Opinion ID: 163265
Heading Depth: 3
Heading Rank: 6

Heading: any other act

Text: by the Bank for which an Employment Claim is made against the Bank except as excluded from coverage under Section IV. Section IV excludes, inter alia, any employment claim “based upon, arising from, or in consequence of willfully violating, in fact, by the Bank any statute, rule, regulation, agreement or judicial or regulatory order.” Section V limits liability to: (i) all costs and expenses of the attorneys appointed by the Underwriter, (ii) and up to a maximum of one years [sic] salary or wages of the past or present Employee or Employee Applicant who is making such Employment Claim if the Employee or Employee Applicant is awarded either front pay or back pay of salary or wages for employment services which were not and will not be actually performed . . . . Salary and wages shall not include insurance premiums, interest, retirement or saving plan contribution/compensation or other benefits. The policy also contains a $1,000 deductible and a provision limiting total liability, including defense costs, to $250,000. 3 The Bank sought indemnification for the amount it paid to settle a lawsuit brought by a former employee, Ricardo Gomez. Gomez resigned from the Bank in October 1999 and, in November, demanded a termination payment pursuant to an alleged employment agreement dated February 12, 1997. In support of his demand, Gomez produced a copy of the employment agreement. The agreement contained a provision, Paragraph 11D, that does not appear in the standard employment agreement used by the Bank. Paragraph 11D in the Gomez agreement also appeared in a different font than the remaining agreement. Pursuant to Paragraph 11D, the Bank allegedly agreed to pay Gomez, upon his resignation, a termination payment of 150% of his taxable income for the preceding twelve months, or approximately $329,000. Gomez also demanded payment of commissions for all loans approved and disbursed within 90 days of his resignation. While employed, Gomez received an annual salary of $40,000 plus commissions and other performance-based compensation. On November 11, 1999, the Bank notified the Insurance Company of the Gomez claim and provided relevant documents. The Bank informed the Insurance Company that it believed Gomez had fraudulently altered his employment agreement by adding a paragraph that did not appear in the original document. Following Gomez’ demand, the Bank was unable to locate an original copy of the Gomez employment agreement. By letter dated November 11, 1999, the Insurance Company notified the Bank that the insurance policy might not cover the Gomez claim because the alleged employment 4 agreement stated: “This Agreement shall not be construed as an Employment Contract.” The Insurance Company also requested the Bank keep it informed of any developments and notify it immediately if Gomez filed suit. Gomez filed suit in Colorado court on December 16, 1999, seeking approximately $329,000 in damages. Gomez also sought attorneys’ fees and punitive damages pursuant to Colorado statute. The Bank filed a counter-claim alleging Gomez had fraudulently altered the employment agreement. On December 22, 1999, the Bank notified the Insurance Company of the suit. The Insurance Company immediately appointed counsel to represent the Bank and informed the Bank it would pay the costs and expenses of the appointed attorney subject to the policy deductible and liability limit. The Insurance Company also informed the Bank of its belief that the indemnity provisions of the insurance policy did not cover a contractual obligation to make a termination payment. The Bank and Gomez attended mediation on August 18, 2000. Although invited, the Insurance Company elected not to attend. Immediately prior to mediation, the Bank demanded the Insurance Company authorize payment up to the policy limit to settle the case. The Insurance Company declined. During the course of mediation, the Bank contacted the Insurance Company via telephone again requesting authorization to settle. The Insurance Company agreed to contribute $10,000 toward settlement. Following mediation, at the recommendation of appointed counsel, the Bank agreed to pay Gomez $175,000 to settle the suit. The Insurance Company issued a check for $10,000 and 5 requested the Bank pay the policy deductible of $1000. The Bank refused and requested indemnification for the remaining settlement amount. The Insurance Company maintained the policy’s indemnification provisions did not cover the Gomez claim. In response, the Bank filed this diversity action in federal court seeking reimbursement of the settlement payment and attorneys’ fees. On appeal, the Insurance Company continues to argue the Gomez claim is not covered by the insurance policy’s indemnification provisions. In addition, the Insurance Company asserts that any coverage that exists is limited to a maximum of one year of Gomez’ base salary, or $40,000.