United States Court of Appeals for the Third Circuit affirms District Court’s ruling that company’s liability insurer does not owe a duty to settle to former employee in action against company.

Steven LeBoon was terminated from his position as Human Resources Manager at Alan McIlvain Company (“AMC”) and sued AMC for employment discrimination.  LeBoon’s case was dismissed for failure to prosecute and affirmed on appeal. Thereafter, LeBoon filed suit against Zurich American Insurance Company, AMC’s liability insurer, claiming, among other things, that Zurich failed to make any good faith offers to settle the employment litigation, and in failing to do so, breached a duty owed to him. The District Court granted Zurich’s motion to dismiss, ruling that Zurich did not owe a duty to LeBoon to settle the employment discrimination case because LeBoon was not an insured under AMC’s policy.

The Third Circuit affirmed on appeal. In LeBoon v. Zurich American Ins. Co., No. 16-2088 (Dec. 12, 2016)¹, the Third Circuit, like the District Court, ruled that LeBoon could not state a plausible bad faith claim because he was not an insured under the liability policy.  The Third Circuit reasoned that “[u]nder the unambiguous terms of the liability policy, Zurich’s only obligation was to provide for the defense and indemnity of covered claims against AMC. It had no obligation to LeBoon, as AMC’s adversary, to settle the employment litigation, and thus his bad faith claims cannot survive Zurich’s motion to dismiss . . . .”

1. The Court’s decision was delivered in a Per Curiam opinion and designated Not Precedential.