In New Jersey, the Workers’ Compensation Act is the exclusive remedy for injured workers as stated in N.J.S.A. 34:15-8. An employee cannot bring a civil suit against an employer or a co-employee alleging bodily injury. However, an exception arises in cases of intentional harm. In Laidlow v. Hariton Machinery Co., Inc., 170 N.J. 602 (2002), the Supreme Court clarified the test to decide when an employer’s conduct rises to the level of an “intentional wrong” under N.J.S.A. 34:15-8. This is known as the “substantial certainty” test.
A very recent Supreme Court decision squarely addressed the question whether an insurer is required to defend an employer against intentional harm claims. The Supreme Court of New Jersey in Rodriguez v. Shelbourne Spring, LLC, No. A-39-23, 2024 N.J. LEXIS 1173 (Dec. 12, 2024), found as follows: (1) the insurer had no duty to provide coverage against the employee’s negligence based claims (including claims for gross negligence against the employer) because of the exclusive remedy bar under N.J.S.A. 34:15-8, and (2) the insurer had no duty to defend against Laidlow claims under the Employers’ Liability portion of the workers’ compensation policy.
The practical impact of this decision is that generally employers have no coverage for intentional harm lawsuits. This is significant because there is a growing trend for intentional harm lawsuits to be filed in New Jersey. There is no coverage under any portion of the New Jersey standard workers’ compensation policy. There is also no coverage under EPLI policies or standard liability policies for intentional harm claims. A few employers, like joint insurance funds, may still provide coverage for members by not adopting the C5 exclusion described below.
- PROCEDURAL HISTORY
The employer in this case, SIR, was an electrical contractor that employed the injured worker, Dionicio Rodriguez. Hartford, the insurer, issued a Workers’ Compensation and Employers’ Liability Policy to the employer. This is the standard policy that all employers have in New Jersey. The plaintiff initially filed a claim petition for workers’ compensation benefits under Part One of the Hartford Policy which the insurer defended on the employer’s behalf. The plaintiff then filed a personal injury complaint in civil court against SIR, seeking money damages and naming his employer as a defendant. The facts were that Mr. Rodriguez had been injured opening an electrical panel on a breaker. He contended in his civil suit that his employer was substantially certain that this action would cause him severe injury because Mr. Rodriguez had not been trained to do what he contended was highly dangerous work.
The employer then forwarded the complaint to Hartford which disclaimed any duty to defend the employer in civil court. The employer filed a third-party complaint against its own carrier claiming that Hartford wrongfully disclaimed defense coverage. Hartford filed a Rule 4:6-2(e) motion to dismiss the employer’s third-party complaint, and the employer cross-moved for summary judgment. The trial judge granted Hartford’s motion and denied the employer’s cross-motion, concluding that the insurance policy expressly excluded coverage for intent-based claims.
The employer moved for reconsideration and filed a motion to amend its third-party complaint, contending for the first time that the policy’s enhanced intentional injury exclusion (EII exclusion) violated public policy. The judge denied reconsideration finding that Rodriguez’s allegations were Laidlow claims and that the policy excluded insurance coverage for intentional conduct by the employer. As to the motion to amend, the trial judge rejected the motion as moot finding that the amendment would be futile.
The Appellate Division affirmed the orders dismissing the employer’s third-party complaint, denying the employer’s cross-motion for summary judgment, and denying the employer’s motion to amend its third-party complaint.
The Supreme Court accepted certification and affirmed the decision. The Court relied on longstanding legal principles regarding the duty to defend arising from the contractual obligations under the language of an insurance policy. Rodriguez, at *12 citing Hartford Accident & Indem. Co. v. Aetna Life & Cas. Ins. Co., 98 N.J. 18, 22 (1984). Here is what the Court concluded:
A. Under The Elective Provisions of the Workers’ Compensation Portion of the Policy, (Part One of the Standard Policy) the Insurer had No Duty to Defend Against Claims of Negligence, Gross Negligence, Recklessness, Intentional Harm or Substantial Certainty of Harm.
Part One of the Hartford policy provided Workers’ Compensation insurance for “benefits” under Workers’ Compensation law. These are the everyday claims that are handled in the Division of Workers’ Compensation. The policy says: “[w]e will pay promptly when due the benefits required of you by the workers’ compensation law.” Id. at *20. Emphasis added. The Court explained that “benefits . . . required by a workers’ compensation law,” included medical benefits under N.J.S.A. 34:15-15; death benefits for dependents under N.J.S.A. 34:15-13; and temporary disability benefits, permanent total benefits, or permanent partial benefits under N.J.S.A. 34:15-12(a) to (c), regardless of fault. Part One of the Hartford policy incorporated by reference the requirements set forth in the Workers’ Compensation Act stating that “the Act covers employees’ accidental bodily injuries ‘arising out of and in the course of [their] employment, of which the actual or lawfully imputed negligence of the employer is the natural and proximate cause.’” N.J.S.A. 34:15-1.
