Salem-Keizer Yellow Cab Co., in Salem, Ore., purchased a new automobile liability insurance policy for $10,000 less than its existing auto policy. Yellow Cab probably figured it was making a smart, money-saving move by switching insurance carriers. But, as we’ll explain, the net cost was an expensive age discrimination lawsuit.
Insurance Policy Excludes Workers Over Age 70
The new policy with Star Insurance was set to take effect on June 25, the same day that Yellow Cab was required to provide the city with proof of insurance for each taxi driver or face suspension of its business license. On the afternoon of June 24, however, a Star Insurance agent informed Yellow Cab that the new policy wouldn’t cover taxi driver David Enlow because he was 72 years old. Yellow Cab had not seen a copy of the policy yet, and up until this point didn’t know that the policy excluded drivers under age 23 or over age 70.
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Older Driver Fired, Lawsuit Follows
On learning of the age limitation, Yellow Cab fired Enlow. He then slapped Yellow Cab with a lawsuit claiming his discharge violated the federal Age Discrimination in Employment Act.
Enlow argued that sufficient evidence demonstrated that age was the reason for his termination. In particular, he was discharged when Yellow Cab obtained less expensive auto liability coverage that didn’t cover drivers over age 70, while younger employees were retained. But Yellow Cab asked the court to dismiss the case, contending that Enlow didn’t present evidence that the company actually intended to discriminate against him.
The court sided with Yellow Cab and dismissed the case. Enlow appealed.
Evidence of Intent to Discriminate
Now the Ninth Circuit Court of Appeal, which covers California, has ruled that the case must go to a jury. According to the court, Enlow presented direct evidence that Yellow Cab terminated him because he was 72, and the insurance policy excluded employees over age 70, thus creating an inference of intentional age discrimination.
However, said the court, Yellow Cab offered evidence of a legitimate nondiscriminatory motive for the termination—that it only temporarily terminated Enlow to avoid having its business license suspended the next day because it didn’t have adequate insurance coverage for him. The company further asserted that the savings in annual premiums—and not age bias—was the only reason it switched insurance policies. And, Yellow Cab had no time to purchase another policy or renegotiate with Star Insurance in the few hours remaining between the time it learned of the age restriction and the next day, when its business license would be revoked.
Thus, to prevail, Enlow will now have to convince a jury that Yellow Cab was motivated by age bias rather than its need to take temporary measures to avoid losing its business license.
Avoiding Problems
This case highlights the litigation risk you can face if you’re not thoroughly informed about the terms of insurance or other benefits that cover your employees. The cab company could have avoided this expensive lawsuit altogether had it diligently read the new policy’s terms before deciding to switch insurance carriers.