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Claims that Fall Under Employers Liability/Part B Coverage

By on March 29, 2018 in Liability with 0 Comments

Employers Liability insurance coverage is a “gap filler” coverage, providing protection to employers in situations where an injured employee has the right to bring a civil tort action for damages despite the provisions of the New Jersey workers’ compensation statute. Although N.J.S.A. 34:15-8 makes workers’ compensation the “exclusive remedy” for an injured employee, in which the injury arises out of and in the course of his/her employment, there are situations in which an employee can still sue his/her employer in a civil action for a bodily injury. What are those types of claims? Are they covered by an Employers Liability insurance policy?

The following are claims that an employee may bring in a civil action against his/her employer, which may be subject to coverage under an Employers Liability policy:

  1. Claims by a minor. Pursuant to N.J.S.A. 34:5-10, a minor may file a civil claim against his/her employer, even if he/she has collected workers’ compensation benefits. The minor is not barred from filing either a civil claim or a workers’ compensation claim until an adjudication is made in one of the two venues through a judgment or an order. At that point, there is an “election of remedies.” Pappano v. ShopRite of Pennington, Inc., 213 N.J. Super. 305 (App. Div. 1986). The civil suit would be covered by an Employers Liability policy.
  2. Employment Discrimination case in which a bodily injury is pled. The case of Schmidt v. Smith, 155 N.J. 44 (1998) involved a sexual harassment claim against an employer, in which the employee claimed to have suffered a bodily injury. The New Jersey Supreme Court found that insurance coverage existed under the employer’s liability section of a workers’ compensation policy for claims of workplace sexual harassment when the harassment resulted in a bodily injury. The Court found unenforceable the C7 exclusion in the policy that excluded claims for damages arising out of discrimination. The Supreme Court ruled that the exclusion was inapplicable because it would prevent an employer from complying with N.J.S.A. 34:15-72, which requires an employer “to obtain sufficient coverage for the payment of any obligation it might incur on account of bodily injuries to an employee.”
  3. Claims filed against an employer based upon a negligence cause of action. Sometimes a negligence claim is filed against an employer, typically because the plaintiff’s attorney did not realize that the defendant was the plaintiff’s employer or it could be a special employer situation in which the employee has more than one “employer” for purposes of the Workers’ Compensation Act. While these claims lack merit from a substantive standpoint, they would be covered under an Employers Liability policy.
  4. Claims filed against the employer for discovery purposes. Employers may be named by a plaintiff for the purposes of facilitating discovery in a civil suit brought against other parties. Naming the employer as a defendant permits the employee to obtain information and/or testimony from the employer without the necessity of a subpoena. New Jersey case law does permit the employer to be named for this limited purpose. However, it is not a substantive claim for damages against the employer. The employer would be entitled to a defense under an Employers Liability policy for such a claim.
  5. Intentional Act exception claim. This type of claim is the much dicier claim in determining if coverage exists and will depend upon the language of the policy. In Charles Beseler Co. v. O’Gorman & Young, Inc., 188 N.J. 542 (2006), the employer sought coverage with its insurance carrier for a civil claim that an employee brought against it under the intentional act exception of the Workers’ Compensation Act. Pursuant to N.J.S.A. 34:15-8, workers’ compensation is not the exclusive remedy for an injured employee if the injury or death occurred due to the “intentional wrong” of the employer. In that scenario, the employee is permitted to pursue a civil claim for damages against his/her employer.

In Beseler, the insurance carrier relied upon the C5 exclusion in its Employers Liability policy which excluded claims for “[b]odily injury intentionally caused or aggravated by you.” The Supreme Court ruled that there was a difference between a subjective intent to cause injury and a substantial certainty to cause injury (the latter is the standard to prove an intentional wrong had been committed). The Court found that the C5 provision did not unambiguously exclude claims that fell under this substantial certainty standard and, hence, found insurance coverage to exist for this intentional act exception claim filed by the employee.

Post Beseler, however, the insurance industry tightened up Exclusion C5 and most policies in New Jersey will contain the newer version of C5 which does specifically exclude claims based upon this substantial certainty standard. Hence, these policies with the new C5 language do now unambiguously exclude an intentional act exception claim.

Does that mean that there will be no coverage for an intentional act exception claim?

The answer is that it depends on several factors:

Are there are claims pled that would be covered (such as a negligence claim)?

What C5 exclusion language does the policy include – the “new” broader language or the older language?

Will the courts uphold the “new” language in light of the Supreme Court’s edict in Schmidt v. Smith that employers must have insurance to cover all work-related bodily injuries asserted in a common law action under N.J.S.A. 34:15-72? If this intentional act exception claim is not covered by the Employers Liability policy, that leaves this type of claim uninsured, which would prevent the employer from complying with its obligation to obtain insurance for such a claim under N.J.S.A. 34:15-72. No reported case has yet tested the validity of this exclusion that was created post Beseler in light of the Schmidt rationale of requiring the employer to have insurance for common law work related injuries. Until it is tested in the courts, there remains some uncertainty whether the “new” language would be found enforceable.

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Betsy G. Ramos

About the Author

About the Author:

Ms. Ramos is an Executive Committee Member and Co-Chair of the Litigation Department at Capehart Scatchard, P.A. located in Mount Laurel, New Jersey. She is an experienced litigator with over 25 years experience handling diverse matters. Practice areas include tort defense, business litigation, estate litigation, tort claims and civil rights defense, construction litigation, insurance coverage, employment litigation, shareholder disputes, and general litigation.

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