In August 2013, Dr. Isom filed a discrimination charge against Wesley with the U.S. Equal Employment Opportunity Commission ("EEOC"). The EEOC closed its investigation after concluding that Dr. Isom was an independent contractor and issued a right to sue letter.

Dr. Isom also filed a charge of discrimination against Premier. The EEOC closed that investigation and issued a right to sue letter after determining that no employment relationship existed between Dr. Isom and Premier.

Shortly after that, Dr. Isom sued Premier and Dr. Baylis in federal district court, alleging racial discrimination in violation of federal law.

In September 2015, the parties entered into a consent judgment in the amount of $4 million. Premier and Dr. Baylis assigned Dr. Isom their right to recover under two insurance policies in exchange for his promise not to pursue any of their other assets.

One policy, from Valley Forge Insurance Company, provided coverage from December 2011 to December 2012. A second policy, from Transportation Insurance Company, provided coverage from December 2012 to December 2013. The policies were substantially similar and contained an Employment Practices Liability Coverage Form (the "EPL").

The insurers determined that Dr. Isom's lawsuit was not covered under the EPL because Dr. Isom was not an "employee" of Premier or of Dr. Baylis.

Dr. Isom sued the insurers for breach of contract, and they moved for summary judgment.

The U.S. District Court for the Southern District of Mississippi granted the insurers' motion. It held that the insurers had no duty to defend against the discrimination lawsuit because Dr. Isom's complaint did not allege facts establishing that he was an "employee" of Dr. Baylis or Premier.

Dr. Isom appealed to the Fifth Circuit.

The Insurance Policies

Under the EPL, the insurers agreed to pay any:

sums in excess of the deductible and subject to the limits of liability that the Insured becomes legally obligated to pay as "damages" because of a "claim" resulting from a "wrongful employment practice" 

To qualify for coverage, a claim had to be:

first made against an insured, during the "policy period" or Extended Reporting Period, if applicable 

The policy defined a

claim 

as:

a "suit" or written demand for monetary damages against an insured and made by or on behalf of . . . an "employee" . . . for a "wrongful employment practice" 

It defined:

employee 

as:

all of your past, present or future full-time or part-time employees, including seasonal and temporary employees and employees leased or loaned to you

The Fifth Circuit affirmed.

In its decision, the circuit court pointed out that Dr. Isom's complaint had not alleged that he was an employee of Dr. Baylis or Premier, merely that he had been assigned to work with them. Moreover, the circuit court continued, the EEOC had closed its investigation because it had decided that there was no employer-employee relationship.

The Fifth Circuit rejected Dr. Isom's contention that, under a "fair reading" of his discrimination complaint, he "may have been" a leased or loaned employee under Mississippi's borrowed servant doctrine, which provides that "if one person lends his servant to another for a particular employment, the servant, for anything done in that employment, is dealt with as the servant of the one to whom he had been lent, although he remains the general servant of the person who lent him."

The circuit court said that it was "clear" that Dr. Isom, an anesthesiologist, was not the borrowed servant of Dr. Baylis, an orthopedic surgeon, explaining that Dr. Isom was not performing anesthesiology services for Premier and Dr. Baylis – he was performing them for patients. There was "no indication in the complaint" that Premier or Dr. Baylis paid Dr. Isom or controlled his performance. Rather, the circuit court found, Dr. Isom and Dr. Baylis were independent specialists performing different functions during the surgery, and Dr. Isom was not "even arguably" their leased or loaned employee.

Accordingly, the circuit court concluded, under the EPL, the insurers had no duty to defend Premier or Dr. Baylis against Dr. Isom's claim, and they were entitled to summary judgment.

The case is Isom v. Valley Forge Ins. Co., No. 17-60014 (5th Cir. Dec. 29, 2017).