PAST AND FUTURE LOST EARNINGS EXCLUDED BY EPL POLICY

February 14, 2012

Last Thursday, in a case of first impression, the Dallas court of appeals determined that damages for past and future lost earnings due to wrongful termination were excluded from coverage under an employment practices liability insurance policy issued by St. Paul Mercury Insurance Company.  Pinnacle Anesthesia Consultants, P.A. v. St. Paul Mercury Ins. Co., --- S.W.3d ----, 2012 WL 404967 (Tex.App.—Dallas February 9, 2012).  Pinnacle had an employment practices liability insurance policy with St. Paul with a $2 million limit.  Dr. Neal Fisher was an employee and shareholder physician with Pinnacle pursuant to a written employment contract.  In 2004, Pinnacle terminated Dr. Fisher, and Dr. Fisher sued for breach of the employment contract alleging he was terminated without cause.  The jury agreed and determined that Dr. Fisher's damages from Pinnacle's terminating him without cause, included past lost earnings of $900,000 and future lost earnings of $5 million.

In the coverage litigation, St. Paul relied on a policy exclusion providing in part that: “The Insurer shall not be liable for that part of Loss that constitutes ... amounts owed under a written contract or agreement....” The damages in the underlying case were for past and future lost earnings. The jury charge in the underlying case defined “Past Lost Earnings” as “the cash value of the earnings Dr. Fisher would have received in the past had Pinnacle not terminated him without ‘Cause,’ less any amounts actually earned by Dr. Fisher.” It defined “Future Lost Earnings” as “the cash value of the earnings Dr. Fisher would, in all reasonable probability, earn in the future, less any earnings, had Pinnacle not terminated him without ‘Cause.’ “The issue before the court was whether this award of damages for past and future lost earnings “constitutes ... amounts owed under a written contract or agreement.”

The court rejected Pinnacle’s argument that the lost earnings were not owed “under the contract” because they were consequential damages.  The court also disagreed with Pinnacle's interpretation of “amounts owed under a written contract” as limited to money owed to Dr. Fisher for fees earned but not paid before the termination of the employment contract.  Lastly, the court rejected Pinnacle’s argument that the policy language was ambiguous.  In doing so, the court upheld the summary judgment entered for St. Paul.