Breach of trust
A non-profit organization held a fundraising event. The organization received a temporary operating fund or "float" from another organization, which was to be repaid from the proceeds of the events. Unfortunately, the funds were inadvertently deposited into the insured organization's general account by an employee and used to pay general expenses. The organization subsequently filed for bankruptcy and was unable to return the float to the lending company. A lawsuit was commenced against the insured organization and the allegations made against the directors included negligence for failing to properly supervise the employee and breach of trust. The claim was ultimately resolved by way of a negotiated settlement in the amount of $75,000. The costs incurred to defend the claim were approximately $30,000.
Breach of duty, abuse of process
The board of a professional association revoked an individual's membership due to allegations of unethical conduct. The member sued the association alleging the board of directors had targeted her and they had not followed the organization's bylaws. Although the facts did not appear to support the allegation that the board targeted the member, the bylaws were somewhat ambiguous, making it more difficult to defend the action. A settlement was negotiated to avoid any embarrassment or loss of reputation to the association. In addition to paying the amount of the settlement, the insurer also paid $100,000 in defense costs.
Wrongful dismissal and defamation
As part of a corporate reorganization, a large non-profit organization terminated the employment of an employee who had been with the organization for more than 15 years. The employee sued the organization alleging wrongful termination. The employee also alleged that she had been defamed as a result of a written communication that found its way into the hands of individuals outside the board of directors of the organization. Although many of the facts were in dispute, the claim was ultimately settled by way of a negotiated settlement. The defense costs incurred were approximately $50,000.
Discrimination
A woman enrolled in an educational program offered by a non-profit organization. During the course of the educational program, the woman became romantically involved with the leader of the program. The relationship ended before the completion of the program and problems developed between the participant and the leader of the program. The participant filed a human rights complaint alleging that she was being discriminated against and had been denied the services offered through the educational program. The insurer defended the complaint by retaining counsel to file an application to dismiss the complaint which was successful. The insurer paid approximately $36,000 in defense costs.
Service club-breach of bylaws
The volunteer board of a small service club voted unanimously to expel a member of the club after several incidents of disruptive behavior, many of which occurred after the member had consumed several alcoholic beverages. On one occasion, the member became verbally and physically abusive toward another member. Upon receiving the news of the expulsion, the member commenced legal action against the club, alleging they had acted in breach of the club's bylaws. The insurer retained counsel to defend the action, which was subsequently dismissed. The insurer incurred approximately $15,000 in defense costs.
Licensing dispute
A member of a professional association sued the association and several of its directors and officers as a result of a disagreement with respect to licensing requirements. The member sought damages as compensation for the alleged breach of fiduciary duty, defamation and interference with economic interests. The insurer retained defense counsel to defend the legal action, but the issues were ultimately resolved without the need for protracted litigation. The insurer paid a nominal amount to the claimant to assist with the resolution. The insurer paid approximately $100,000 in defense costs.
Wrongful dismissal claim
A senior executive's employment was terminated after several employees complained about the executive's behavior toward them, including alleged sexual misconduct and harassment. The executive sued the organization for wrongful termination, and the directors and officers for alleged interference with contractual relations. Although the executive succeeded at trial, the insurer appealed the decision of the trial judge and won the appeal with the result that no damages were paid to the executive. The total defense costs incurred were approximately $250,000.
Breach of fiduciary duty
A non-profit organization applied for government funding for the purpose of organizing and hosting an event. The organization was successful in obtaining the government funding. Unfortunately, the expenses incurred for the event far exceed the revenues received. As part of its follow up to providing funding for the event, the government conducted an audit and determined that the funds had not been used for the purposes described in the funding application. The government commenced action seeking damages due to the alleged negligent misrepresentations in the application documents and for the alleged breach of fiduciary duty on the part of the directors of the organization. The claim was resolved by way of negotiated settlement. The total costs incurred to defend the claim were $35,000.
Race, relocation and bonus structure
During a merger, a non-profit organization had both a corporate reorganization and a relocation of its offices. Due to these two factors, several corporate and administrative positions were eliminated, all of which were held by minority employees. Four employees sued alleging discrimination due to race.
An investigation found that non-minority employees received bonuses while minority employees did not. All employees were required to be in their positions for a specific amount of time to receive a bonus; and the minority employees had not held positions for the required length of time. Coincidence? It really doesn’t matter. While the non-profit may have acted innocently, they wound up in an undesirable situation. They finally settled the case through mediation.
Country club misconduct
An assistant sports pro was fired due to alleged misconduct, including failure to follow club procedures. Following the termination, the sport’s director emailed both potential employers and club members with the details of the termination, including accusations of theft.
This email opened the Club up to further liability when the former assistant sports pro learned of it and made a claim for damage to his professional reputation.
This case illustrates how actions both during and after a claim can impact exposure when those actions occur without the advice of counsel.
An uncooperative employee or whistle blowing retaliation
A food cooperative was sued by a former employee. He alleged he was fired for reporting equipment malfunctions to regulators. The coop maintained he was fired due to insubordination, combativeness and abusive behavior towards other employees.
It did appear he was fired for whistle blowing because his termination occurred three days after he contacted regulators about the malfunctioning equipment. Since a jury could easily see how his complaints to authorities played some part in the decision to fire him, the coop decided to settle the case at private mediation.
An injury, a termination and a lawsuit
A cooperative employee sustained an injury on the job and filed a worker’s compensation claim. Shortly after the claim was filed, the employee was terminated by the general manager. He filed a lawsuit alleging wrongful termination, age discrimination and retaliation after receiving a letter from the Cooperative disagreeing with his interpretation of the injury.
During discovery, three factors were brought to light by the former employee’s lawyer to help prove the allegations: one, there was a trend of hiring younger employees over the past several years; two, several employees confirmed that the former employee complained of work-related headaches and three, the employee was terminated only after he filed the worker’s compensation claim.
This case illustrates that routine worker’s compensation matters can lead to litigation involving broader claims with greater exposure brought on by timing issues and other circumstances that may not have been intentional.
Contract confusion causes consternation and chaos
An independent grain sales contractor signed a two-year contract with an agricultural Cooperative believing the contract could only be terminated if he engaged in unlawful activity. However, the Cooperative terminated the relationship claiming that the contractor failed to reach earnings goals.
The contractor initiated a lawsuit alleging that his contract was unlawfully terminated. He also claimed unlawful interference with business and defamation—letters were supposedly sent to his clients damaging his reputation.
Litigation was expensive because numerous witnesses and experts had to be deposed to discuss the claims as well as the economic formulas involved in the sales contract. The lawsuit lasted over three years. It finally settled before trial after several important witnesses relocated and became unavailable for trial.
Any examples in this article are for illustrative purposes only and any similarity to actual individuals, entities, places or situations is unintentional and purely coincidental. This material is not intended to establish any standards of care or to serve as legal advice appropriate for any particular factual situations. Please remember that only the relevant insurance policy can provide the actual terms, coverages, amounts, conditions and exclusions for an insured.
To learn more, email managementliability.us@victorinsurance.com or connect with your business development contact.