fifth Circuit Holds Insurer Not Required to Fund Wage and Hour Arbitrations Due to Lack of Timely Notice

A divided Fifth Circuit Court of Appeals has affirmed an Eastern District of Texas order stating an insurance company was not obligated to pay costs related to a staffing agency’s wage and hour arbitrations with numerous workers because the agency failed to provide the insurer with timely notice of the first claim. In ADI Worldlink, L.L.C. v. RSUI Indemnity Company, No. 17-41050 (5th Cir., August 2, 2019), a staffing company, Worldlink, procured a one-year directors and officers liability insurance policy from an insurer, RSUI, in 2014. Worldlink subsequently renewed the policy on an annual basis for one-year periods.

In August 2014, a worker submitted a wage and hour claim to Worldlink.  Nearly one-year later, the staffing agency received notice that several additional wage and hour claims were filed against it.  In September 2015, Worldlink finally notified its insurer about the workers’ claims which were resolved through arbitration.  RSUI denied the staffing agency’s claim because Worldlink was first notified about a wage and hour claim in 2014, but failed to promptly notify the insurer.  According to RSUI, an interrelatedness provision included in the parties’ insurance policy “deemed all claims related in a specific manner to have been made at the time of the earliest such claim.”  Because of this, RSUI asserted that Worldlink was required to submit its initial claim no later than December 31, 2014.

After RSUI denied the staffing agency’s claim, Worldlink sought a declaratory judgment against the insurance company in federal court based on diversity of citizenship.  The trial court granted RSUI’s motion for summary judgment after concluding “timely notice of the 2014 claim was not given.” In addition, the court “found the 2015 claims related back to the 2014 claim and were governed by the 2014 policy, thus making it proper for RSUI to deny coverage of all the claims.”  After that, Worldlink filed an appeal with the nation’s Fifth Circuit Court of Appeals.

After examining the trial court’s order granting summary judgment in favor of the insurer de novo, the Fifth Circuit Court of Appeals ultimately agreed with the lower court and affirmed its order.  You may read both the majority and dissenting opinions on the Fifth Circuit’s website.

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