Cracker Barrel Restaurant Chain Sues Insurers Over Harassment Claims

Restaurant chain Cracker Barrel is suing two of its insurance carriers, claiming they did not reimburse the company after it settled sexual and racial harassment claims for $2 million.

The lawsuit filed last week in U.S. District Court in Nashville alleges Cincinnati Insurance Co. and Houston Casualty Co. violated contracts with Cracker Barrel Old Country Stores Inc.

Women who worked at three Cracker Barrel restaurants in Illinois filed a federal lawsuit against the company in 2004 claiming sexual harassment and racial discrimination by employees and managers.

The U.S. Equal Employment Opportunity Commission joined the women as plaintiffs in the lawsuit, which alleged the women were groped by male employees, subjected to obscene and racist jokes and shown pornographic pictures at the restaurants. The women said bosses laughed at them when they complained.

Cracker Barrel says it requested last March that the insurance companies settle the lawsuit for $2 million, but the insurers say that they weren’t obligated to do so under policies signed with Cracker Barrel.

Cracker Barrel’s lawsuit alleges that the carriers “consistently denied their insurance policy obligations by refusing to reimburse” the company.

“Most if not all of these claims do not fall within the coverage period of the policy,” said Joan Shevchik, spokeswoman for Cincinnati Insurance, “We are reviewing this matter with our attorneys and will file a formal response in due course.”

Representatives with Houston Casualty did not immediately comment.

Cracker Barrel said in a released statement last Friday that the lawsuit “outlines our position that two insurance companies are not honoring the contractual commitments they made with our company.

“Although we consider litigation to be a last resort, it’s our responsibility to protect our business interests.”

Cracker Barrel has in the past faced lawsuits and federal inquiries over complaints of refusing to serve black customers, discriminating against minority workers and firing gay employees. The company has taken steps to rebuild its folksy image and reach out to minorities.

Cracker Barrel in 2004 agreed to pay $8.7 million to settle federal lawsuits in Georgia that alleged black customers were subjected to racial slurs, denied service or segregated in smoking sections.

The company also settled a Justice Department lawsuit the same year with similar claims by agreeing to a number of operational changes but without admitting wrongdoing or paying fines or penalties.

Cracker Barrel, which is a subsidiary of CBRL Group Inc., is based in Lebanon, a Nashville suburb. It operates about 550 Cracker Barrel Old Country Store restaurants and gift shops in 41 states.

Cracker Barrel shares rose 6 cents to close at $50.37 on the Nasdaq Stock Market last Friday.

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On the Net:

Cracker Barrel: http://www.crackerbarrel.com