According to SIR, the appellate and trial courts had ignored the company’s focus on Hartford’s duty to defend SIR under the workers compensation part of the policy and narrowed its analysis to consider only the second part, employer’s liability. SIR also claimed the court had been wrong to dismiss the company’s motion to amend its complaint against Hartford.

Part 1 - Workers Compensation

The justices looked to Van Dunk v. Reckson Assocs. Realty Corp., 45 A.3d 965 (N.J. 2012), where the Supreme Court of New Jersey had found that an employer who “committed an exceptional wrong” was found grossly negligent did not necessarily commit an “intentional wrong” just because he was grossly negligent. The justices applied the same standard to Rodriguez’s allegations. Like the employer in Van Dunk, Rodriguez’s allegations of negligence, gross negligence, and recklessness did not automatically mean SIR had committed any intentional wrongs.

His claims of negligence, gross negligence, and recklessness were not “intentional wrongs” that could fall outside the scope of the Workers Compensation Act. The court said those claims were subject to workers compensation exclusivity. The court pointed out that Rodriguez had already received payment from Hartford for those benefits, and he was not seeking additional benefits in his suit against SIR.

Workers compensation benefits were awarded to employees injured on the job where “the actual or lawfully imputed negligence of the employer is the natural and proximate cause" (N.J.S.A. 34:15-1; emphasis added). The court pointed out that Rodriguez had already received workers compensation benefits from Hartford, and he was not seeking additional benefits in his suit against SIR. He wanted monetary compensation for the injuries he alleged were the result of SIR’s intentional conduct. Workers compensation covers workplace accidents, not intentional action. These allegations, therefore, were outside the scope of the state Workers Compensation Act. Since they were outside the scope of that Act, there was no way Hartford’s duty to defend could be triggered under Part 1 of SIR’s policy.

Part 2 - Employer’s Liability and the Enhanced Intentional Injury Exclusion

Where Part 1 of SIR’s policy covered workers compensation benefits, Part 2 covered the gap between it and the rare occasions when employees could file suit against their employers under an exception to workers compensation. SIR’s policy from Hartford provided coverage for “bodily injury by accident or bodily injury by disease” (emphasis omitted). Expressly excluded from Part 2 coverage were “any obligation imposed by a workers compensation…or any similar law” and “bodily injury intentionally caused or aggravated by [SIR]” (emphases omitted).

As previously stated, Hartford had fulfilled its obligation to Rodriguez concerning workers compensation benefits under Part 1 of the policy. The “enhanced intentional injury” (EII) exclusion endorsement expressly precluded coverage for “all intentional wrongs within the exception allowed by N.J.S.A. 34:15-8 including . . . bodily injury caused or aggravated by an intentional wrong . . . which is substantially certain to result in injury.” Though this endorsement appeared to close the matter, SIR had sought permission to add a claim that this endorsement went against public policy, which had been denied by the trial court as “futile,” which in turn was affirmed by the appellate court.

The Supreme Court of New Jersey agreed with the trial and appellate courts that allowing SIR to amend its complaint to add that claim would have made no difference because the EII exclusion did not go against public policy. The justices pointed to multiple insurance suits, some concerning the same EII exclusion, where judges had ruled an exclusion for intentional wrongdoing under an insurance policy was permissible. Therefore, the exclusion precluded coverage for Rodriguez’s non-negligence claims against SIR because they alleged intentional wrongdoing by SIR. Since the claims were not within the scope of coverage under the Employers Liability part of SIR’s policy, Hartford did not have a duty to defend.

The verdict of the trial and appellate courts was affirmed.

Editor’s Note: An insurer’s duty to defend its insureds is a bedrock principle of insurance law. Though it has a fairly broad scope, it is not unlimited. Insurers are only obligated to defend an insured if the claims against the insured could fall within the scope of coverage. If the claims are outside the scope of the insurance policy at issue, then the duty to defend is not triggered.

That is exactly what happened in this case. Rodriguez’s negligence-based claims had already been addressed by the workers compensation part of SIR’s policy, and were explicitly outside the scope of coverage for the employers liability part. His other claims alleged Sir had committed intentional wrongdoing, which was within the purview of a specific exclusion for intentional wrongs. There was no possibility that any of Rodriguez’s claims against SIR would be covered, so Hartford’s duty to defend was never triggered.

Read More:

Intentional Act Exclusion and Its Affect on the Duty to Defend

Expected or Intended

Did you Mean it or Not? The Intentional Acts Exclusion

Intentional Act and the Expected or Intended Injury Exclusion