Watch the full video at https://rumble.com/v23v33u-employment-exclusion-effective.html and at https://youtu.be/siX4bBOz954
To enforce coverage under an errors and omissions policy, Roadway Services, Inc. sued its insurer, Travelers Casualty and Surety Company of America to defend a wrongful death case, alleging that Roadway failed to provide a safe workplace for the deceased . Travelers argued that it has no obligation to cover Roadway’s claims because of clear and unambiguous exclusions. IN Roadway Services, Inc. v. Travelers Casualty And Surety Company Of America, No. 22-3337, United States Court of Appeals, Sixth Circuit (December 29, 2022), the Sixth Circuit resolved the dispute.
FACTS
In 2018, a driver struck and killed a highway employee while he was on the job. His widow sued Roadway for wrongful death, alleging it failed to maintain safe working conditions. Roadway did not seek coverage under its workers’ liability insurance contract. Instead, it asked Travelers to pay for its defense through a directors and officers insurance policy. Travelers refused, citing an exception to the policy. Roadway sued to compel coverage. Both parties moved for summary judgment, and the district court, finding the policy ambiguous, ruled for Roadway. Travelers appealed.
THE INSURANCE POLICE
Under Ohio law, an insurance policy is generally interpreted like any other contract. Special provisions regulate more general ones.
Roadway’s policy covers Roadway’s directors and officers and the cost of replacing them by Roadway itself. It insures Roadway for losses “in consequence of all claims” made during the policy period. However, the policy also contains a relevant exception. Exclusion A.13(d) provides that “solely with respect to insurance contract C.” Travelers will “not be liable for loss for any claim . . . based on or arising out of any employment-related wrongful act.”
ANALYSIS
The employment-related wrongful act exclusion bars Roadway’s claim because the wrongful death suit involves what the parties agree qualifies as an employment-related wrongful act – Roadway’s alleged failure to maintain safe working conditions. Exclusion A.13(d), clearly and unambiguously eliminated coverage of Roadway’s losses from the wrongful death suit.
Roadway’s arguments otherwise were unconvincing. Because of Roadway’s alleged failure to maintain safe working conditions, its employee would not have died, and his widow would not have suffered mental anguish and sued. Thus, the losses arose out of Roadway’s wrongful act, and exception A.13(d) applies.
A claim can both “arise out of” a wrongful act and be a claim for damages brought “in respect of” the act. Nothing in the insurance agreement indicated that the drafters intended to give the terms anything other than their plain meaning, although the meanings include some overlap.
The Sixth Circuit concluded that there is no conflict between these two exclusions, nor are the exclusions ambiguous. The district court’s judgment was therefore annulled and the case was remanded with instructions to rule for Travelers on the coverage claim.
When an employee dies on the job, the only remedy available to the heirs is the workers’ compensation scheme. To obtain a larger recovery, the decedent’s spouse filed a wrongful death action alleging that the employer was negligent for failing to provide the decedent with a safe workplace. Roadway had employers’ liability insurance but chose to claim on an E&O policy only to find that a clear and unambiguous exclusion barred their claim. Why they did not require that the claimant spouse be limited to workers’ compensation was not revealed by the appellate decision. Roadway sought coverage under an insurance policy that was not designed to cover an employee wrongful death claim and, as a result, lost its defense and indemnification claim,
(c) 2023 Barry Zalma & ClaimSchool, Inc.
Subscribe and receive videos limited to Excellence in Claims Handling subscribers at locals.com https://zalmaoninsurance.locals.com/subscribe.
Go to substack at substack.com/refer/barryzalma Consider subscribing to my publications on substack at substack.com/refer/barryzalma
Barry Zalma, Esq., CFE, now limits his practice to serving as an insurance consultant specializing in insurance coverage, insurance claims management, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims attorney and more than 54 years in the insurance industry. He can be reached at http://www.zalma.com and zalma@zalma.com
Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published on https://zalma.substack.com. Go to the Zalma On Insurance podcast at https://anchor.fm/barry-zalma; Follow Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos on Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to Insurance Claims Library – https://zalma.com/blog/insurance-claims-library
