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Insurance Law

The Next Coverage Battle Looming?: Eliminating Coverage Under A “Standard” CGL Policy For Construction Site Bodily Injury Claims

Over the past few years insurers have been taking various affirmative steps, such as adding endorsements, to attempt to limit their exposure for bodily injury claims on construction sites (not to mention for property damage). The Eleventh Circuit just provided (for the second time in six months) the roadmap for insurers to accomplish this. But here’s the most important part of the Eleventh Circuit’s decision – it requires no action to be taken by insurers other than applying the terms of a standard CGL policy. In other words, even insurers that have taken no affirmative steps, to attempt to limit their exposure for construction site bodily injury claims, still very likely have the tools at hand to do so.

One way that insurers have affirmatively attempted to limit their exposure for construction site BI claims has been to amend their CGL policy’s “employer’s liability” exclusion to preclude coverage for bodily injury to employees of “any insured” -- as opposed to the standard language, which applies to preclude coverage for employees of “the insured.” In this way, coverage may not be owed to general contractors, that are additional insureds under policies issued to subcontractors, for injuries to employees of the subcontractor. This is a very common claim when there is a construction site injury. Since the amended exclusion precludes coverage for bodily injury to employees of “any insured,” no coverage is owed to the general contractor, even though the injured party is not an employee of the GC. In other words, it does not matter that the insured seeking coverage is not the employer of the injured party.

Another tack insurers have taken has been to add exclusions that preclude coverage for an employee of any contractor at the site – period -- regardless of the employee’s relationship, or not, to a party seeking coverage.

[A different issue, and perhaps one that is also in play, is whether there is any potential liability for the subcontractor (and, hence, the subcontractor’s insurer) based on contractual indemnity owed to an up-tier contractor that is subjected to liability for a subcontractor’s employee’s injury.]

Last year the Eleventh Circuit demonstrated another method for insurers to limit their exposure for bodily injury claims on construction sites. However, its significance, unlike these other methods just described, is that it requires no changes to standard policy language. So those insurers that have made no changes to standard policy language, to attempt to limit their exposure for construction site BI claims, are not precluded from attempting to do so.

In Amerisure Insurance Co. v. Orange and Blue Construction, Inc., 545 F. App’x 851 (11th Cir. 2013), [enhanced version available to subscribers], the Eleventh Circuit held that the employer’s liability exclusion applied to preclude coverage for Epoch Properties, a general contractor-additional insured, under a policy issued to a subcontractor, for an injury sustained by an employee of another subcontractor. The employee killed on the construction site was employed by a contractor that was three tiers removed from the general contractor.

Not surprisingly, Epoch, the general contractor, argued that the employer’s liability exclusion did not apply because it excluded coverage for bodily injury to an employee of “the insured” and the decedent, three tiers removed, was hardly an employee of the GC-insured. In other words, at issue was a typical (non-amended) employer’s liability exclusion that was tied to an employee of “the insured,” i.e. an employee of “the insured seeking coverage.”

But the court was not persuaded that the employer’s liability exclusion was so limited. The Eleventh Circuit held that “[a]lthough Mr. Tejeda may not have been one of Epoch’s employees in the traditional sense, Mr. Tejeda was a ‘statutory employee’ of Epoch for purposes of workers’ compensation law. . . . Because Mr. Tejeda was one of Epoch’s statutory employees and was injured during the course of his employment, Amerisure had no duty to defend or indemnify Epoch against his Estate.”

To put all of this another way, a typical (non-amended) employer’s liability exclusion, that was tied to an employee of “the insured,” was treated as if it were an amended exclusion that applied to an employee of “any insured.”

Now turn to another recent case before the Eleventh Circuit addressing this issue – Jennifer Stephens, as Personal Representative of the Estate of Charles Becker v. Mid-Continent Ins. Co., No. 13-10170 (11th Cir. Apr. 24, 2014), [enhanced version available to subscribers],. Just as in Orange and Blue, the court held that no coverage was owed to a general contractor because the underlying plaintiff decedent, an employee of its subcontractor, was also considered a statutory employee of the general contractor. Thus, coverage was precluded for the general contractor because the decedent was an “employee of ‘the insured.’” Moreover, here, unlike in Orange and Blue, the general contractor was seeking coverage under its own policy and not as an additional insured under its subcontractor’s policy.

Here’s what happened in Stephens. Charles Becker was working on a construction job in Little Torch Key, Florida. He was helping to install a modular home on the property of Jeffrey and Connie Kirkland. Becker began climbing down a ladder when it detached from the house and he fell to the ground. Becker died on the way to the hospital.

To save time I’ll quote liberally from the court’s opinion. “The representative of Becker’s estate, Jennifer Stephens, subsequently brought a wrongful death suit in Florida state court against the following parties: Becker’s direct employer, Team Fritz; the Kirklands; and Anchorage Homes LLC, another contractor working on the modular home construction project. At the time of the accident, Anchorage held a commercial general liability insurance policy with Mid–Continent Casualty Company. . . . The policy contained several exclusions from coverage, including an exclusion of damages relating to injuries to any of Anchorage's employees.”

