A United States district court judge in the Eastern District of Virginia held in Admiral Insurance Co. v. G4S Youth Services, No. 3:07-CV-656, that Admiral Insurance Company (“Admiral”) is obligated under a contract for commercial general liability insurance to defend its insured G4S Youth Services (“G4S”) in a Florida litigation in which G4S has been sued for the shooting death of one of its employees. The court held that an employer’s liability exclusion did not apply to the incident, in which an employee was shot on company property in a personal dispute. A case from the Western District of Virginia came to a different conclusion about the scope of the same exclusion under Tennessee law. That case is now before the U.S. Court of Appeals for the Fourth Circuit.
G4S, headquartered in Richmond, Virginia, collaborates with the Florida Department of Juvenile Justice (“DJJ”) to operate several juvenile correction facilities in Florida. The insurance contract provides commercial general liability coverage to G4S and also designates the DJJ as an additional insured. The insurance contract provides coverage for bodily injury or property damage caused by an occurrence that takes place in the coverage territory. Also, like similar general liability insurance contracts, the insurance contract requires Admiral to defend G4S in any suit seeking damages that the insured becomes legally obligated to pay because of bodily injury.
The insurance contract contains an Employer’s Liability Exclusion, which excludes from coverage:
“Bodily Injury” to (1) an “employee” of the insured arising out of and in the course of (a) employment by the insured; or (b) performing duties related to the conduct of the insured’s business…
Shanique Harris was an employee at G4S and worked at a juvenile corrections facility in Florida, an insured location under G4S’s insurance contract. On July 14, 2006, Ms. Harris’ boyfriend confronted her in the facility’s parking lot and an argument ensued. During the course of the argument, Ms. Harris’ boyfriend shot and killed her.
Ms. Harris’ estate initially sought workers’ compensation for Ms. Harris' injuries, but this request was denied on the basis that there was no causal connection between the employee’s death and her employment. Subsequently, Ms. Harris’ estate sued G4S and the DJJ, Mary Harris as Personal Representative for the Estate of Shanique Harris, et. al. v. G4S Youth Services LLC, No. 2007-CA-329 (“the underlying litigation”). The complaint asserts three counts: (1) negligence against G4S; (2) vicarious liability against DJJ for G4S’s negligent conduct; and (3) premise liability against DJJ for breach of the duty of care to employ sufficient security to protect its invitees on the facility’s premises.
Upon notice of the underlying litigation, Admiral filed a declaratory judgment action seeking a declaration that it was not obligated under the insurance contract to defend or indemnify G4S. Admiral moved for summary judgment, arguing that the Employer’s Liability Exclusion within the insurance contract barred coverage since Ms. Harris’ death occurred at her place of employment during business hours, and further argued that the underlying complaint’s allegations did not trigger Admiral’s duty to defend or indemnify.
G4S for its part argued that the Employer’s Liability Exclusion should be construed narrowly, and that Ms. Harris’ death did not “arise out of the course of her employment” but from a personal dispute with an estranged boyfriend. Further, G4S stated that the premises liability claim against DJJ, an additional insured under the insurance contract, is a covered claim under the insurance contract, triggering Admiral’s duty to provide a defense in the underlying litigation.
The Court’s Ruling
The court found that the Employer’s Liability Exclusion did not bar coverage and, further, that the allegations in the underlying complaint triggered Admiral’s duty to defend. The court recognized, however, that some of the claims in the complaint may not be covered under the insurance contract and therefore abstained from ruling on whether Admiral had a duty to indemnify G4S for any damages incurred in the underlying litigation.
Applying Virginia law, the court relied on the “eight corners rule” to determine whether allegations in the underlying litigation triggered Admiral’s contractual duty to defend and indemnify. The “eight corners rule” allows the court to look at only the insurance contract and the underlying complaint. Finding the insurance contract’s provisions and, in particular, the Employer’s Liability Exclusion, to be unambiguous, the court ruled that Ms. Harris’ death did not arise from the course of her employment. Relying on Webster’s Dictionary, the court narrowly construed the term “arise” and found that the term requires that the injury “originated from, or came into being as a result of, the course of Harris’ employment.” In the instant case, Ms. Harris’ death arose only because of a personal dispute she had with her boyfriend. While her death occurred on her employer’s premises during business hours, the court refused to embrace a more expansive interpretation of the Employer’s Liability Exclusion, noting that a personal dispute was the actual cause of Ms. Harris’ death.
Next, the court addressed whether the actual allegations in the underlying litigation triggered coverage. Upon a review of the claims, the court concluded that the plaintiff’s premises liability claim constituted a covered claim, triggering Admiral’s duty to defend. Here, the court rejected Admiral’s argument that the premises liability claim was not sufficiently plead. While acknowledging that the Employer’s Liability Exclusion likely barred coverage for the negligence claims premised on the employee/employer relationship, the court found that since the premises liability claim was not premised on this relationship and survived a motion to dismiss in the underlying litigation, this claim triggered coverage. As such, the court found that Admiral owed a defense in the underlying litigation.
Finally, recognizing that some claims in the underlying litigation may not constitute covered claims under the insurance contract, the court abstained from deciding the issue of indemnification, noting that such finding would be premature until the underlying litigation was resolved.
The Admiral decision creates a split in the federal district courts in Virginia. On March 24, 2009, in Admiral Insurance Co. v. ACE American Ins., et al., No. 5:08-cv-00055, a federal district judge from the Western District of Virginia held that under a commercial general liability contract, the same insurer, Admiral, was not obligated to defend or indemnify its insured for a workplace shooting. In this case, the district court held, applying Tennessee law, that the Employer’s Liability Exclusion barred coverage. The court found that the phrase “arising out of” within this exclusion should be construed broadly since commercial general liability policies are not drafted to provide coverage to an employer’s employees.
This decision, currently on appeal to the Fourth Circuit, is contrary to the instant case in which the court interpreted the same exclusion narrowly. While the two decisions are based on the law of different states, the application of the Employer’s Liability Exclusion to shooting deaths occurring on the employer’s property nevertheless was an issue of first impression for each jurisdiction. The decisions are good examples of the significant impact that choice of law can have on the outcome of a case. Insurers and insureds should therefore always bear in mind the possibility that state laws will differ and that the difference in applicable law could yield an outcome in one state that is opposite the outcome in another under an identical set of facts.