Non-Party’s Claim of Employment Relationship with Plaintiff Creates Question of Fact in DJ Action

A complaint clearly and repeatedly alleges the plaintiff was the employee of the defendant, but for purposes of the employment practices exclusion, was she really? At this point, it’s unclear after her “real” employer claims her as its own in the declaratory judgment action. Bikram Choudhury founded the popular Bikram (or hot yoga) in the 1970s. A former student accused Bikram of raping her in 2010. As Bikram’s legal counsel was looking into that rape accusation, she alleges that Bikram harassed her into halting the investigation and fired her. She then brought the underlying suit based on the harassment, which included alleged defamation and alleged she was employed by Bikram. The insurer denied coverage and in the ensuing declaratory judgment action argued that coverage was  barred by the employment related practices exclusion. In response, Bikram and company submitted affidavits from a non-party law firm that the plaintiff was hired by that separate law firm and sent to work for Bikram on behalf of the firm, but that the firm retained control, dictated payments to her, and actually fired her. The court held that despite the allegations in the complaint (which the court deemed “self-serving”), it was not clear that the plaintiff in the underlying case was an employee (either directly or on a joint employer basis) of Bikram or one of his companies based on the law firm’s representations. Accordingly, the court found that there was a question of fact regarding whether the employment practices exclusion applied and the insurer must provide a defense. Bikram’s Yoga College of India, L.P., et al v. Philadelphia Indemnity Insurance Company, et al., United States District Court Central District of California, December 9, 2015.

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