A family-owned healthcare firm is accusing a major insurer of bad faith after being denied a defense in an employment practices liability dispute.
Disability Management Network, Ltd., doing business as Triune Health Group, has filed a complaint against Federal Insurance Company in the United States District Court for the Northern District of Illinois, Eastern Division.
Triune alleges that Federal Insurance refused to defend it in a lawsuit brought by Lombardi Associates, Inc. and Tracey Lombardi, despite Triune’s purchase of an Employment Practices Liability Coverage policy intended to provide such protection.
According to the complaint, Triune, a healthcare business organized under Illinois law, purchased a liability policy from Federal Insurance in September 2024 that included Employment Practices Liability Coverage. The policy was designed to protect Triune in the event of an employment-related claim.
The dispute centers on two agreements Triune entered into on Jan. 11, 2021, with Lombardi Associates and Tracey Lombardi: a Transition Services Agreement and an Employment Agreement. The Transition Agreement provided for the transfer of Lombardi Associates’ business to Triune, with compensation to Lombardi Associates and Tracey based on commissions.
Separately, the Employment Agreement made Tracey an employee of Triune, with a base salary of $52,000 and eligibility for employee benefits, but no entitlement to commissions.
A conflict arose regarding the parties’ performance under the Transition Agreement. On July 30, 2024, Lombardi Associates and Tracey, through counsel, sent Triune a letter alleging breach of the Transition Agreement and seeking damages for lost commissions. The complaint states that this demand did not allege any violation of the Employment Agreement or seek damages related to it.
On April 22, 2025, Lombardi Associates and Tracey filed a Complaint for Damages against Triune, alleging breach of both the Transition Services Agreement and the Employment Agreement, as well as fraudulent misrepresentation and tortious interference with prospective business advantage. Triune then tendered the lawsuit to Federal Insurance, seeking a defense for the employment-related cause of action (Count II – Breach of Contract – Employment Agreement).
Federal Insurance denied its duty to defend, asserting that the claim was first made prior to the policy period, referencing the July 30, 2024 demand letter. Triune’s complaint alleges that this denial was arbitrary, unreasonable, and contrary to the policy language and facts.
The policy, as quoted in the complaint, states that the insurer has “the right and duty to defend any Matter covered by this Coverage Part… coverage shall apply even if any of the allegations are groundless, false or fraudulent.”
The policy defines “Employment Claim” to include “any: (1) written demand… for monetary or non-monetary (including injunctive) relief… which is brought and maintained by or on behalf of a past, present or prospective employee… against an Insured for an Employment Practices Wrongful Act…” and defines “Employment Practices Wrongful Act” to include “any actual or alleged: (A) Breach of Employment Contract; … (E) Workplace Tort…”
Triune alleges that Federal Insurance continued to deny coverage after being asked to reconsider, and did not offer a defense under a reservation of rights or seek a judicial determination of its obligations.
Triune seeks a declaratory judgment, compensatory damages for breach of contract, and punitive damages for alleged bad faith under Illinois law.
