Fourth Circuit Says Injured Worker May Proceed Against Employer’s Auto Liability Policy

Workers’ Compensation Exclusion in Policy Does not Apply.

Construing West Virginia law, the Fourth Circuit Court of Appeals held that an injured construction worker could proceed to recover damages under his employer’s commercial automobile liability insurance policy where the owner of the employer authorized a homeowner, upon whose property construction work was being performed, to move one of the employer’s vehicles that was blocking a driveway and in doing so, the homeowner accidentally struck the construction worker, causing him serious injuries [United Fin. Cas. Co. v. Ball, 2019 U.S. App. LEXIS 32470 (4th Cir. Oct. 30, 2019)]. The Court reasoned that in as much as the injured worker’s negligence claim against the homeowner was a claim against a third party, rather than a claim against his employer for workers’ compensation benefits, the liability policy’s workers’ compensation exclusion did not apply.

Background

Employees of Milton Hardware, LLC, including the firm’s owner, were performing construction work at the home of Rodney Perry. Milton Hardware’s owner authorized Perry to move one of the company’s trucks, which was blocking the driveway. In doing so, however, Perry accidentally struck a company employee, Greg Ball, causing him serious injuries.

Declaratory Judgment Action

When Ball requested indemnification from the construction company’s insurer, United Financial Casualty Company, it denied coverage and filed the instant action for a declaratory judgment that the policy it issued to the construction company did not cover Perry’s liability for Ball’s injuries. The district court agreed. While the court recognized that Perry was a permissive user of the truck and therefore an “insured,” as defined in United Financial’s policy, the court concluded that the workers’ compensation exclusion in the policy eliminated coverage because Ball was an employee of a named insured and the policy excluded coverage for “[a]ny obligation for which an insured … may be held liable under workers’ compensation … law.”

Common Law Suit Against Third Party

The Fourth Circuit stressed that If an employee’s work-related injury was caused entirely or in part by the negligence of a third party, the employee was entitled to sue the third party under the common law. If, however, the employee recovers from the third person, then the employer or other entity that paid workers’ compensation benefits on behalf of the employer is subrogated to the employee’s claim to the extent of benefits paid.

The Fourth Circuit continued that while a claim that an injured employee asserted against his or her employer for injuries arising in the course of and resulting from the employment is generally a workers’ compensation claim, a claim brought by that employee against a third party for the same injuries is a common-law claim that does not arise under the West Virginia Workers’ Compensation Act. As applied to the dispute at hand, Perry’s liability for Ball’s injuries would not be, in the words of the Worker’s Compensation exclusion, an “obligation for which [Perry as an insured] … may be held liable under workers’ compensation … law.” Perry was not Ball’s employer; Ball was not Perry’s employee; and Ball’s claim against Perry did not, therefore, arise under workers’ compensation law.

Separate Indemnification Exclusion

The Court observed that United Financial also relied on the Employee Indemnification and Employer’s Liability exclusion to deny Perry liability coverage. While that provision, on its face, would apply to exclude coverage for Perry’s liability to Ball, the Court found that the exclusion clause was inoperable because its limitation of coverage contravened West Virginia Code § 33-6-31, which requires motor vehicle insurance policies issued in the State to provide liability coverage to individuals using an insured vehicle with the owner’s consent, except when the injured person could claim workers’ compensation in connection with an accident for which his employer was liable.

The Court said that because it had concluded that neither the Worker’s Compensation exclusion nor the Employee Indemnification and Employer’s Liability exclusion barred coverage to Perry as an insured, the Court vacated the district court’s judgment and remanded for further proceedings consistent with its opinion.