An agent insures a building landlord and also insures one of his tenants, an office. The tenant’s sole employee slipped on the premises outside the building and sprained her ankle. There is no workers compensation coverage. A medical payments claim was filed but was denied by the carrier, citing this exclusion:

Exclusions
We will not pay expenses for “bodily injury”:

a. Any Insured
     To any insured, except “volunteer workers”.

b. Hired Person
     To a person hired to do work for or on behalf of any insured or a tenant of any insured.

c. Injury On Normally Occupied Premises
     To a person injured on that part of premises you own or rent that the person normally occupies.

d. Workers Compensation And Similar Laws
     To a person, whether or not an “employee” of any insured, if benefits for the “bodily injury” are payable or must be provided under a workers’ compensation or disability benefits law or a similar law.

Inarguably, exclusions 2.a. and 2.d. do not apply. Exclusion 2.c. does not apply because the injury took place outside the tenant’s premises (“that part of premises you own or rent that the person normally occupies”). That leaves exclusion 2.b.:

b. Hired Person
     To a person hired to do work for or on behalf of any insured or tenant of any insured.

The carrier says that “Hired Person” includes both independent contractors hired by the tenant and employees since employees are “hired.” In discussing this with several coverage experts, the consensus was that “Hired Person” refers to independent contractors, but not employees. Reference to “employees” can be found throughout the policy, a fact that makes one wonder why “employee” was not included in the language above if the intent was to exclude them. For example, in the Who Is An Insured section and in the employers liability exclusion, where the policy means employee, it uses the word “employee.”

Also, the language says that the exclusion applies to a person “hired to DO work for” a tenant, not a person “hired to work for” a tenant, language one would expect to be used to identify an employee.

Unfortunately, to date the insurer has not backed off of its denial. In my book, “When Words Collide: Resolving Insurance Coverage and Claims Disputes,” I stress that the best way to avoid a claim dispute is to determine the meaning of policy language prior to loss. This involves READING the policy forms you sell or service, researching their meaning, and asking for clarification so it can be determined if an uninsured exposure exists that is insurable by a separate endorsement or policy form.

Do you read the policies you sell and service? Do you have a reasonably clear understanding of them? Have you contemplated likely claim scenarios to determine if the existing coverages are adequate for the needs of your customers. These are daunting tasks but by undertaking them, you place yourself far above other mainstream practitioners.

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Bill Wilson

Founder at InsuranceCommentary.com
One of the premier insurance educators in America on form, coverage, and technical issues; Founder and director of the Big “I” Virtual University; Retired Assoc. VP of Education and Research from Independent Insurance Agents & Brokers of America. Reprint Request Information

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