The U.S. Eleventh Circuit Court of Appeals recently held that an employer liability exclusion in a contractor’s liability policy excludes coverage for the death of an employee of a subcontractor working for the contractor on the basis that the subcontractor’s employee was a statutory employee of the contractor. Stephens v. Mid-Continent Cas. Co., 2014 WL 1623737 (11th Cir. Apr. 24, 2014). 

An employee of a subcontractor fell while working on a construction project and ultimately died from his injuries. The employee’s estate sued his employer and the contractor overseeing the construction project. The contractor sought defense and indemnity from its CGL insurer. The insurer denied coverage on the basis of the policy’s employer liability exclusion because the decedent was employed by a subcontractor who had been employed by the contractor and who was thus a statutory employee of the contractor. The contractor then entered into a consent agreement with the decedent’s estate, stipulating to a judgment in favor of the estate and assigning the contractor’s rights against its insurer to the estate. The estate sued the insurer to collect the judgment, and the district court granted the insurer’s motion for summary judgment, finding that the employer liability exclusion barred coverage. The estate appealed. 

On appeal, the Eleventh Circuit affirmed the district court’s ruling, finding that under Florida law, a contractor who subcontracts part of its work to a subcontractor develops a statutory employment relationship with the employees of that subcontractor. As a result, the Eleventh Circuit held that statutory employees are to be treated identically to actual employees in respect of employer liability exclusions. It found there was enough evidence to show that the contractor had subcontracted work to the decedent’s company, and therefore, the claim fell within the exclusion.