A federal judge ruled that Blake Lively was a contractor, not an employee. Justin Baldoni is now using that ruling to make an insurer pay his legal bills.
Blake Lively and Justin Baldoni are shown in this composite image (Credit: Wikimedia Commons)
For most of the past two years, the legal fight over It Ends With Us centered on what happened on a New Jersey film set and in the publicity storm that followed. The newest chapter is less dramatic and more familiar to HR. It asks whether the woman at the center of the case was ever an employee.
Judge James I. Montgomery of Los Angeles Superior Court is now weighing that question. Justin Baldoni and his production company, Wayfarer Studios, have asked him to rule that QBE Insurance Corp. had a duty to defend them against Blake Lively's claims. The motion for summary adjudication is set for a hearing on Nov. 10.
The two sides disagree on almost everything. QBE's court papers argue that all of Lively's claims came from her work as the film's lead actress, whether they were labeled harassment, retaliation, defamation or false light.
QBE says the case is "fundamentally rooted in an employment setting." Baldoni's lawyers answer that a federal judge has already rejected that framing and that QBE is bound by his ruling. They have been blunt about the insurers since the start. In a filing earlier this year, they said it was unclear why the insurers "chose to run for cover, rather than coverage."
The ruling Baldoni is relying on
The federal judge is Lewis J. Liman of the Southern District of New York. In April, he issued a 152-page decision that found Lively was an independent contractor, not an employee. That finding ended her harassment claims under Title VII of the Civil Rights Act of 1964, which covers only employees.
Liman's analysis looked at how much control Lively had. She held contractual approval rights over the script, the director, her co-lead, hair and makeup, and filming locations. Her engagement was also tied to a single project and lasted a limited time. Ten of her 13 claims were dismissed.
Rachael Rustmann, an employment lawyer at Constangy, Brooks, Smith & Prophete, noted in her analysis of the decision how wide its reach is. She wrote that independent contractors, "no matter how integral they are to a business," generally have to rely on state law or their contracts rather than federal employment statutes.
The same finding is now doing a second job. It helped defeat Lively's federal harassment claims, and Baldoni's side is using it to try to unlock insurance money. The policy language that makes employee status central to QBE's defense has not been made public.
Classification is also an insurance question
Most employers think of worker classification as a matter of wages and taxes. This case shows it can also decide which insurance policy responds, and sometimes whether any policy responds.
Employment practices liability insurance (EPLI) is typically designed around claims from employees, former employees and job applicants. Claims from contractors and other third parties may need a separate endorsement or a different policy altogether. Some fall between policies and are covered by neither. If an organization isn't sure how a worker is classified, it may not be sure it is insured either.
Wayfarer's insurance history shows how complicated this can get. When Baldoni, Wayfarer and its executives sued their insurers on July 30, 2025, they named New York Marine and General Insurance Co., QBE and certain underwriters at Lloyd's. Those policies carried at least $8 million in combined coverage. Each insurer had covered a different kind of risk, from advertising injury to multimedia liability.
The application form problem
A fourth insurer, Harco National Insurance, raises the most useful lesson for HR. Harco sued Wayfarer in federal court in New York, asking for a declaration that it owed nothing. Its two policies ran from July 2023 to July 2025. According to the complaint, Wayfarer's July 2023 application included a warranty that no one it sought to insure knew of any circumstances that might lead to an employment practices claim.
Harco alleges that complaints of harassment during pre-production and production had surfaced as early as May 2023. If so, they came before that warranty was signed. The warranty itself said that any claim arising from undisclosed knowledge would be excluded. The dispute is unresolved, and Harco's account is only one side of it.
The practical lesson applies to any employer. The complaints HR hears internally can end up deciding coverage. When an EPLI application asks whether anyone knows of circumstances that could lead to a claim, the person signing it needs to know what HR knows. Brokers and HR should agree in advance on when a complaint gets reported to an insurer. That decision shouldn't be made in a hurry after a demand letter arrives.
This matters because employment claims are not slowing down - the Equal Employment Opportunity Commission secured $660 million for 17,680 victims of discrimination in fiscal 2025. Of that, $528 million came through pre-litigation enforcement, the most in the agency's 60-year history.
Contractor status is not a shield
Employers shouldn't read the Lively ruling as a way out of liability. Liman let her retaliation claim go forward under California's Fair Employment and Housing Act. He reasoned that the statute's anti-retaliation provision protects "any person" who opposes prohibited conduct, whether or not that person is an employee.
Geography mattered too. The court held that California law did not govern the harassment claims because most of the filming happened in New Jersey. The retaliation claim survived because the alleged smear campaign was said to have been directed from California. Anthony J. Oncidi and Dixie M. Morrison of Proskauer Rose wrote that employers with interstate ties "must remain mindful of California's expansive protections." Federal appeals courts have also shown how worker status can reshape an employer's retaliation exposure.
Meanwhile, the federal rules for classification may change. In February, the Department of Labor proposed a new test for independent contractor status under the Fair Labor Standards Act. It would give the most weight to two "core" factors: control over the work and the worker's opportunity for profit or loss. The proposal covers wage-and-hour law, not Title VII, and the 2024 rule stays in force until a final rule is issued.
Where things stand
The main dispute is largely over. Lively and Baldoni settled her remaining claims on May 4, two weeks before a scheduled May 18 trial. Several outlets reported that no money changed hands. Baldoni's $400 million defamation and extortion lawsuit against Lively and her husband, Ryan Reynolds, was dismissed in June 2025.
In August, Liman awarded Lively $363,245.40 in attorneys' fees and $44,206.35 in costs under a California law that protects people who report sexual harassment from retaliatory defamation suits. The total was about 5 percent of the roughly $8 million she had asked for.
The remaining question is who pays for all of this. For HR leaders, the steps are clear:
- Compare every category of worker you use against how your EPLI and D&O policies define "employee" and "insured."
- Ask your broker in writing whether claims from contractors and other third parties are covered.
- Before anyone signs a renewal application, make sure open complaints and investigations have been disclosed to the person signing it.
- Treat classification as a decision you revisit as working relationships change.
