Employee Exclusion Enforced in Montana
Barry Zalma, Esq., CFE
Insurance claims expert, consultant at Barry Zalma, Inc. and author/Publisher at ClaimSchool, Inc.
Clear & Unambiguous Exclusions Defeat Plaintiffs Claims
Posted on March 31, 2020 by Barry Zalma
Taking an assignment of a claim against an insurer for a defendant can be the only way to collect a judgment when then insurer refuses to pay for defense or indemnity. However, if the denial of coverage is fair and reasonable giving up the chance to collect from the tortfeasor is a waste of time and money.
In Nautilus Insurance Company v. Chad Michael Roan and Brittany Nichole Roan, CV 19-7-BLG-TJC, United States District Court For The District Of Montana Billings Division (March 26, 2020) Chad Michael Roan and Brittany Nichole Roan (collectively, “Roans”) learned that their chance of being paid was non-existent.
Because of the claim made by the Roans, Nautilus Insurance Company (“Nautilus”) sued the Roans seeking a declaratory judgment relating to insurance coverage obligations to the Roans and non-parties Dale Rambur and Rambur Construction (collectively, “Rambur”).
FACTUAL BACKGROUND
Dale Rambur and/or Rambur Construction hired employees through an employment agency, Advanced Employment Services, to work for Rambur Construction to reroof Rambur’s house. Defendant Chad Roan and three other workers from Advanced Employment began work on the project on June 9, 2016. Chad and the other workers took direction directly from Rambur’s foreman, Kurt Schultz. While rolling out roofing material, Chad stepped backward off the roof, fell approximately 15 feet to the ground, and sustained bodily injuries.
The Roans subsequently sued Rambur in Montana District Court alleging negligence, inherently dangerous activity, and loss of consortium. At the time of Chad’s accident, Nautilus insured Rambur Construction under a Commercial General Liability Policy, policy number NN679954 (“Policy”). Nautilus issued a denial of coverage to Rambur and informed Rambur that the Exclusion – Injury to Employees, Contractors, Volunteers and Other Workers endorsement eliminated a Rambur’s right to defense or indemnity.
The Roans and Rambur subsequently reached a settlement agreement on August 27, 2018, which allowed for entry of a stipulated judgment in the amount of $300,000 against Rambur. Essential to the stipulated judgment, however, was the agreement “that such judgment shall specifically provide it shall be collected only from the proceeds of insurance policies and insurance coverages applicable to Nautilus Insurance Company.” Judge Donald L. Harris held a reasonableness hearing on the stipulated judgment on February 13, 2019, and ordered the judgment be entered in favor of the Roans for the stipulated amount on May 7, 2019.
APPLICABLE LAW
The U.S. District Court concluded that it is well-settled in Montana that an insurer’s duty to defend arises when a complaint against an insured alleges facts, which if proved, would result in coverage. The fundamental protective purpose of an insurance policy, paired with the insurer’s obligation to provide a defense, require coverage exclusions to be narrowly construed. Therefore, the insurer must construe the factual assertions from the perspective of the insured. The insurer, however, has no obligation to look beyond the complaint in determining whether a claim is covered by a policy.
The duty to defend arises from the language of the policy. Without coverage under the policy terms, no duty exists. In Montana, the interpretation of an insurance contract is a question of law. A court interpreting an insurance policy is to read the policy as a whole and, to the extent possible, reconcile the policy’s various parts to give each meaning and effect. The terms and words used in an insurance policy are to be given their usual meaning and construed using common sense. Moreover, a court may not create an ambiguity where none exists, nor may a court rewrite an insurance policy by ignoring clear and unambiguous language to accomplish a good purpose.
DISCUSSION
The Policy contains an exclusion for injuries to employees, contractors, volunteers and other workers. This exclusion applies regardless of where the services are performed; or Bodily injury occurs; and whether any insured may be liable as an employer in any other capacity; and to any obligation to share damages with or repay someone else who must pay damages because of the injury.
Nautilus argued that the Roans’ claim unequivocally fell within this policy exclusion. Nautilus emphasized the Roans’ allegation that:
[Rambur] hired employees to work for [Rambur] construction company through an employment agency, Advanced Employment Services. Plaintiff Chad Roan was working as an employee for Advanced Employment Services. Defendant Dale Rambur retained the construction crew with employees hired through Advanced Employment. Nautilus also emphasized the Roans’ allegations that during this job all of the employees worked at the direction of Defendant Dale Rambur or his foreman Kurt Schultz, who told the employees from Advanced Employment how to do the job, provided all the equipment for the job, and directed all activities at the work site.
The Roans’ claim clearly falls with the exclusion for injuries to employees and other workers. The exclusion includes “leased workers,” which are defined under the Policy to mean “a person leased to you by a labor leasing firm under an agreement between you and the labor leasing firm to perform duties related to the conduct of your business.” The allegations of the underlying complaint falls squarely within that definition.
Even construing the Policy’s exclusions narrowly and strictly, as Montana law requires, the Roans’ claims fall within the Policy’s employee exclusion. The Policy was not issued to cover Rambur’s employees, contractors, or others working on Rambur’s behalf. It does, however, cover other third-party personal injury or property damage claims which do not fall within the employee exclusion. Therefore, the Court found that the Policy exclusion of bodily injury for varying types of workers does not render it illusory as the Roans’ claimed.
Plaintiff’s Motion for Summary Judgment was granted as to its claim for declaratory relief.
ZALMA OPINION
Rambur made a great deal with the Roans. The $300,000 judgment could only be paid from Rambur’s insurer who owed neither defense nor indemnity. The judgment, therefore, is nothing more than a piece of paper that has no value. If Rambur had no assets to execute upon, the deal made sense. If it had any assets, the deal was not logical. It is essential that parties, before entering into such a deal, where the plaintiffs promise not to execute against the tortfeasor, should never be entered into without first thoroughly investigating the assets of the defendant and its ability to collect on the judgment and if not, then carefully review the available insurance coverages.
? 2020 – Barry Zalma
This article, and all of the blog posts on this site, digest and summarize cases published by courts of the various states and the United States. The court decisions have been modified from the actual language of the court decisions, were condensed for ease of reading, and convey the opinions of the author regarding each case.
Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at https://www.zalma.com and [email protected].
Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.
Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.
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