No Coverage for Employer Under Professional Liability Policy

    Although the employer raised numerous claims against the insured employer, none were covered under the policy. Hemphill v. Landmark Ins. Co., 2023 U.S. App. LEXIS 8079 (April 5, 2023). 

    Carl Hemphill and MJC Labor provided temporary employee placement and visa application processing services to workers from Mexico and Central America. The Professional Liability policy covered claims “arising out of negligent acts, error or omissions in the rendering or failure to render permanent and/or temporary placement services.”

    A former MJC client, Jose Castillo, filed an action against Hemphill alleging violations of federal human trafficking, wage-and-hour, and unfair trade practices laws. Castillo alleged that he signed an employment contract with one of Hemphill’s companies. When he arrived in the U.S., Hemphill confiscated his passport, housed him in unsatisfactory accommodations, assigned him tasks outside the scope of his employment contract, and considerably underpaid him. Castillo sued and the case was settled. 

    Hemphill sought coverage under the Landmark policy. Landmark refused to defend Hemphill because Castillo’s allegations arose from Hemphill’s intentional actions rather that from negligent actions in providing placement services. Hemphill then filed suit against Landmark seeking a declaration that Landmark was required to defend him. The District Court dismissed Hemphill’s lawsuit.

    On appeal, Hemphill argued that he had a reasonable expectation of coverage in the Castillo lawsuit after Landmark defended him in an earlier, similar class action. No authority supported a finding a duty to defend when the insured’s expectation of coverage arose solely from the insurer’s conduct in another, unrelated action. The scope of coverage in the Landmark policy was clear. Hemphill’s expectations did not change the policy language. 

    Further, the underlying complaint did not allege negligence of Hemphill or MJC in providing Castillo placement services. Nor was there an allegation of negligent misrepresentation. The underlying complaint alleged that Hemphill “deceived Castillo about rental housing in which he would be living.” But Castillo did not allege that Hemphill or MJC ever represented to him that his housing conditions would be sanitary or not crowded, or that he would not have accepted Hemphill’s employment offer had he known that the housing conditions were subpar. 

    Therefore, the District Court’s dismissal was affirmed.