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November 10, 2016  

 Q&A of the Week
Employer May Be Held Liable for Death Due to Lack of Workers Comp Coverage

A Puerto Rico Subscriber asked the following question:

The insured is a supermarket that has a contract with an armored motor vehicle company for the transportation of cash deposits from the sales of the supermarket. The contract between them requires the following from the security company: first, they must supply a daily pickup for cash deposits from the supermarket to the bank. Secondly, the armored motor vehicle company is required to have a valid workers compensation policy during the time of the contract.
One of the security employees of the armored vehicle company was assaulted and killed in front of the insured supermarket. It was later found that the employer, the armored motor vehicle company, did not have an active workers compensation policy. The state workers compensation agency fined the armored motor vehicle company and allowed the family of the employee to collect benefits from the unpaid workers compensation policy. The state worker compensation agency described the insured supermarket as an "uninsured statutory employer" of the deceased employee.
The family of the security employee made a claim against the supermarket. Is this claim covered under the CGL policy of the supermarket (Form CG 00 01)? Do the workers comp and employer liability exclusions apply to this claim because of the definition of "uninsured statutory employer" by the state workers compensation agency?

ANSWER: The uninsured statutory employer designation does cause a problem. It is unclear from the policy language whether that distinction makes the insured the employer for insurance purposes or not. Reading the workers compensation exclusion and the employer liability exclusion in the CGL form, there most likely is not any coverage for this claim. The workers compensation exclusion applies to "any obligation of the insured under a workers compensation law or any similar law." And the employers liability exclusion applies whether the insured may be liable as an "employer or in any other capacity." Since there was no workers compensation coverage in place at the time of the accident by either employer, the workers compensation exclusion would not apply, but if the insured is liable because the state has declared it to be a statutory employer, that would be interpreted by the policy as "any similar law" and/or "in any other capacity," which would exclude coverage for this injury.
 Litigation Watch
Allocation of Loss Dispute

The insured pipeline company brought an action against excess liability insurers to recover remediation and settlement costs arising from a 1976 turbine fuel leak. This case is Columbia Casualty Company v. Plantation Pipe Line Company, 2016 WL 4548664.

In 1976, Plantation employees discovered that turbine fuel had leaked from an underground pipeline. Within 24 hours, Plantation repaired the pipeline, cleaned up the leak, and compensated the affected landowner. In 2007, an employee found contaminated soil during maintenance of a pipeline and this contamination was traced back to the 1976 leak.

Plantation had primary insurance through American Reinsurance Company and excess liability coverage with Columbia Casualty. The excess policy limits were $2 million. Plantation filed an action in 2012 seeking recovery for amounts it spent to settle third party claims and for remediation costs. Columbia contended that its policy was not triggered by the claims at issue here. The Superior Court, Fulton County, entered summary judgment in favor of the insured and this appeal followed.

The Court of Appeals of Georgia noted the insurer's argument that the environmental contamination caused by the occurrence in 1976 continued to unfold as the quantity of pollutant that Plantation failed to clean up in 1976 migrated downward through the soil and formed a plume in the water table. Columbia argued that because of the progressive nature of environmental contamination, the resulting injury overlaps multiple successive insurance policy periods, and so, multiple successive insurance policies were potentially triggered. This means that the losses claimed by Plantation should be allocated among those multiple policies. Columbia contended that the continuous trigger theory should be adopted since the losses took place over three decades and thus, the claims should be allocated pro rata among each successive policy period from 1976 to 2007.

The court said that even if it were to adopt the continuous trigger theory, the application of the theory is premised on the assumption that the Columbia policy contains language that limits coverage to property damage that takes place during the policy period. However, the court pointed out, the Columbia policy did not provide that the policy applies to property damage that occurs during the policy period; instead, the policy provides that it applies to occurrences taking place during the policy period. The court said this means it is presented with a policy that by its plain terms covers property damage caused by an occurrence, provided the occurrence takes place during the policy period and provided the insured's losses exceed the attachment point of the policy. The court found that there was no dispute that an occurrence took place during Columbia's policy period, that property damage occurred as a result of that occurrence, and that the insured's losses exceeded the $2 million attachment point of Columbia's excess policy.

The court affirmed the ruling of the trial court and held that the Columbia policy that applied to occurrences taking place during the policy period provided coverage without allocation to successive policies.

(As a side note, Columbia contended that the known loss doctrine applied but the court said that the doctrine is not the law of Georgia.)

Editor's Note: The Court of Appeals of Georgia rules that policy language prevents the allocation of loss in this instance. The court said that the insurer could have drafted language in the policy to limit coverage to occurrences taking place during the policy period to the extent of injury taking place during the policy period. The insurer did not do this and so, allocation was not granted.
 Fraud of the Week
Agent Fraud – Maryland
AMOUNT: $630,000

An insurance agent in Germantown, Maryland, pled guilty to a scheme to submit fraudulent insurance applications using the identities of others to obtain over $630,000 of commission money. In 2011 the agent was licensed to sell insurance in Maryland and soon after began working for an insurance company. This company provided agents with advance commission payments of half of the total commission when a new application was submitted to the company. The agent admitted to electronically submitting over 3,100 fraudulent insurance applications under her name and license number and using the names and license numbers of other individuals in order to receive advance commissions. Over 1,400 applications for over 300 fictitious applicants and more than 1,700 applications for more than 350 real applicants were fraudulently filed. The real individuals were neither eligible for the policies, nor were they aware that any policies had been filed in their names.

The agent was either granted access, or stole access, to her family members' bank accounts in order to withdraw advance commission deposits that were made on the fraudulent policies submitted under the names of those family members in order to withdraw the payments before they realized the money had been deposited in their accounts. The agent is required to pay back the outrageous amount of $630,278.12, the amount of loss attributed to her during the conspiracy, and faces a maximum of twenty years in prison.
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