Evanston informed Hastings that its request was barred by the policy's employer's liability exclusion.

Hastings responded, challenging Evanston's determination. It then filed an action against Evanston seeking a declaratory judgment that Evanston was obligated to defend and indemnify it in the Cohen suit. Evanston moved to dismiss, and Hastings cross-moved for summary judgment.

The U.S. District Court for the Eastern District of New York held that the employer's liability exclusion did not bar Hastings' request for coverage and that Hastings was entitled to indemnification in the Cohen action.

Evanston appealed to the Second Circuit, where the parties disputed whether Mr. Cohen was “an employee of the Named Insured” under the exclusion.

Evanston relied on Certified Multi-Media Solutions, Ltd. v. Preferred Contractors Ins. Co. Risk Retention Grp., LLC, 674 Fed. Appx. 45 (2d Cir. 2017) (summary order) to support its argument that the “Named Insured” language in its policy included all parties listed as “Named Insureds.” It also sought to rely on Endurance Am. Specialty Ins. Co. v. Century Surety Co., 630 Fed. App'x 6 (2d Cir. 2015) (summary order), which it asserted held that the “Named Insured” policy language unambiguously referred to all of the policy's listed “Named Insureds.” Evanston further maintained that the broad definition of “employee” under the employer's liability exclusion supported its contention that the exclusion barred coverage for injured employees of all the listed “Named Insureds.”

For its part, Hastings argued that the policy's specific use of “the Named Insured,” as opposed to “a Named Insured,” “any Named Insured,” or “any Insured,” distinguished the cases Evanston relied on. In addition, Hastings maintained that the policy's “Separation of Insureds” provision required that “the Named Insured” language of the employer's liability exclusion should be read “[a]s if each Named Insured were the only Named Insured; and separately to each insured against whom claim is made or 'suit' is brought.” Based on the “Separation of Insureds” provision and because Hastings was the only insured party seeking coverage, Hastings asserted that it “must be treated as the only 'Named Insured' for the purpose of interpreting the Employers Liability Exclusion.”

The Evanston Policy

The Evanston policy provided:

It is hereby understood and agreed that:

This insurance does not apply to any claim, suit, cost or expense arising out of bodily injury to

(1) an employee of the Named Insured arising out of and in the course of employment by any Insured, or while performing duties related to the conduct of the Insured's business, or

(2) the spouse, child, parent, brother, sister or relative of that employee as a consequence of (1).

. . .

Wherever the word employee appears above, it shall also mean any member, associate, leased worker, temporary worker of, or any person or persons loaned to or volunteering services to, any Named Insured.

(Emphasis added.) 

The Second Circuit's Decision

The circuit court ruled that the employer's liability exclusion was ambiguous and did not bar coverage.

In its decision, the circuit court found that there was an ambiguity in the policy language as to whether the employer's liability exclusion barred coverage for Hastings. The circuit court reasoned that a “fair reading” of the exclusion might only exclude coverage for injuries to “an employee of the Named Insured,” and in light of the separation of insureds clause, “the Named Insured” was Hastings.

On the other hand, it continued, “another reasonable reading” of the exclusion, proposed by Evanston, was that “an employee of the Named Insured” could refer to employees of any of the policy's listed “Named Insureds” given the exclusion's broad definition of “employee.”

Because the policy language was ambiguous and could support either party's interpretation, that ambiguity required it to construe the policy language in Hasting's favor, the Second Circuit said. It then concluded that, as a matter of law, the employer's liability exclusion did not bar coverage, and the district court had properly denied Evanston's motion to dismiss and granted Hastings' motion for summary judgment on this issue.

The case is Hastings Development, LLC v. Evanston Ins. Co., Nos. 15-3816, 15-4085 (2d Cir. July 10, 2017). Attorneys involved include: For Appellant: ERIC DAVID SUBEN, Meryl Lieberman, Traub Lieberman Straus & Shrewsberry LLP, Hawthorne, NY. For Appellee: STEVEN D. JANNACE, Simmons Jannace DeLuca, LLP, Hauppauge, NY.