Workers’ Compensation Coverage Under Policy Issued to a
Staff Leasing Company did not Provide
Non-Leased Employees of Leasing Company’s Customers
Tech-Built 153, Inc. v. Virginia Surety Co., Inc. a/k/a Combined Specialty Insurance Co. et al.
No. 2005-068 (April 21, 2006)
Tech-Built is a New Hampshire corporation involved in construction. In April 1999, Tech-Built and Surge, an employee leasing company, entered into a client service agreement in which Surge furnished staff to Tech-Built for specific jobs. Virginia Surety was Surge’s workers’ compensation carrier.
Tech-Built served as the general contractor at a condominium project in Weare, NH, and hired a subcontractor for framing work. Scott Thomas was an employee of that framing subcontractor. While working on site, Thomas was injured as the result of a fall.
The framing subcontractor that employed Thomas did not have workers’ compensation insurance. So, the DOL determined that the contractor, Tech-Built was then liable for coverage. Tech-Built then instituted a declaratory judgment action against Surge and Virginia Surety for coverage under the workers’ compensation policy held by Surge.
The trial court granted the motions for summary judgment filed by Surge and Virginia Surety, stating that coverage for workers’ compensation under the Virginia Surety policy extended only to Surge employees. This appeal followed.
On Appeal Tech-Built argued that the following language contained in the policy demonstrates that Tech-Built is an additional named insured under the policy:
- Item one of the policy’s information page had a place for filling out the name and address of the insured, and for other work places not shown in the address field.
- On that page, the line for the “insured,” was filled in with “Surge, et al.”
- The “other workplaces” line, was filled in with “See A I/L Additional Named Insured and/or Locations,” which was a reference to an endorsement.
- On that endorsement, after the phrase, “Item (1) Insured of the Information page is amended to include the following:” there followed a list of over one hundred fifty companies, including Tech-Built.
The Supreme Court rejected Tech-Built’s logic, and observed that the GENERAL SECTION of the insurance policy declared it as a “contract of insurance between the named employer [Surge] and the insurer. In the section entitled, “Who Is Insured”, the policy states that the employer named in Item 1 of the Information Page is the insured [Surge].
The language throughout the policy revealed that the contracting parties anticipated that a single employer was named as the insured, and that coverage for that employer extended to all “workplaces” of that employer, including Tech-Built’s workplace and the more than one hundred fifty other companies listed.
Paragraph E of the GENERAL SECTION states:
This policy covers all of your workplaces listed in Items 1 or 4 of the Information Page; and it covers all other workplaces in Item 3.A. unless you have other insurance or are self-insured for such workplaces.
The Supreme Court reasoned that if all of the companies listed in the endorsement were named insureds, paragraph E, would not make sense.
Moreover, there were several companies listed in the endorsement multiple times but with different locations. There would be no purpose to repetitively list these companies if the intent of the parties was to name each company as an additional insured. Additionally, if each company listed were to be considered a named insured, the result would extend workers’ compensation coverage to each company and the numerous employees of each company.
Furthermore, the contract between Surge and Tech-Built required that Surge provide workers’ compensation coverage for its leased employees that filled job functions under the terms of the Tech-Built-Surge agreement. Surge was simply fulfilling its statutory obligation to provide workers’ compensation coverage to its leased employees.
The Court acknowledged that, in general, it does not look beyond the four corners ofa contract to determine the scope of the parties’ intent. However, the Court referenced an Illinois case to support its position that where the intent of the contracting parties can be conclusively resolved by objective extrinsic evidence, as in this case, the Court “will not ignore that evidence in favor of dogmatic adherence to insurance maxims.” The Court stated that it would interpret the language of a contract/policy in light of the “circumstances and the context in which the agreement was negotiated.”
The Court held that the only fair reading of the policy in accordance with the clear intent of the contracting parties is to extended workers’ compensation coverage exclusively to Surge employees that Surge leases to the numerous companies identified in the policy endorsement.
Please feel free to contact me with any questions regarding this Workers' Compensation court decision.