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Campbell Soup Co. v. Liberty Mutual Insurance Co.

August 5, 1988

CAMPBELL SOUP COMPANY, CAMPBELL SOUP (TEXAS) INC., PLAINTIFFS,
v.
LIBERTY MUTUAL INSURANCE COMPANY; THE HOME INSURANCE COMPANY; AMERICAN HOME ASSURANCE COMPANY; AFFILIATED FM INSURANCE COMPANY; CALIFORNIA UNION INSURANCE COMPANY; PRUDENTIAL REINSURANCE COMPANY; EMPLOYER'S MUTUAL INSURANCE COMPANY; GRANITE STATE INSURANCE COMPANY; GIBRALTAR CASUALTY COMPANY; AIU INSURANCE COMPANY; NATIONAL UNION FIRE INSURANCE COMPANY; ROYAL INDEMNITY COMPANY; INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA; NEW ENGLAND INSURANCE COMPANY; CERTAIN UNDERWRITERS AT LLOYD'S, LONDON, AND LONDON MARKET COMPANIES; ALLIANZ INSURANCE COMPANY; NORTH RIVER INSURANCE COMPANY; FIREMAN'S FUND INDEMNITY CORPORATION; PACIFIC EMPLOYERS INSURANCE COMPANY; AMERICAN CENTENNIAL INSURANCE COMPANY; CENTENNIAL INSURANCE COMPANY; FEDERAL INSURANCE COMPANY; AMERICAN EXCESS INSURANCE COMPANY, DEFENDANTS



Lowengrub, P.J. Ch.

Lowengrub

The narrow issue to be resolved by this court is whether a reasonable cause determination, hereinafter referred to as the RCD, issued May 6, 1986, by the Equal Employment Opportunity Commission (EEOC) compels defendants, pursuant to the terms of their liability policies, to defend plaintiff in the proceedings conducted by the EEOC in response to charges of discriminatory hiring and employment practices.*fn1 In other words, is the RCD the functional equivalent of a suit so as to compel the insurers, which include plaintiff's primary general liability carriers and umbrella carriers, to defend plaintiff against charges of discriminatory employment practices? The EEOC has not filed suit against plaintiff in a court of competent jurisdiction.

The RCD is a consequence of a charge filed by former EEOC Commissioner Daniel Leach on September 29, 1980. The charge read, in relevant part:

I, Daniel E. Leach, . . . am a Commissioner of the Equal Employment Opportunity Commission and that I have cause to believe that Campbell Soup (Texas), Inc., has committed the unlawful employment practices set forth in the foregoing charge.

Six years after the charge was filed, the EEOC issued the above referenced RCD to support the earlier charge of unlawful employment discrimination.

The RCD, which is also referred to by this court as the Leach decision, included a summary of the charge against Campbell and a description of the EEOC investigation into Campbell's business and employment practices. The 26-page decision also summarized the EEOC's findings and conclusions relevant to

the charge of employment discrimination. The gist of the RCD is an allegation that Campbell (Texas) discriminated "against blacks and women because of their race and/or sex with respect to recruitment, hiring, assignment, promotion, training, policies and practices, and other terms and conditions of employment."

Plaintiff contends that the RCD is the functional equivalent of a suit as it initiates an administrative procedure which is coercive in nature. Plaintiff also argues that the term "suit," as used in the various insurance policies, is ambiguous and should be broadly construed to include the proceedings before the EEOC. Accordingly, it is plaintiff's position that the issuance of the RCD compels the carriers to defend plaintiff in the EEOC proceeding.

Defendants argue that the RCD is not a suit or the functional equivalent thereof as it does not compel any coercive action against plaintiff. Instead, they contend it merely seeks to place plaintiff in a conciliation mode pursuant to § 706 of the Equal Employment Opportunity Act, 42 U.S.C.A. § 2000e-5(b). Since there is no suit, the contractual predicate to the duty to defend, the carriers argue they need not provide counsel nor pay the costs of counsel engaged by plaintiff to represent it in the EEOC proceeding.

The Legal Analysis.

Resolution of the case at bar requires a review of the following: 1) the applicable provisions of the insurance policies; 2) the law as it pertains to the duty of an insurer to provide a defense to its insured; 3) the relevant sections of the Equal Employment Opportunity Act. 42 U.S.C.A. § 2000e et seq.; and 4) a comparison of the Equal Employment Opportunity Act to the New Jersey Spill Compensation and Control Act, N.J.S.A. 58:10-23.11 et seq.

1. The Insurance Policies.

The policy issued by Liberty Mutual, the general liability carrier, provides, inter alia,

In consideration of the payment of the premium, in reliance upon the statements in the declarations made a part hereof and subject to all of the terms of this policy, agrees with the named insured as follows:

I. Coverage A-Bodily Injury Liability

Coverage B-Property Damage Liability

The company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of

Coverage A. bodily injury or

Coverage B. property damage to which this policy applies, caused by an occurrence, and the company shall have the right and duty to defend any suit against the insured seeking damages on account of such bodily injury or property damage, even if any of the allegations of the suit are groundless, false or fraudulent, and may make such investigation and settlement of any claim or suit as it deems expedient. . . . [Emphasis supplied]

The policy issued by California Union Insurance Company, which issued an "Umbrella Liability Policy" provides, inter alia,

Insuring Agreement

Coverage A -- Personal Injury Liability

Coverage B -- Property Damage Liability

Coverage C -- Advertising Liability

The Company will indemnify the Insured for ultimate net loss in excess of the retained limit hereinafter stated which the Insured shall become legally obligated to pay as damages because of

A. personal injury or

B. property damage or

C. advertising injury to which this insurance applies, caused by ...


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