B. The insurer has no duty to defend against intentional harm claims under standard Employers’ Liability insurance policies (Part Two) on account of the plain language of the exclusions set forth in the standard workers’ compensation policy
In Rodriguez, Part Two of the standard Hartford Policy set forth the exclusions of coverage for Employers’ Liability insurance, specifically section C5 which provided in relevant part: This insurance does not cover. . . . . [b]odily injury intentionally caused or aggravated by [the employer].” Id. at *23. The Hartford Policy contained an additional “New Jersey Part Two Employers Liability Endorsement,” applying “only to the insurance provided by Part Two (Employers Liability Insurance).” This is the so-called EII exclusion, which states that: “[w]ith respect to Exclusion C5, this insurance does not cover any and all intentional wrongs within the exception allowed by N.J.S.A. 34:15-8 including but not limited to, bodily injury caused or aggravated by an intentional wrong committed by you or your employees, or bodily injury resulting from an act or omission by you or your employees, which is substantially certain to result in injury.” Id. at *23-24. Emphasis added.
The Court held that Part Two of the insurance policy imposed no duty on Hartford to defend the employer against Mr. Rodriguez’s intentional harm suit based on the unambiguous policy language.
C. Exclusions in Employers’ Liability Insurance are not against public policy when the language is unambiguous as in Rodriguez.
The Court also concluded that the trial judge properly denied the employer’s motion for leave to amend its third-party complaint as futile. The employer moved for reconsideration and filed a motion to amend its third-party complaint, contending for the first time that the Hartford Policy’s EII exclusion violated public policy. The Court concluded that contrary to the employer’s contention, the EII exclusion did not violate public policy.
The Court went on to distinguish Rodriguez from companion cases Beseler and Delta Plastics. See Charles Beseler Co. v. O’Gorman & Young, Inc., 188 N.J. 542, 548 (2006); N.J. Mfrs. Ins. Co. v. Delta Plastics Corp., 188 N.J. 582, 582 (2006). In these earlier cases, the Court considered C5 exclusions in Employers’ Liability policies that excluded coverage for bodily injury intentionally caused or aggravated by the employer. In those cases, the Court ruled that the C5 exclusions did “not unambiguously exclude injuries falling under the ‘substantially certain’ prong of the intentional-wrong exception recognized by Laidlow.” Beseler, 188 N.J. at 547. Due to the “lack of express language excluding conduct substantially certain to result in injury,” however, the Court held that the C5 exclusions were ambiguous and thus ruled for the insured employers. Id. at 548.
Following decisions in Beseler and Delta Plastics, the Compensation Rating and Inspection Bureau (CRIB), amended the New Jersey Workers’ Compensation and Employers’ Liability Insurance Manual (Manual), N.J.S.A. 34:15-90.2(i), to include an updated New Jersey Part Two Employers Liability Endorsement. To restore the C5 intentional wrong exclusion while conforming with the Court’s directive that such an exclusion must be unambiguous, the new endorsement was amended. It provides that:[w]ith respect to Exclusion C5, this insurance does not cover any and all [*31] intentional wrongs within the exception allowed by N.J.S.A. 34:15-8 including but not limited to, bodily injury caused or aggravated by an intentional wrong committed by you or your employees, or bodily injury resulting from an act or omission by you or your employees, which is substantially certain to result in injury. [CRIB Manual Amendment Bulletin #436, Exhibit 1, effective July 1, 2007.]
The New Jersey Department of Banking and Insurance (DOBI) approved the Manual Amendment Bulletin #436, which included the amended endorsement to the C5 exclusion, in a letter dated May 23, 2007. The Court in Rodriguez therefore concluded that the EII exclusion in the Hartford Policy contained language identical to the language approved by DOBI in 2007 and complied with the holding in Beseler by including “express language excluding conduct substantially certain to result in injury.” Rodriguez, at *31. The Court therefore concluded that the New Jersey-specific endorsement that bars coverage for intentional wrong claims did not violate public policy.
Hartford Insurance rightly won this case. Where does this leave employers who are faced with intentional harm lawsuits? In a perilous position! When an intentional harm suit is filed against the employer, alleging substantial certainty of harm or intentional harm, generally the employer has no ability to obtain insurance coverage. Some employers, like joint insurance funds, may not have adopted the standard C5 exclusion, but almost all other employers will not have coverage, and this case makes clear there is no duty on the part of the carrier to defend the suit.
The fact is that most intentional harm suits get dismissed in New Jersey at some point in time, but usually not until a great deal of discovery has been completed. Legal fees can be extremely high to defend such lawsuits, so even if the employer eventually wins, and then wins again on the appeal, it may feel like a pyrrhic victory to the employer because the legal defense costs must be funded entirely by the employer. Such defense costs can amount to tens of thousands of dollars. Capehart Scatchard defends intentional harm lawsuits. If readers have questions, Betsy Ramos, Esq., Chair of the Litigation Department, may be consulted.
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