Why it matters

Applying a limited reading of an insured’s policy providing coverage for “directors,” the Eighth U.S. Circuit Court of Appeals determined that a supervisory employee was not entitled to coverage because he was not on the company’s Board of Directors. The CGL policy defined insureds as “executive officers and directors.” The policyholder argued that the employee in question directed other workers and thus the employee was an “insured” under the policy. But the federal appellate panel disagreed, ruling that the policy unambiguously insures only members of the insured’s Board of Directors, rather than all employees who may “direct” some aspect of the company. Thus it is important for policyholders to understand which employees are and are not “insureds” under their policies and seek to obtain coverage for those who are not, if necessary.

Detailed Discussion

United Fire & Casualty Insurance Co. insured Rose Concrete under a CGL policy. A worker at Rose Concrete in Missouri was injured on the job and sued the company as well as his supervisor, Wayne Rockett. The worker alleged that Rockett acted negligently because he knew the dump truck driven by the plaintiff was defective and yet continued to allow him to operate the vehicle.

United Fire agreed to represent Rockett in the suit but reserved its rights because it believed Rockett did not qualify as an “Insured” under the policy. A state trial court judge entered an $850,000 judgment against Rockett, prompting United Fire to file the declaratory judgment action.

The trial court entered summary judgment in favor of United Fire, finding that Rockett was not an insured because he was not an executive officer or director within the meaning of the policy’s terms. In addition, the district court found that the policy contained exclusions relating to employee coverage, so Rockett could not be covered as an employee either.

To avoid liability, United Fire argued that Rockett was not an “Insured” under the policy because the relevant section of the policy limited coverage to “executive officers and directors” and “only with respect to their duties as [insured’s] officers or directors.”

Although Rose Concrete did not have specific job titles for its employees, it contended that Rockett was a “director” because he was generally referred to as the company’s director of operations, and that he “directed” people and processes as part of his job.

But the Eighth Circuit disagreed.

When analyzing the term “directors” within the context of the United Fire policy as a whole, the policy unambiguously insures only members of Rose Concrete’s Board of Directors, rather than all employees who may “direct” some aspect of, or an activity at, the company. Therefore, the parties’ debate over Rockett’s job title and whether he “directed” Rose Concrete employees is immaterial because the parties agree that Rockett was never a member of Rose Concrete’s Board of Directors.

To read the opinion in United Fire & Casualty Insurance Co. v. Thompson, click here.