Exclusion Confusion – no defense of GC from its own Insurer on sub’s bi claim due to Employer’s Liability Exclusion

This is the second recent construction case decided under MA law denying coverage to an entity listed as insured on an insurance policy.  The first case was in State Court Phoenix  Bay State v First Financial Insurance, the latest a Federal judge decided Nagog v Nautilus  Nagog Real Estate Consulting Corp. v. Nautilus Insurance Co., Dist. Court, D. Massachusetts 2020.  Both Courts found coverage blocked by the policy’s exclusion reaching “any insured”.

General contractor’s general liability insurance refused to defend a claim against the CG brought by an employee hired by a subcontractor.

PARTIES

General Contractor                        Nagog

General Contractor’s Insurer       Nautilus

Subcontractor                                  Framing sub

Suit                                                     Framing sub employee v GC and Owner

FACTS  General Liability policy offers coverage, subject to exclusions. Endorsements change all of these.

Employers with worker’s compensation are immune from lawsuits from employees. “Employer’s liability” sits beside workers’ compensation for employers. Employer’s liability usually excludes cover for bodily injury claims from employees (since the employee should get comp and the employer is immune). 

Some insurers, like Nautilus here, expand the exclusion to block claims for bodily injury brought by ANY insured (defined to include subcontractors hired by the insured) The Policy excludes coverage in situations in which an employee, contractor’s, subcontractor’s employees or workers of any insured brings suit for personal injury suffered during the course of their employment.

The employee here sued the General Contractor who demanded its insurance provide a defense and indemnity.

ISSUE May the insurer rely on the employer’s liability exclusion and avoid protecting its insured General Contractor?

HOLDING Nautilus has no duty to defend Nagog in the underlying Suit.

REASONS  An endorsement here broadened the exclusion to exclude bodily injury to employees of “any insured” under the policy.

Suit alleges that Desjean was an employee of Nagog …, … insured under the Policy and the L205 Endorsement bars coverage for injuries of employees of “any insured…

The Court analyzed the interplay of the employee injury exclusion and the separation of insured provision.

This decision highlights the importance of scrutinizing the language used to define “employee,” as used in the employer’s liability exclusion.

Useful expert commentary on this question https://www.irmi.com/articles/expert-commentary/employers-liability-exclusion-in-cgl-policies

COMMENT I hope the premiums for this Nautilus policy were very affordable because the coverage is far less than many would expect. Parties need to pay close attention to the use of “the” insured versus “any” insured in an employer’s liability exclusion