Employee Exclusion Ambiguous? Sometimes. (NY)

In Essex Ins. Co. v. George E. Vickers, Jr. Enterprises Inc., the insurer sought a declaration that it was not obligated to defend or indemnify its insured or the owner of a construction project for an incident involving one of a subcontractor’s employees.

The incident involved Miguel Pinon, an employee of Paul Michael Contracting, which was hired by George Vickers, the insured general contractor. On June 25, 2005, Pinon, while on his lunch break at a beach not far from the construction site, dove into the water and broke his neck. The Workers’ Compensation Board denied Pinon benefits on the basis that the accident did not occur in the course of his employment.

After Pinon sued, Vickers and Lynn sought indemnification and defense from Essex, who disclaimed on the basis that even though Pinon was not injured during the course of his employment, the employee exclusion still barred coverage. In opposition to plaintiff’s motion for summary judgment, Vickers and Lynn argued that the word “employee” in this context was ambiguous because the policy did not define “employee” and that it was open to interpretation as to whether the parties intended for a worker acting outside the scope of his employment to be considered an “employee” within the meaning of the employee exclusion. The Supreme Court agreed with the insured and proerty owner and denied the insurer’s motion. The Second Department affirmed.

Another issue that arose during the case was whether the property owner had been named an additional insured on Vickers’ policy. Vickers purchased a commercial liability policy from plaintiff ending March 25, 2004. Lynn was named as an additional insured on that policy. However, the renewal quotation for the policy beginning on March 26, 2004, stated “no additional insureds.” In the insurance application to renew the policy for 2005 to 2006, Vickers listed Lynn as an additional insured. However, the renewal quotation for that coverage period stated that the quote included “NO AI’s.”

The property owner moved for reform of the policy to add them as additional insureds based on mutual mistake. They argued that Vickers included them as additional insureds on the application for 2005-2006, that plaintiff did not refuse the request, and that plaintiff had previously granted Vickers’ request to add Lynn as additional insureds on the 2003-2004 policy. Once again, the Supreme Court and Second Department agreed with Lynn, the property owner, and granted their request for reformation.

Special thanks to Gabriel E. Darwick for his contribution.  For more information, contact Denise Fontana Ricci at dricci@wcmlaw.com.