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November 10, 2016  

 Q&A of the Week
Employer May Be Held Liable for Death Due to Lack of Workers Comp Coverage

A Puerto Rico Subscriber asked the following question:

The insured is a supermarket that has a contract with an armored motor vehicle company for the transportation of cash deposits from the sales of the supermarket. The contract between them requires the following from the security company: first, they must supply a daily pickup for cash deposits from the supermarket to the bank. Secondly, the armored motor vehicle company is required to have a valid workers compensation policy during the time of the contract.
One of the security employees of the armored vehicle company was assaulted and killed in front of the insured supermarket. It was later found that the employer, the armored motor vehicle company, did not have an active workers compensation policy. The state workers compensation agency fined the armored motor vehicle company and allowed the family of the employee to collect benefits from the unpaid workers compensation policy. The state worker compensation agency described the insured supermarket as an "uninsured statutory employer" of the deceased employee.
The family of the security employee made a claim against the supermarket. Is this claim covered under the CGL policy of the supermarket (Form CG 00 01)? Do the workers comp and employer liability exclusions apply to this claim because of the definition of "uninsured statutory employer" by the state workers compensation agency?

ANSWER: The uninsured statutory employer designation does cause a problem. It is unclear from the policy language whether that distinction makes the insured the employer for insurance purposes or not. Reading the workers compensation exclusion and the employer liability exclusion in the CGL form, there most likely is not any coverage for this claim. The workers compensation exclusion applies to "any obligation of the insured under a workers compensation law or any similar law." And the employers liability exclusion applies whether the insured may be liable as an "employer or in any other capacity." Since there was no workers compensation coverage in place at the time of the accident by either employer, the workers compensation exclusion would not apply, but if the insured is liable because the state has declared it to be a statutory employer, that would be interpreted by the policy as "any similar law" and/or "in any other capacity," which would exclude coverage for this injury.
 Read More
 What's New This Week in FC&S
Opt-out Plans

Option or opt-out plans are an alternative to the workers compensation system. Read More
 Litigation Watch
Allocation of Loss Dispute

The insured pipeline company brought an action against excess liability insurers to recover remediation and settlement costs arising from a 1976 turbine fuel leak. This case is Columbia Casualty Company v. Plantation Pipe Line Company, 2016 WL 4548664.

In 1976, Plantation employees discovered that turbine fuel had leaked from an underground pipeline. Within 24 hours, Plantation repaired the pipeline, cleaned up the leak, and compensated the affected landowner. In 2007, an employee found contaminated soil during maintenance of a pipeline and this contamination was traced back to the 1976 leak. 
Read More
 Fraud of the Week
Agent Fraud – Maryland
AMOUNT: $630,000

An insurance agent in Germantown, Maryland, pled guilty to a scheme to submit fraudulent insurance applications using the identities of others to obtain over $630,000 of commission money. Read More
 FC&S Ask the Experts
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  Diane W. Richardson, CPCU
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