While a federal appeals court ponders a lawsuit alleging taxi drivers should actually be considered employees and not independent contractors, an insurance company has asked a Cook County judge to declare one of the cab companies being sued should need to find some means other than an insurance claim to fund its defense against the allegations it has violated federal labor law in how it classifies and pays its drivers.

Zurich American Insurance filed suit in Cook County Circuit Court against taxi company Yellow Group LLC and its parent company, Yellow Cab, saying the terms of the taxi company’s policy should mean it has no obligation to indemnify the taxi service in its ongoing dispute with its drivers.

The Zurich lawsuit arises after the U.S. Seventh Circuit Court of Appeals took up the case brought by Chicago cab drivers against Yellow Cab and several other taxi companies operating in Chicago, including Chicago Carriage Co., Flash Cab Co., Dispatch Taxi Affiliation Inc. and others.

The drivers, including named plaintiffs Peter Enger, Karen Chamberlain, Courtney Creater, Gregory McGee and Finn Ebelechukwu, brought the action in March 2014 in Chicago federal court, seeking to also serve as representatives on behalf of a class of other current and former Chicago taxi drivers. They alleged the taxi companies had improperly classified them as independent contractors, forcing them to rely on fares and tips and causing them to “often” earn less than minimum wage and “sometimes owe more than they earn during a shift.”

The drivers’ complaint asserted the taxi companies’ policies amounted to violations of Illinois wage and hour laws, meaning the taxi companies had enjoyed “unjust enrichment” at the expense of their drivers.

In December 2014, however, U.S. District Judge Andrea R. Wood dismissed the drivers’ lawsuit, saying she believed the agreements between the companies and the drivers made clear the drivers’ only source of expected compensation would come from fares and tips paid by customers. That, the judge said, would mean “there was no agreement between the two that provided” for the cab companies to ever pay the drivers, as they would employees, under the meaning of the law.

The drivers appealed the decision in January, and the appeal is pending before the Seventh Circuit.

To pay for its defense against the continuing lawsuit, Yellow Cab, citing its insurance policy through Zurich, has called upon the insurer to fund its defense.

Zurich, however, has denied that coverage, pointing to terms in its policy which it argues exempt it from insuring against litigation arising out of claims the cab company violated “any labor or employment-related law, rule or regulation.”

Other sections of the policy purportedly also specifically exclude coverage for claims arising from “an actual or alleged violation of … the Fair Labor Standards Act and any other law concerning wage and hour practices.”

“The Enger Lawsuit is a claim for actual or alleged violations of the responsibilities, obligations or duties imposed by Illinois law concerning wage and hour practices,” Zurich’s complaint states. “The claim is therefore not covered and Zurich American has no obligation to defend or indemnify any insured against the Enger Lawsuit.”

Zurich is represented in the matter by attorneys Jeffrey A. Goldwater and Michelle M. Bracke, of the Chicago office of the firm of Lewis Brisbois Bisgaard & Smith LLP.

Yellow Cab and the other cab companies have been represented in the federal action by the firm of Michael Best & Friedrich LLP, of Chicago.

The cab drivers have been represented by attorneys with the firms of Stephan Zouras LLP, of Chicago, and Lichten & Liss-Riordan P.C., of Boston.

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Organizations in this Story

Cook County Circuit Court Lewis Brisbois Bisgaard & Smith LLP Lichten & Liss-Riordan P.C. Michael Best and Friedrich LLP

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