New York's 'Scaffold Law" and a Temporary Worker Exclusion

Question from an IIABNY member: I am looking to you to help clarify a question I have regarding a “temporary worker” exclusion currently attached to one of my clients policies, attached is a copy for your reference.
 
My insured’s policy is written without a “labor law” or “employee injury” exclusion which she paid a lot more for and is very important because she is a “sub-contractor” for many large companies and signs many project contracts.   At the time the policy was written the attached “temporary employee” exclusion did not seem to present too much of an issue because the insured did not anticipate any time that she would need to hire a temporary employee, that is until now.    So a few days ago my insured sent me the attached labor firm contract asking me for a certificate of insurance so I immediately went to the carrier for information pertaining to this “temporary employee” exclusion currently on the policy and below is the email thread for your reading pleasure.

 
In your opinion if the insured does proceed with this labor firm and takes on 2 people to help her out now that she is busier than she thought  will she have a gap in coverage if a labor law or third party over action suit would come up or would the labor firm be held responsible since technically they are not her employees?   Attached is the labor firm contract for your reference.

Answer: This endorsement excludes Labor Law claims and other injury claims involving temporary workers.

NY Labor Law Sections 240(1) and 241(6) apply to owners, contractors and their agents (i.e., those who have the authority to hire subcontractors and to direct and control the work.) These entities must provide certain devices to workers engaged in certain specific activities, and the devices must provide “proper protection” to the workers. If a worker’s injury is caused at least in part because a device did not provide proper protection, the entities are legally liable; the worker does not have to prove they were negligent.

While the law does not permit these entities to delegate the legal responsibility for compliance, the entities may transfer the financial responsibility for violations. Typically, they do this by requiring downstream parties to name them as additional insureds under the downstream parties’ CGL polices and/or requiring them to sign hold harmless agreements. This is how an injury to one of the named insured’s employees gets covered by the CGL – the additional insured seeks coverage, and the employers’ liability exclusion does not apply because the injured person is not an employee of the additional insured.

The endorsement on your client’s policy says:

“This insurance does not apply to ‘bodily injury’ or ‘personal and advertising injury’ to any:

1. ‘Temporary worker’;…

For the purposes of this endorsement only, ‘temporary worker’ means:

A person who is furnished to any insured to substitute for a permanent ‘employee’ on leave or to meet seasonal or short-term workload conditions; however, ‘temporary worker’ does not include a person who is furnished to any insured by a labor union to substitute for a permanent ‘employee’ on leave or to meet seasonal or short-term workload conditions.”

A temporary worker is one furnished to any insured (named insured or otherwise), and the exclusion applies to any temporary worker. It’s interesting to contrast this with the employers’ liability exclusion in the ISO CGL policy:

This insurance does not apply to: …

"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 exclusion does not apply to liability assumed by the insured under an "insured contract".

This exclusion does not apply in most scaffold law cases because 1) the injured employee is not an employee of the insured (the owner or GC), and 2) the exclusion does not apply to liability assumed under an insured contract (the hold harmless agreement).

The endorsement on this policy concerns me because it applies to injury to any temporary worker, not just a temporary worker of “the insured.” Suppose a temp gets hurt on the job and sues the GC. The GC is an additional insured under the employer’s CGL policy. The GC submits the claim to the insurer. The insurer cites the endorsement – “insurance does not apply to bodily injury to any temporary worker” (unless furnished by a union.) Any means any. Also, note that the endorsement does not include an exception for liability assumed under an insured contract. Essentially, if a temp worker gets hurt and sues any of the insureds, there is no coverage.

I agree with the underwriter’s statement that this is not a Labor Law exclusion – it applies to injuries arising out of ordinary negligence, too. It’s not limited to Labor Law. However, in my opinion it would certainly exclude coverage for any scaffold law claims involving a temp. 

Comments

[Chaim Goldberger]

Not so simple

ISO CG 00 01 10/01 and other similar forms have the following wording added to the "employer's exclusion"

This exclusion applies:
(1) Whether the insured may be liable as an
employer or in any other capacity

"any other capacity" easily includes employees of subs, etc. how else can an insured be "any other capacity" to "his employee" ? is it if they got injured in the weekend (at the job-site) while not at work?

[Tim Dodge]

Chaim,

I see what you're saying. However, I found this excerpt in the International Risk Management Institute's *Commercial Liability Insurance* manual:

"The wording of the exclusion is expanded from the text contained in earlier CGL policies—that is, those used before the 1986 CGL program, to clarify that the exclusion applies whether the insured is liable as an employer or in any other capacity. As a result of this expansion, the exclusion eliminates coverage for claims made by the insured's employees under the "dual capacity doctrine" or so-called consequential bodily injury claims made by a member of an injured employee's family. The employers liability coverage of the National Council on Compensation Insurance (NCCI) workers compensation policy specifically covers dual capacity and consequential bodily injury, and the additional exclusionary wording first incorporated into the 1986 CGL coverage form is intended to eliminate overlaps between the two policies.

Dual capacity suits attempt to circumvent the exclusive remedy doctrine in most state workers compensation laws by alleging that the employee's injuries resulted not from the employer-employee relationship, but from some other relationship with the employer. For example, an employer may be held liable as the manufacturer of a product (a truck driver for a tire manufacturer is injured when one of the truck tires—manufactured by the employer—blows out) or merely as the owner of premises (a worker is injured because the employer's building is negligently maintained). In a consequential bodily injury suit, a member of an injured employee's family allegedly suffers bodily injury as a result of the employee's injury (e.g., a spouse suffers a heart attack upon learning of the employee's fatal injury).

The dual capacity language of the exclusion is occasionally misunderstood as extending the exclusion's scope to insureds other than a named insured employer when that other insured causes bodily injury to one of the named insured's employees. For example, the exclusion is sometimes invoked when an additional insured vendor under a manufacturer's CGL policy, or an additional insured contractor under a subcontractor's policy, becomes responsible for injury to the manufacturer's or subcontractor's employee. By itself, the dual language clause—"whether the insured may be liable as an employer or in any other capacity"—can be interpreted to mean "whether the insured is the injured person's employer or not." Under such a reading, the additional insured has no coverage for injury to the named insured's employee injured in the course of employment.

But such an interpretation fails to take into account the opening language of the exclusion, which limits its applicability to injury to an employee of "the insured." The term "the insured" has been widely held by the courts—and is generally understood by the insurance industry itself—to be a reference to the insured against whom a claim has been made and who is seeking coverage under the policy. (See the discussion later in this annotation of the importance of the separation of insureds principle to the applicability of the employers liability exclusion.) This point is seldom misunderstood in and of itself, but sometimes becomes confused when the dual capacity language is taken out of the context of the rest of the exclusion. "Liable as an employer or in any other capacity" still refers only to the insured who is the employer of the injured employee, but who may also have a liability exposure connected to some additional relationship with the employee."

This discussion clearly indicates that the exclusion is not intended to apply to subcontracting situations.