Link to Mo. Sup. Ct. Opinion
Where non-permanent employee was injured in a workplace accident by the acts of permanent co-employees, the non-permanent employee was denied status as a “temporary worker” and consequently denied recovery under the employer’s comprehensive general liability insurance policy.
Bryan Gavan was employed as a bricklayer with Ste. Genevieve Building Stone Company (hereinafter “Genevieve”) when he was injured on May 15, 2000, when a ladder on which he was standing collapsed.[2] As a result of his injury, Gavan sought and received workers’ compensation benefits, and he also sued and settled with two co-employees for $2,300,000. As a part of the settlement agreement with the co-employees, Gavan agreed to satisfy the judgment only from the proceeds of the insurance policies of Genevieve.[3] Gavan then sought to collect from Genevieve’s insurer under Genevieve’s policies.
Gavan’s basis for the claim was that the insurer was obligated to “pay those sums that the insured becomes legally obligated to pay as damages because of ‘bodily injury.’” The insurer resisted the claim because the policies at issue expressly excluded coverage for employees who cause bodily injury to a co-employee acting in the course of employment, and the insurer concluded Gavan and the two malefactors were co-employees. The policies defined “employee” to exclude a “temporary worker,” which the policy defined as “a person who is furnished to the policyholder to substitute for a permanent employee on leave or to meet seasonal or short-term workload conditions.” Gavan argued that he was a temporary worker, and as a result, was not subject to the co-employee exclusion.
The Missouri Supreme Court held that Gavan was not a “temporary worker” as the insurance policies defined that term. To qualify as a temporary worker, one must be “furnished” to the employer. The court held that the furnishing provision unambiguously required that a third party be involved in providing or supplying Gavan to Genevieve. No third party was involved in supplying Gavan to Genevieve and thus Gavan’s claim failed.
II. Legal Background
This section will focus on the “furnish” requirement under the policies at issue in Gavan, its interpretation in Missouri courts and its interpretation in other jurisdictions. Gavan’s claim that he furnished himself to Genevieve, thus eliminating the third-party furnisher, stood on solid legal ground until the Missouri Supreme Court ruled in Gavan. One Missouri appellate court addressed the issue in American Family Mutual Insurance Co. v. As One, Inc.,[4] a case involving a policy with identical language to the one at issue in Gavan. The As One court concluded that “there is simply no requirement in the word ‘furnish,’ or in the policy, that indicates a third entity must furnish the specific worker."[5]
A majority of jurisdictions disagree with the conclusion of the As One court, and have held that a worker is not furnished unless a third party has been involved in providing or supplying the worker to the insured. [6] In Brown v. Indiana Insurance Co.,[5] the Supreme Court of Kentucky explained why injuries to temporary workers would not be included in the employee exclusion from the comprehensive general liability (hereinafter “CGL”) policy. Because the temporary worker remains the employee of the third party that “furnished” the worker, the temporary worker is covered under the furnishing entity’s compensation insurance.[6] For this exception to apply, though, “the worker must have been ‘furnished to’ the entity by [a third party], thereby assuring the temporary worker is covered by the workers’ compensation insurance of the [third party].”[7]
In Carl’s Italian Restaurant v. Truck Insurance Exchange, a Colorado appellate court addressed the issue of whether it makes sense to allow a person to “furnish” himself so as to qualify himself as a “temporary worker."[8] The court concluded that allowing a person to furnish himself to work is not logical. “If a person could furnish himself to an employer, every worker could choose to ‘furnish himself…and become a ‘temporary worker’ whenever such a classification would be convenient."[9] If this court were to adopt this construction, the clause would have no meaning.[10] Another court agreed, disavowing the As One rationale, saying its rationale “effectively reads the phrase ‘furnished to’ out of the CGL policy."[11]
Further buttressing the majority holding in Gavan is that its position is consistent with workers’ compensation laws. If Gavan were allowed to recover under Genevieve’s insurance policy, after already collecting workers’ compensation from his injury, Gavan would be allowed double recovery from Genevieve. The employee exclusion is drafted into policies like the one at issue in Gavan to “draw a sharp line between employees and members of the general public."[12] Employers retain CGL policies “to cover its liability to the public for negligence of its agents, servants and employees under the doctrine of respondeat superior.”[13] The CGL does not cover employees because the Workers’ Compensation Act constitutes the full extent of an employer’s liability for injuries sustained by its employees in the course of their employment.[14]
III. Comment
The Missouri Supreme Court’s decision in Gavan makes sense in light of the legal principles espoused and explained in the “Legal Background” section. What is less clear, though, is why the court did not simply conclude that the phrase “furnish to” is ambiguous and interpret the ambiguity in the favor of the insured.[15] The majority explained away the possibility of interpreting the phrase as ambiguous and in favor of the insured by looking to a number of recent decisions defining “furnishing” as requiring a third party.[16] Notwithstanding the dictionary meaning of “furnish,” the court held the term—in the CGL context—not to be ambiguous when given its plain and ordinary meaning.[17]
While Gavan’s argument that the term “furnish to” is ambiguous and must be construed against its drafter[18] appears to have some force, it is unconvincing. The normal rule, were Gavan to be the insured, is that when insurance contract language is ambiguous the court should construe ambiguous provisions in an insurance policy against the insurer.[19] However, Gavan’s employer, a commercial party, is the insured. In a scenario where the insurer deals with a sophisticated insured like Genevieve, the insured should not have the policy construed in its favor merely because there is an alternate plausible interpretation, though it is not the best one.[20] It is true that the policy did not define the phrase “furnish to”, but it does not then follow that the insured should be liable. In fact, in the context of a sophisticated insured, like Genevieve, it makes sense to impose the fault for the ambiguity more on Genevieve than on the insurer. Genevieve is necessarily more knowledgeable about its own operations and is better positioned to assess all policy terms in light of situations that may arise in the specific context of its business.
