The “Employee Exclusion” found in many CGL policies has been upheld for some time in New York. Originally, it only applied to losses involving an employee of the named (or additional) insured, and over time the language was modified to extend the exclusion to claims involving anyone working on behalf or retained by the insured.
This modified language has also been upheld in New York, and recently, an Illinois federal court has recently followed New York courts in interpreting an Employee Exclusion in favor of the insurer. In Nautilus Ins. Co. v. Jona Enterprises, Inc., the insured, Jona, was a general contractor at a job site. Jona retained a subcontractor which in turn hired the injured worker.
The policy contained an Employee Exclusion that bars coverage for injuries to the insured’s employee, defined as “any person . . . hired by, loaned to, leased to, contracted for, or volunteering services to the insured, whether or not paid by the insured.”
The court followed New York’s Appellate Division and ruled that the injured worker was the insured’s employee because he was “contracted for” the insured to work at the job site even though he was not paid by the insured.