Insurance Law

Is That Covered? "Additional Insured" Coverage for Claims Brought by Employees of Named Insured

By Michael R. Kelley

Consider this common scenario: Big Shopping Mall owns the local shopping development and leases stores to multiple tenants, including the Popular Chain Restaurant. An employee of the Popular Chain Restaurant, Bob Suzealot, slips, falls and is injured while helping to unload frozen chicken in the restaurant. Suzealot can't sue the Popular Chain Restaurant because such a claim is barred by the Worker's Compensation Statute. But, Bob's enterprising attorney recommends that Bob sues Big Shopping Mall instead.

Big Shopping Mall has good lawyers who have prepared for these types of claims and drafted leases for all of the tenants of the Mall that require the tenants to add Big Shopping Mall to the tenant's commercial liability policy as an "additional insured." That means that if the Mall is sued by a third party for a claim arising at a tenant's store, the Mall is protected by the tenant's insurance coverage.

So far so good for Big Shopping Mall.

But, it turns out, the tenant's insurance company denies coverage to Big Shopping Mall on the basis of the "Employer's Liability" exclusion, commonly found in commercial liability policies, which excludes claims brought by employees of an "insured." Since Suzealot is an employee of the insured Big Chain Restaurant, the insurance company concludes that the exclusion applies to all insureds, including additional insureds like the Mall.

Can the insurance company deny coverage on this basis?

According to a 1967 Pennsylvania Supreme Court case, the answer is YES, [enhanced version available to lexis.com subscribers]! But, according to a recent Superior Court case, the answer is NO, [enhanced version available to lexis.com subscribers]. There is a real conflict in the law on this important issue. The good news is that the Pennsylvania Supreme Court has agreed to hear the appeal and we should have clarity in the next 6-12 months.

The even better news is that Big Shopping Mall can add language to all of its tenant leases to completely avoid application of the Employer's liability exclusion. Please let me know if you or your client would like to discuss the indemnity language that eliminates this insurance coverage issue


The McNees Insurance Recovery & Counseling Group helps clients understand their insurance coverage, submit claims and, where appropriate, sues insurance companies for failing to honor legitimate claims.


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