In DaSilva v. JDDM Enterprises LLC et. al., the Appellate Division for the Superior Court of New Jersey recently considered the interplay between worker’s compensation statutes and the common Workers’ Compensation Exclusion often present in contractor’s insurance policies.
The coverage action arose out of Utica Insurance Company’s disclaimer of coverage to JDDM, a general contractor insured by a Utica Contractor’s Special insurance policy. Plaintiff DaSilva, an employee of a JDDM subcontractor, sued JDDM for injuries he incurred on the construction site. His employer, the subcontractor, failed to obtain Worker’s Compensation insurance coverage, as it was required to do pursuant to the N.J. statute. JDDM tendered to Utica, and Utica disclaimed all coverage pursuant to the policy’s Workers’ Compensation Exclusion, which excluded coverage for all bodily injury if “benefits are provided or required to be provided by the insured under a workers’ compensation law.”
JDDM argued that the exclusion was ambiguous, and should be construed in favor of coverage given the unequal bargaining power between JDDM and Utica. The Court disagreed, holding the Workers’ Compensation Exclusion was unambiguous and Utica’s disclaimer was proper.
The Court found N.J. Statute 34:15-79(a) dispositive. This statute required any contractor who places work with a subcontractor, to obtain workers’ compensation coverage “in the event of the subcontractor’s failing to carry workers’ compensation insurance as required by this article.” Thus, the New Jersey regulation explicitly makes contractors liable for the workers’ compensation coverage that would otherwise be carried by their subcontractors, thus providing a powerful incentive for contractors to hire insured subs. Given this rule, the Court found that JDDM, as Utica’s insured, was plainly required by law to provide workers’ compensation, and thus the plain language of the Exclusion barred coverage.
The DaSilva case is a reminder to contractors in New Jersey to be mindful of workers’ compensation coverage to all subcontractors hired, given the ubiquity of the Workers’ Compensation Exclusion in insurance policies.
Thanks to Vivian Turetsky for her contribution to this post.