Another argument bolstering the majority position in Gavan is a common sense one. It is axiomatic to say that a CGL policy provides coverage for the insured’s liability to third parties.[21] As Genevieve’s employee, Gavan is not a “third party.” Rather, he recovered under the workers’ compensation laws, whose purpose is “to place upon industry the losses sustained by employees resulting from injuries arising out of and in the course of employment."[22] While Gavan is entitled to compensation for his injury, he is not entitled to a windfall. Allowing double recovery for Gavan foists double liability upon Genevieve, as a payout under the CGL renders Genevieve a necessarily riskier employer to insure and will result in an increase in its premiums. Genevieve paid once for Gavan’s injury through its workers’ compensation insurance premiums, and allowing Gavan his second recovery under the CGL leads to an economically unjustifiable result.
- Andrew Crossett
[1] No. 88764 (Mo. Jan. 15, 2008) (en banc) available at http://www.courts.mo.gov/file.jsp?id=26414. The West reporter citation is Gavan v. Bituminous Casualty Corp., 242 S.W.3d 718 (Mo. 2008) (en banc).
[2] From 1996-2000, Genevieve periodically employed Gavan on an as-needed basis.
[3] Genevieve carried both a comprehensive general liability and umbrella insurance policies.
[4] 189 S.W.3d 194 (Mo. App. S.D. 2006).
[5] Id. at 199. It should be noted that the As One court relied on Webster’s Third New International Dictionary to substantiate its conclusion. Id. at 198.
[6] 2008 WL 131985, at *2 (Mo. 2008).
[7] 184 S.W.3d 528, 538 (Ky. 2005).
[8] Id.
[9] Id. The issue in Brown was governed by statute, but the rationale of the opinion is applicable in Gavan.
[10] 2007 WL 4198353 (Colo. Ct. App. 2007).
[11] Id. at *3. The court used an example: Suppose a worker picks up the telephone of a person who’s on a lunch break, and assume that task is outside the scope of the employee’s normal employment tasks. For insurance purposes, the employer could then assert that the employee who picked up the phone furnished himself for the job and was thus a “temporary worker.” Id.
[12] Id.
[13] Gen. Agents Ins. Co. of America, Inc. v. Mandrill Corp., 243 Fed. Appx. 961, 968 (6th Cir. 2007).
[14] American Family Mut. Ins. Co. v. Tickle, 99 S.W.3d 25, 29 (Mo. App. E.D. 2003).
[15] Id.
[16] Id.
[17] See Gavan v. Bituminous Cas. Corp., 2008 WL 131985 at *4 (Mo. 2008) (Teitelman, J., dissenting) (“If the term ‘furnished to’ requires a third-party referral, the policy should simply state that. The policy at issue in this case does not do so.”)
[18] Id. at *2.
[19] Id.
[20] Here, the insurance company.
[21] Hunt v. Everett, 181 S.W.3d 248, 250 (Mo. App. W.D. 2006).
[22] Given the arguments and authorities cited in the “Legal Background” section, I assume the “best” position is that which is outlined by the Gavan majority.
[23] A corollary to this statement is that entities purchase CGL policies for the benefit of third parties. Willy E. Rice, Insurance Decisions—A Survey and an Empirical Analysis, 35 Tex. Tech. L. Rev. 947, 1028 (2004).
[24] Custer v. Hartford Ins. Co., 174 S.W.3d 602, 610 (Mo. App. W.D. 2005).
