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Employers Liability Coverage: Exploring Coverage for Employee Tort Claims Alleging That Injury Was 'Substantially Certain'

By Seth A. Tucker and Ann-Kelley Kemper
December 28, 2006

When an employee is injured on the job, the claim is usually handled through the Workers' Compensation system. Indeed, it is relatively rare for a worker, even one who has been seriously injured, to sue his or her employer in tort because of the 'exclusive remedy' feature of most Workers' Compensation Acts. That feature, also known as the 'Workers' Compensation bar,' directs all such claims to the compensation system unless an enumerated exception applies. Nonetheless, because there are such exceptions, employers frequently purchase 'Workers' Compensation/Employers Liability' ('WC/EL') policies, which provide insurance not only for claims brought through Workers' Compensation but also for claims brought in the civil court system.

This article addresses a recurring issue under the Employers Liability coverage of WC/EL policies, namely, whether the insurer is obligated to defend and, if necessary, indemnify the policyholder/employer when an injured employee (or the estate of an employee killed on the job) sues the employer alleging that the exclusive remedy provision does not apply because the employer acted knowing that injury to the employee was 'substantially certain.' The issue has been litigated for years, and was addressed anew as recently as early December, when the New Jersey Supreme Court handed down unanimous decisions in two cases, Charles Beseler Co. v. O'Gorman & Young, Inc., No. A-75-05, 2006 N.J. LEXIS 1658 (Dec. 4, 2006), and New Jersey Manufacturers Insurance Co. v. Delta Plastics Corp., No. A-87-05, 2006 N.J. LEXIS 1659 (Dec. 4, 2006). The weight of authority (including the recent New Jersey Supreme Court decisions) and the better reasoning favor a finding of coverage.

The Liability Regime and the Insurance Policy Exclusion

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