Question from an IIABNY member: Many GL forms no longer have the fellow employee exclusion, but if they did, what is the significance of removing it? For example, if an employee was hurt by a product and sued a third party manufacturer, who brought back in the employer and another employee, alleging an affirmative negligent act by the employee (i.e., purposely broke the machine, etc.), would this exclusion preclude coverage? But, in many cases in third party over claims, an insured (employee) does indirectly bring a suit against an employer (insured). Is this covered under common law liability, i.e., an insured suing another insured?
Answer: The CGL’s “Who Is An Insured” section states:
2. Each of the following is also an insured:
a. Your…"employees", other than either your "executive officers" (if you are an organization other than a partnership, joint venture or limited liability company) or your managers (if you are a limited liability company), but only for acts within the scope of their employment by you or while performing duties related to the conduct of your business. However, none of these "employees"…are insureds for:
(1) "Bodily injury" or "personal and advertising injury":
(a) To you, to your partners or members (if you are a partnership or joint venture), to your members (if you are a limited liability company), to a co-"employee" while in the course of his or her employment or performing duties related to the conduct of your business, or to your other "volunteer workers" while performing duties related to the conduct of your business;
Therefore, the policy does not cover an employee for his liability for an injury suffered by a co-employee who was in the course of his employment or performing duties related to the conduct of the named insured’s business. The example I think of, because I’ve seen it in dozens of bad comedies: A guy carrying a stack of lumber on his shoulder hears his name called, so he turns around quickly and knocks a co-worker out cold. Under the unendorsed CGL, if the co-worker sued the guy with the lumber for his injuries, the CGL would not defend and indemnify the guy. If the insurer modifies the policy to remove this exception to “who is an insured,” the lumber guy might have coverage. The insurer might try to apply the Employers Liability Exclusion (Exclusion e.). However, I suspect that a claim denial based on this exclusion would not succeed. It precludes coverage for:
"Bodily injury" to:
(1) An "employee" of the insured arising out of and in the course of:
(a) Employment by the insured; or
(b) Performing duties related to the conduct of the insured's business;
This implies that the exclusion would not apply to an employee who injures another employee, since the injured employee does not work for the other (it would apply to a sole proprietor who injures an employee.) Therefore, with the “Who Is An Insured” section modified and under this interpretation, our klutz with the lumber would have coverage when his colleague comes to.
Under your example, I don’t think the employee who broke the machine would have coverage. The policy provision says, “None of these ‘employees’ are insureds for…’bodily injury’… to a co-‘employee’ while in the course of his or her employment or performing duties related to the conduct of your business…” If the subject of the claim is an injury to another employee, the first employee does not have insured status, whether it’s a third party action claim or not.