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Newsletter -
Winter 2006
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New Jersey Courts continue to take the side of insureds against their insurance carriers, making it increasingly costly for insurers to conduct business in the State. In a decision issued earlier this Fall, the New Jersey Superior Court, Appellate Division, expanded the coverage obligations of insurers under Employers Liability Policies with respect to intentional acts that result in injury to employees. In Charles Beseler Co. v. O’Gorman & Young, Inc. et al., decided September 9, 2005, the appellate panel affirmed the trial court’s ruling that the policy in question does not exclude coverage for “intentional acts which are not themselves intended to cause injury.” The case arose out of a workplace injury sustained by Malden Homar, an employee of a Charles Beseler Co. (“Beseler”) subsidiary. Beseler, which was sued by Mr. Homar under the “intentional wrong” exception to the workers compensation bar, was insured under a policy of employers liability insurance issued by New Jersey Manufacturers Insurance Company (“NJM”). NJM denied coverage to Beseler on the basis that its policy does not provide coverage for “intentional wrong” claims. The basis for the denial was a provision of the Coverage B Section of the NJM policy excluding coverage for “bodily injury intentionally caused or aggravated by you;…” which is standard language in New Jersey Workers’ compensation Policies. Comparing the allegations of Mr. Homar’s complaint to the language of the NJM Policy, the traditional exercise for determining whether covered claims have been asserted, the Court held that NJM owed coverage. The Court drew a distinction between bodily injury that is intentionally caused or aggravated by the insured employer, and an injury caused by an intentional act of the employer that resulted in the injury. This somewhat subtle distinction means that the intentional-wrong exclusion (often known as the “C5 exclusion”) will not apply in cases where the employer is accused of an intentional act that happened to result in injury. On the other hand, now carriers will only be able to rely upon the C5 exclusion in instances where the employer is alleged to have harbored a deliberate intent to harm. The consequences of this decision promise to be costly and extensive for insurers issuing employers liability coverage. We anticipate that this ruling may give rise to a significant increase in litigation against employers now that the scope of coverage has been expanded. It is unlikely that in many workplace accidents, allegations of intentional conduct will be made to permit the filing of a Superior Court Lawsuit with the potential for insurance coverage to apply. This makes the case far more lucrative and provides an incentive to Plaintiff’s counsel to make the assertion of intentional wrong. On November 17, 2005, the New Jersey Supreme Court granted Certification in this matter, meaning that it will review the decision of the Appellate Division and ultimately decide if this ruling will stand. We will monitor this closely to see whether the decision is upheld or overturned, and will report the result in a future edition.
– Christopher H. Westrick, Esq.
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