Most, if not all, commercial general liability policies contain a workers’ compensation exclusion, which have been widely interpreted to exclude claims made by employees directly against their employers.[i] However, that exclusion can be avoided in certain circumstances where a party that was liable for the employee’s injuries seeks indemnity back against the employer, as outlined in a recent South Florida case.[ii]
In this matter, a company was retained to perform landscape work on a construction project. While on the project, a landscaping employee was injured when he slipped and fell on a slippery substance. As a result, he filed a lawsuit against the owner of the property and the general contractor for the construction project. In response, the owner and general contractor filed claims against the landscaping employer seeking indemnification for the injuries to the employee. Thus, in a roundabout way, the employee was ultimately seeking to recover from his employer for an injury that he suffered while in the course and scope of his employment, in contradiction to the workers’ compensation exclusion.
Accordingly, the insurance carrier for the landscaping company denied coverage for the indemnification claim and a declaratory action ensued. After considering cross-motions for summary judgment, the Court found that there was a duty to defend despite the existence of the workers’ compensation exclusion. Specifically, the Court found that the exclusion, and the cases interpreting the exclusion, only excluded claims where employees were directly suing their employers. The Court found that the exclusion did not apply to an indemnity claim brought by a third party, even though it arose directly from the employee’s jobsite injuries.
Note that the Court’s reasoning was wholly dependent upon the language of the specific exclusion. Specifically, the Court noted that the workers’ compensation exclusion did not preclude coverage for any claim brought by any party “arising out of” or “related to” any “bodily injury” inflicted upon an insured’s “employee,” including indemnity and contribution claims. The Court reached this conclusion despite the fact that the same language was used in another exclusion contained in the same policy. Accordingly, the Court was not making a public policy declaration that this type of indemnity claim could never be excluded, and provided a potential model for how the exclusion could be drafted to avoid coverage.
However, as noted in most cases interpreting exclusions, “[p]olicy provisions that tend to limit or avoid liability are interpreted liberally in favor of the insured and strictly against the drafter who prepared the policy, and exclusions to coverage are construed even more strictly against the insurer than coverage clauses”.[iii]
[i] See, e.g., Pac. Employers Ins. Co. v. Wausau Bus. Ins. Co., 508 F. Supp. 2d 1167 (M.D. Fla. 2007); Scottsdale Ins. Co. v. GFM Operations, Inc., 789 F. Supp. 2d 1278 (S.D. Fla. 2011) (“Worker’s Compensation and Similar Laws” exclusion analyzed in the context of a claim brought directly by an employee against insured employer); Sinni v. Scottsdale Ins. Co., 676 F. Supp. 2d 1319 (M.D. Fla. 2009) (exclusion applied in case brought directly by employee who was provided “significant workers’ compensation benefits for the very injuries for which she subsequently sought relief in the underlying tort action”); Oppenheim v. Reliance Ins. Co.,804 F. Supp. 305 (M.D. Fla. 1991) (worker’s compensation exclusion applied to a claim brought directly by an employee of insured who “was entitled to Workers’ Compensation benefits and received them”); Indian Harbor Ins. Co. v. Williams, 998 So. 2d 677, 679 (Fla. 4th DCA 2009) (workers’ compensation exclusion applied to negligence claim brought directly by employee against employer/insured which “violated his statutory duty to maintain workers’ compensation insurance for his employees”); Florida Ins. Guar. Ass’n, Inc. v. Revoredo, 698 So. 2d 890 (Fla. 3d DCA 1997) (exclusion applied because obligation to decedent who was “deemed to be employed” by insured “is under workers’ compensation law”).
[ii] Order available from Cole, Scott & Kissane upon request.
[iii] See Flores v. Allstate Ins. Co., 819 So.2d 740 (Fla. 2002).