“Anchorage filed a claim with Mid–Continent, seeking legal defense and indemnification. On April 20, 2009, Mid–Continent notified Anchorage that its insurance policy excluded coverage for damages arising from Becker’s death, and that Mid–Continent therefore would not defend or indemnify Anchorage. Mid–Continent explained that its investigation had revealed that Anchorage, as construction contractor for the Kirkland project, had employed Team Fritz as a subcontractor. According to Mid–Continent, Team Fritz’s employees therefore were the ‘statutory employees’ of Anchorage under Florida law. Any liability for injury to Becker therefore was excluded from coverage under the policy's employee exclusion clause.”

“After receiving this letter, Anchorage proceeded in the state court proceedings with its own counsel. On August 27, 2010, Stephens and Anchorage signed a mediated settlement agreement and executed a so-called Coblentz agreement, which resolved Stephens’ claims against Anchorage. Under this agreement, Anchorage stipulated to the entry of a judgment in favor of Stephens in the amount of $4,350,000, and Anchorage assigned to Stephens its rights with respect to its claims against Mid–Continent. In turn, Stephens agreed not to collect the amount of the judgment from Anchorage.”

“Stephens, as assignee of Anchorage, brought suit against Mid–Continent in the U.S. District Court for the Southern District of Florida, asserting that Mid–Continent had wrongfully refused to defend and indemnify Anchorage in the state court proceedings, and seeking as relief the judgment amount of $4,350,000. . . . The district court [held] that . . . Becker was exempted from Anchorage’s insurance policy with Mid–Continent under the policy’s employee exclusion clause.”

The Eleventh Circuit affirmed. It explained that, “[u]nder Florida law, a contractor who sublets part of its work to a subcontractor develops a statutory employment relationship with the employees of that subcontractor. As the district court correctly noted, the concept of a ‘statutory employee’ derives from Florida’s Workers’ Compensation Law: (b) In case a contractor sublets any part or parts of his or her contract work to a subcontractor or subcontractors, all of the employees of such contractor and subcontractor or subcontractors engaged on such contract work shall be deemed to be employed in one and the same business or establishment, and the contractor shall be liable for, and shall secure, the payment of compensation to all such employees, except to employees of a subcontractor who has secured such payment.” Fla. Stat. § 440.10(1) [enhanced version available to subscribers].

The Eleventh Circuit looked at the relationship between Anchorage and Team Fritz and concluded that Team Fritz was Achorage’s subcontractor. Among other reasons, the court noted that “there was undisputed evidence that Anchorage was paid pursuant to the Owner/Contractor Agreement [with the homeowners], and that Anchorage issued payments to Fritz for the installation work.” Having concluded that Anchorage was the statutory employer of Becker, Team Fritz’s employee, Anchorage – based on an exclusion in its policy for bodily injury to an employee of the insured -- was not entitled to coverage under its general liability insurance policy for the damages arising from Becker’s death.

In general, a “statutory employee” is an employee of a subcontractor, who is also deemed to be an employee of the general contractor (i.e., a statutory employee), when he sustains bodily injury while acting within the scope of his employment. Even though a “statutory employee” is considered an employee of the general contractor for purposes of certain aspects of workers compensation, a few other courts, like the Eleventh Circuit, have held that the employee of the subcontractor is also considered an employee of the general contractor – a statutory employee -- for purposes of the employer’s liability exclusion. There are at least cases in Texas, Tennessee and Idaho (relying on the trial court decision in Orange and Blue) that have so held.

While lots of insurers have been using endorsements, to attempt to limit their bodily injury exposure on construction sites, Orange and Blue (additional insured scenario) and now Stephens (non-additional insured scenario) demonstrate a possible way to do so using the standard CGL policy language that is probably already in most insurers’ hands. Therein lies the significance of these two decisions.

Give the huge exposure that can come from construction site injuries, will more insurers, based on these decisions, look to their “standard” employee exclusion (excluding coverage for bodily injury to an employee of “the insured”), to disclaim coverage to general contractors, on the basis that they are in fact the employer – the statutory employer -- of an underlying plaintiff that is an employee of the GC’s subcontractor? If so, look for a significant battle to ensue over this issue.

Coverage Opinions is a bi-weekly (or more frequently) electronic newsletter reporting or providing commentary on just-issued decisions from courts nationally addressing insurance coverage disputes. Coverage Opinions focuses on decisions that concern numerous issues under commercial general liability and professional liability insurance policies. For more information visit

The views expressed herein are solely those of the author and not necessarily those of his firm or its clients. The information contained herein shall not be considered legal advice. You are advised to consult with an attorney concerning how any of the issues addressed herein may apply to your own situation. Coverage Opinions is gluten free but may contain peanut products.

    Randy Maniloff is Counsel at White and Williams, LLP in Philadelphia. He previously served as a firm Partner for seven years and transitioned to a Counsel position to pursue certain writing projects including Coverage Opinions . Nonetheless he still maintains a full-time practice at the firm. Randy concentrates his practice in the representation of insurers in coverage disputes over primary and excess obligations under a host of policies, including commercial general liability and various professional liability policies, such as public official’s, law enforcement, educator’s, media, computer technology, architects and engineers, lawyers, real estate agents, community associations, environmental contractors, Indian tribes and several others. Randy has significant experience in coverage for environmental damage and toxic torts, liquor liability and construction defect, including additional insured and contractual indemnity issues. Randy is co-author of “General Liability Insurance Coverage - Key Issues In Every State” (Oxford University Press, 2nd Edition, 2012). For the past twelve years Randy has published a year-end article that addresses the ten most significant insurance coverage decisions of the year completed.

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