Not long ago an owner of a four-unit apartment building, fully insured with a Landlord/Tenants package policy and Umbrella coverage, tendered an injury lawsuit to his insurance company. The insured had hired a roofer to replace the roof. The roofer hired a worker to help and the worker fell from the roof just hours into the job, and was badly injured. The worker filed suit and the insurer defended but initially refused to settle—until the owner engaged coverage counsel.

The insurer had appointed defense counsel, who recommended a settlement which would include funds from the Umbrella, as the injuries were serious and permanent. The insurance company balked at settling and attempted to hide behind the “employee exclusion.” The insured owner never even met the worker much less hired him—how could the “employee exclusion” impair coverage in the Umbrella?

As coverage counsel we went to work quickly and learned that the facts included that the roofer was unlicensed—hence the insurer’s coverage counsel argued the Umbrella was “not in play.”  We found that under the Labor Code 2750.5, as a general proposition, the owner who hired the unlicensed roofer became the roofer’s “statutory employer,” and thus was likely liable for the injuries. However, under Labor Code 3352(h) the worker who worked less than 52 hours before his injury was not an “employee” for workers compensation purposes. We successfully convinced the insurer that, this injured worker did not meet the Labor Code 3352(h) definition as he worked only a few hours before his fall, and, as such, the worker could not possibly be an “employee” as that term was used in the Umbrella and primary “employee exclusion.” We secured a settlement for our client in record time!

The take away lesson for such insured owners is please use licensed contractors! Also, when insurers balk at paying settlements, coverage counsel can loosen the purse strings.