Q

I handle the insurance for a construction company that is negotiating a construction contract with a landowner. The landowner's risk manager has asked that my client, the contractor, delete the co-employee exclusion from its CGL policy. The landowner also is requiring additional insured status on my client's policy.

The additional insured requirement is very common, but I'm not sure why the co-employee exclusion should be deleted. Please explain.

New York Subscriber

A

The co-employee exclusion on the standard CGL form is situated in the who is an insured section. Employees of the named insured are considered insureds under the policy, except for certain situations. Among them is the fact that employees are not insureds for bodily injury or personal and advertising injury they do to their co-employees in the course of business. There is no coverage under the CGL policy for the employee that causes injury to another of the employees.

This exclusion is intended to illustrate that employees do not have access to their employer's liability insurance to defend them should they injure a co-employee. However, this may lead the landowner's risk manager to believe that his employer, as landowner, could be sued by a contractor's employee who is injured by a co-worker. The landowner's risk manager may want to be sure that injured employees of the contractor have direct recourse to the insurance of the contractor. Even though most contractors carry workers compensation insurance that would apply to the situation, the risk manager is trying to plan ahead for situations in which that is not the case, or in which a court permits the injured employee to sue for negligence.

The additional insured endorsement for owners, lessees, or contractors (CG 20 10 07 04) includes the person or organization shown in the endorsement as an insured with respect to liability arising out of the contractor's on-going operations. It does not automatically make the employees of the landowner co-employees with those of the contractor. However, some risk managers might fear that it could be interpreted that way, making the employees of each company co-employees for purposes of the exclusion.

Many risk managers believe this is an important coverage gap and want to be sure the exclusion is deleted in all applicable policies. However, underwriters may be hesitant to delete the exclusion because they believe workers compensation coverage should be the sole remedy for employee injuries.