Employer's Liability and the CGL Form

Q

Our agency insures a motel management company that handles the operations of motels for the owners. In this capacity, our insured makes decisions for the owners such as hiring, firing, and directing all employees — from the local managers to the housekeepers.

This is the scenario: the workers compensation policy for a motel is in the name of the legal owner. Under general liability coverage for the motel, the management company is an additional insured. The management company carries its own general liability coverage. Does the motel management company have a gap in coverage when they instruct the manager (or some other employee) to climb a ladder to clean out gutters, and the employee is injured from a fall? Since it is an on-the-job injury, the employee is covered by workers compensation, but what if he then sues the motel management company since that company's representative directed him to climb the ladder? How would one provide coverage for the motel management company for this type of incident?

Alabama Subscriber

A

In determining if the management company has a gap in coverage, the key point is: who is the worker employed by? If the employer is the motel, then the employer's liability exclusion on the general liability form does not apply to the motel management company. If, however, the employer is the management company, then it needs a workers comp policy because the general liability policy will not respond to a claim of injury to the employee. It makes no difference if the management company directed the employee to climb a ladder or clean out gutters or whatever. If the employee is employed by the motel owner, that is what counts.

The employer's liability exclusion speaks about bodily injury to an employee of the insured, so that is what you must look for in this case — who is the employer? Louisiana law may dictate just who the employer is in such an instance, especially since the management company does the hiring and firing for the owner. But, that is still where the answer lies. As long as the employee is not the employee of the management company, the exclusion does not apply and the general liability policy would protect the management company.

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