Side litigation to a case involving charges of what amounts to human trafficking has ended with a trucking company’s insurer prevailing on its claim that it isn’t liable for any of the costs involved in the original lawsuit.
In a brief opinion handed down last week in the U.S. District Court for the Eastern District of Pennsylvania, Judge Gerald McHugh said Landmark Insurance Co. has no responsibility for any liabilities incurred by Carl Hemphill and his company, MJC Labor Solutions, in the lawsuit brought by a Mexican national it hired in 2015. Landmark had a policy with MJC.
McHugh’s brief order did not explain his reasoning behind ruling in favor of Landmark’s request to dismiss the case brought by Hemphill and MJC.
The original case brought against Hemphill, MJC Labor, Pennsylvania-based trucking company KAH Transportes — which Hemphill owns — and several other defendants is ongoing in the same federal court. It was filed in 2018 by Jose Enrique Castillo Chaidez, whose lawsuit says he was hired by MJC under an H2B temporary visa, which allows foreign nationals to be hired for a specific work purpose. He was hired to work for KAH.
In that lawsuit, Chaidez charged Hemphill and MJC with “human trafficking and wage violations.” The suit spells out a list of what it says were actions taken against Castillo, beginning with seizing his passport upon arrival in the U.S., requiring monthly payments for “filthy, over-crowded and vermin-invested housing,” requiring manual labor that wasn’t in the arrangement for him to come to the U.S., and failure to compensate him for all hours worked.
The relationship got so bad that it ended up with Hemphill calling the police on Castillo and the driver spending three nights in jail, according to the original lawsuit.
“Defend” vs. “indemnify”
The question then arose as to whether Landmark, as MJC’s insurer, would defend Hemphill and the company in the Castillo action. “Defend” is not the same thing as “indemnify,” according to the suit Hemphill/MJC filed against Landmark after it said it would not defend the company and owner in the Castillo lawsuit. “An insurer is obligated to defend its insured ‘if the factual allegations of the complaint on its face encompass an injury that is actually or potentially within the scope of the policy,’” the Hemphill/MJC lawsuit says, citing a precedent. It cites another precedent that says that “any doubts regarding the insurer’s duty to defend must be resolved in favor of the insured.”
The Hemphill/MJC lawsuit said Landmark already had defended the company in what it said was a similar case.
In its motion to dismiss the Hemphill/MJC case, Landmark said the policy it had with MJC would provide coverage for “the rendering or failure to render the insured’s professional services, i.e., the providing of permanent and/or temporary employee placement services and/or visa application processing services for others for a fee.” That’s the sort of work MJC Labor does.
But Landmark added that the lawsuit by Castillo doesn’t deal with those issues. Rather, it deals with what Landmark said might be “wrongful conduct” during Castillo’s employment. “Thus, Landmark declines to provide a defense to MJC Labor or Hemphill,” the insurer said.
Landmark said that since its rejection of the request, Hemphill and MJC have “repeatedly contorted the allegations in the [lawsuit] in an attempt to wedge those allegations into the coverage available under the Landmark Policy.”
The lawsuit against Landmark doesn’t attempt to determine the validity of Castillo’s claims. It focuses solely on whether the insurer has an obligation to defend Hemphill and MJC Labor.
As one of the section heads in the Landmark lawsuit says, “even if the [Castillo lawsuit] alleged that MJC Labor or Hemphill, on behalf of MJC Labor, provided the covered professional services, none of Castillo’s claims arise out of those professional services.” Rather, they are about his treatment and relationships with Hemphill’s various companies once he got to the U.S.
A separate section head in the Hemphill/MJC response to Landmark’s ultimately successful move to have the lawsuit dismissed sums up its key argument: “It is reasonable to infer from the Castillo complaint that Mr. Hemphill was acting on behalf of MJC Labor when he recruited Mr. Castillo to work as a truck driver in the United States.”
Ultimately, the judge in the case went with the Landmark argument.