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Why you should tender co-employee claims to all potential carriers.
Sept. 2016  |  Bad Faith Update  |  Vol. 2 Iss. 11

Leaving No Stone Unturned

Co-Employee Claim Coverage

 
The issue of co-employee liability and its interplay with the immunity provided by the Worker’s Compensation Act has recently been a topic of intense debate with a flurry of decisions handed down by Missouri’s Supreme and lower appellate courts. Even when work comp immunity has been defeated or is rendered inapplicable, the claimant and the insured face an additional battle in triggering potential insurance coverages for such a loss.

It is imperative that counsel for the insured leave no stone unturned by tendering all claims to all potential insurance carriers in order to maximize the chances of a satisfactory outcome for all.

Commercial General Liability Policies

Responsible business owners typically acquire Commercial General Liability policies to protect against losses and injuries for which the business may be liable. The standard CGL policy includes coverage for employees of the business as additional insureds. While these policies typically provide wide-ranging coverage for losses sustained by the general public, such policies often contain exclusions narrowing the coverage afforded for losses and injuries sustained by co-employees.

General exclusions present in many policies state that coverage is not provided, or employees are not insureds, for:
  • “Bodily injury” to:
    • An “employee” of the insured arising out of and in the course of: Employment of the insured, or Performing duties related to the conduct of the insured’s business; or
    • The spouse, child, parent, brother or sister of that “employee” as a consequence of Paragraph (1) above…
The exclusion has been upheld as valid in various cases including American Family Mut. Ins. Co. v. Tickle and Gavan v. Bituminous Cas. Corp.

While the exclusion appears broad and has been enforced, all hope for coverage is not lost by the mere presence of the exclusion.

Insurance policies are interpreted broadly to afford coverage and exclusions are interpreted strictly against the carrier. See Poague v. State Farm Fire & Cas. Co. and Burns v. Smith. It also remains the carrier’s obligation to demonstrate the applicability of the exclusion and an argument can always be made that the injured party does not fit the policy definition of “employee” vis-à-vis a co-worker (since the co-worker is not an “employer”) or that the injured party may not have been in the course and scope of their employment.
 
Tendering to Other Carriers
 
Even if coverage may not be available under the insured’s CGL policy, other policies may provide coverage for the loss.

Even if unlikely, coverage may be provided under the responsible party’s homeowner’s policy, a commercial auto policy, or a Worker’s Compensation-Employer’s Liability policy or even Employment Practices Liability Insurance (EPLI). In addition, if an auto is involved in the loss, tendering of the claim to personal auto-carriers is recommended even though coverage for injuries sustained by an employee of the insured in the course and scope of employment is not mandated by the MVFRL.
 
Best Practices
 
When a potential co-employee case arises, best practices require the claim be tendered to all potential carriers, i.e. Homeowner’s, CGL, Employer’s Liability and Auto carrier, no matter how remote the possibility of coverage under the policies may seem. Doing so provides the greatest potential for coverage for the injuries and protection for the personal assets of the insured.
 
Additionally, forcing the carriers to make tough coverage decisions at every turn increases the chances of shifting exposure for the loss from the insured to the carrier as a result of a wrongful coverage decision and increases the opportunity for the injured party to recover for their injuries.
 
There is simply nothing to lose by leaving no stone unturned and tendering the claim to every potential insurer.
"I've been working on bad faith cases for over 30 years. If you need help, contact me for advice."

- Kirk Presley
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