By: Alexander S. Beck, Esq., Stearns, Roberts & Guttentag, LLC
A coverage exclusion found in many commercial general liability (CGL) policies is the “employer’s liability exclusion”. Under this exclusion, an employer’s insurance coverage does not extend to the bodily injury of its employees, when the injury arises out of and in the course of their employment. However, Florida courts have applied the separation of insured provision (also called the “severability of interest” provision) to extend coverage when the employee alleges that his bodily injuries were caused by the negligence of his co-employees, in addition to the employer’s negligence.
In Evanston Ins. Co. v. Design Build Interamerican, Inc., 2014 WL 1363959 (11th Cir. 2014), a construction worker (“employee”) was critically injured while delivering a steel pipe to a construction site. The employee was delivering the pipe on behalf of a subcontractor to the general contractor (“employer”). When he arrived at the site with the pipe, the employee was asked to help carry it to an upper level of the construction site. While on the upper level, he stepped on an unsupported drop ceiling and fell twenty feet to a concrete floor, sustaining serious injuries.
The employee’s wife, in her capacity as guardian for her husband, brought an action against the employer and three of his co-employees alleging negligence. The employer’s insurance carrier (“insurer”) denied coverage under the CGL policy because of the employer’s liability exclusion. The exclusion provided that insurance coverage does not extend to the bodily injury of an employee of “any insured” when the injury arises out of and in the course of their employment.
The insurer filed a declaratory judgment action to exclude coverage of the employee’s claims. The district court ruled that because the employee sustained injuries while he was performing duties related to the conduct of his employer, his claims were excluded under the CGL’s employer’s liability exclusion. The employee appealed the district court’s decision.
On appeal, the employee did not dispute that it was an employee of the employer as defined in the employer’s liability exclusion. The employee argued that the exclusion must be read in light of the policy’s ‘separation of insureds’ provision. The separation of insureds provision provides that “[i]nsurance applies: [a]s if each Named Insured were the only Named Insured”. Thus, the employee argued that the separation of insureds provision, as applied to the “any insured” language within the employer’s liability exclusion, precludes application of the exclusion in the context of an employee suing a co-employee.
Florida courts have explained that the separation of insureds provision creates a separate insurable interest in each individual insured under a policy, such that the conduct of one insured will not necessarily exclude coverage for all other insureds. The appellate court reasoned that since each insured has a separate insurable interest, each provision of the policy must be read as if coverage is foronly that insured (i.e. only the employer, or only a co-employee). As such, the employer’s liability exclusion does not preclude coverage for claims against co-employees because each individual co-employee has a separate insurable interest in the policy. Therefore, the appellate Court held that the language—“an employee of any insured ”— in the employer’s liability exclusion would not preclude coverage for the co-employees’ actions because the injured employee was not an employee of his co-employees. The appellate court reversed the declaratory judgment in favor of the three co-employees named in the underlying negligence action, as none of these insureds were the employer of the employee.
This case demonstrates that a separation of insured provision creates a separate insurable interest in each individual insured under a policy, such that the conduct of one insured will not necessarily exclude coverage of all other insureds. Since each insured has a separate insurable interest, each provision of the policy must be read as if coverage is for only that insured.
About the Author: Alexander S. Beck is an associate with Stearns, Roberts & Guttentag, LLC. Mr. Beck in construction law including construction lien claims, payment and performance bond claims, bid protests, construction contract preparation, and construction and design defect claims He can be reached for consultation at [email protected].