Coverage and Exclusions

Arguments to Consider

Insurance and Risk Management

The Issues

If an employee, carrying a concealed weapon as permitted by state law, shoots a customer or a fellow employee and the employer is subsequently sued over the incident, will the standard general liability policy afford insurance coverage to the employer?

 What if an employer learns that an employee has a weapon at work, decides to seize it, and holds the employee in a room awaiting security or the police? Is this false arrest or imprisonment (an injury covered by the standard CGL form)?

 What if an employer forbids an employee from carrying a weapon to work and the employee is subsequently attacked and beaten on the work premises? Will the general liability policy of the employer offer a defense and/or indemnification when the employee files a lawsuit claiming his ability for self-defense was impaired by the actions of the employer?

 Coverages and Exclusions

Of course, general liability coverage is based on the insured being legally liable for causing the bodily injury or property damage, and it may be that the employer is not liable due to state law or some other point of law. Nevertheless, two facts are certain: first, the employer will most definitely be brought into any lawsuit filed by an injured person; and second, the duty of the employer's insurer to defend the insured employer will be triggered unless there is some clear, unquestionable exclusion in the general liability policy that would apply to the shooting incident.

 Therefore, leaving the question of liability to the legal system, we will address the question of insurance coverage and exclusions.

 If a customer is shot and injured on the insured's work premises, the only possible exclusion on the general liability policy that might apply is the expected or intended injury exclusion. However, this is a stretch. Unless it is clear that the insured employer actually intended or expected the customer to be injured, this particular exclusion will not prevail against coverage for a claim against the employer. The exclusion must be viewed from the standpoint of the insured, and even though the employee who did the shooting may have acted intentionally and expected the injury, this does not mean the insured employer will be assigned that same intent.

 The standard CGL provides coverage for use of reasonable force to protect persons or property. However, an injured person may argue the shooting incident was an act of excessive force. Having coverage does not mean an insured can fire a gun whenever he feels threatened and assume there will be coverage. If the employee uses excessive force, there will not be coverage.

 What if an employee is shot by another employee? While there is workers' compensation to consider, this benefit is for injuries arising out of, and in the course of, employment. In this situation, it will be up to the workers compensation bureaus and courts to decide if being shot by a fellow employee is injury arising out of, and in the course of employment. However, if the determination is that there is no causal connection between the injury and the employment, the general liability policy of the insured employer will apply to a claim against the employer.

 For example, Jason and Rick work together at a production plant, and get into an argument over how fast Jason is doing his work. The argument escalates and Jason shoots Rick. Rick files for workers compensation due to his injury and time away from the job. While being shot isn't a normal job hazard, Rick was on the jobsite during working hours when he was shot. While Jason intended the injury, the employer did not. In this example, Rick would be eligible for workers compensation benefits under his employer's policy, as there was no intent by the insured for Rick to be injured.

 Again, unless it can be shown that the employer expected or intended the injury to occur; there is no exclusion to prevent coverage for the insured who is brought into a lawsuit by the injured worker or his estate.

Arguments to Consider

Of course, an insurer could claim that since the insured employer knew the employee had a concealed weapon at the workplace, the insured should have known or expected a shooting might occur. Moreover, if the employer knew that the pistol-packing employee had a violent temper and a history of physical confrontations with fellow employees and customers, this strengthens the argument. However, just because the employer knows these things, it is not proof that the insured expected or intended the injury to occur. The assertion of an exclusion to deny coverage requires the insurer to prove that exclusion's applicability. Until the insurer can prove the exclusion applies, the duty to defend and pay damages remains intact for the benefit of the insured employer.

 What if the employer seizes the concealed weapon and holds the employee awaiting security or the police? When the employee files a lawsuit claiming false arrest, detention, and imprisonment, will the general liability policy of the employer provide a defense? Questions of whether or not the insured committed a false arrest or imprisonment involves legal squabbles over the definition of false arrest, and if the concealed weapon law allows the employee to carry the weapon on the workplace premises—neither of we can settle here. However, if the legal basis of the claim of false arrest against the insured is upheld, the employer will look to its general liability insurance policy for coverage.

 The standard CGL form will pay those sums that the insured becomes legally obligated to pay as damages because of a personal injury, a term defined in the liability policy to include false arrest or imprisonment. However, there is no coverage if the injury caused by the insured comes with the knowledge that the act would violate the rights of another. Therefore, if the insured knew that state law allowed the employee to carry a concealed weapon onto work premises but still seized the weapon and put the employee in custody, a strong case could be made that the insured knowingly violated the rights of the employee. It is true however, that most concealed weapon laws allow employers to forbid employees from carrying a weapon to work, so this knowing violation of the rights of another exclusion may not be applicable. Nevertheless, the situation does require the insured to be familiar with the wording of the concealed weapon law.

 Then there is the question of what happens if an employer forbids an employee to carry a weapon to work, after which the employee is attacked and beaten at work. If the employee then files a lawsuit against the insured employer claiming that his ability for self-defense was impaired by the employer—that the action of the employer caused or resulted in the employee being injured—how will the insured's general liability policy respond?

 The injured employee would claim that he incurred bodily injury, and that the employer was legally responsible for those injuries. The general liability policy of the insured employer would respond with a defense since there is no clear-cut, unambiguous exclusion in the policy to prevent such a response. However, the duty to pay the claim would ultimately depend on the liability of the insured being established in a court of law.

Insurance and Risk Management

From this discussion, it is apparent that concealed weapon laws can paint a bull's-eye on the backs of employers. It is not enough that the insured employer can rely on the general liability policy for insurance coverage should liability be established. Sound risk management calls for preemptive action.

 For instance, an employer can attempt to get an exemption from the scope of the concealed weapon law (if one does not already exist) for the workplace, so that the employer has the authority to forbid weapons on the premises. The employer can also make it clear to all employees and would-be employees that company policy forbids bringing weapons onto the premises. The employer should also conduct careful pre-employment examinations in an effort to make certain to hire stable, sensible people—people not known to try to settle disagreements with force.

 Employers can live with concealed weapon laws, but the laws do create liability exposures for the employer that need to be addressed and not ignored.