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Insurance carrier claims it didn’t understand policy

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in Compensation and Benefits,Human Resources

Farmers Automobile Insurance Association (FAIA) failed to pay overtime to its claims adjusters in violation of the Fair Labor Standards Act (FLSA) and the Illinois Minimum Wage Act. FAIA attempted to collect on an employment-practices liability policy it had purchased from St. Paul Mercury Insurance.

St. Paul pointed to a clause that specifically exempted violations of the FLSA and similar laws. FAIA sued and claimed that the policy language was so complicated “the average person” wouldn’t understand it.

Judge Richard Posner of the 7th Circuit reminded FAIA that it is an insurance company and should be able to understand an insurance policy.

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