There is no exclusion on the standard CGL form that would prevent coverage for such a claim, so the CGL insurer should pay the claim—no problems. On the other hand, consider this: The employee has premises liability coverage under his homeowner's policy, and the CGL insurer says the injury was not business-related. After all, what does the employee's dog have to do with the business? What if the file box contained family photo albums and was only in the office area temporarily? And what if the employee was serving the customer the coffee at the kitchen table after the business was concluded? The CGL insurer could raise coverage questions (or, at least, shared liability questions) that would only be answered at a trial, a trial that would cost defense expenses, liability payments, and a possible loss of future business from that disgruntled customer.

There is very little an insured employer can do if the insurer decides it wants to contest a claim. So, the better course for the insured would be to make sure there is adequate insurance coverage for a business-related claim that occurs at the employee's home, and try to arrive at a pre-loss understanding among the parties involved—the insured, the insurer, and the employee—as to what is considered business-related activities covered by the CGL form. Such actions will not prevent every coverage dispute, but they will serve as good risk management tools.

CGL aside, the more complicated exposure when it comes to the employee working from home is workers' compensation coverage.

In most jurisdictions, an injury is compensable under the state workers' compensation law only if the injury arises out of and occurs during the course of employment. This point usually presents no problem if the employee is present at his office, plant, or store. However, for an employee working in his home, where is the dividing line between the course of employment and unrelated personal activities? Between arising out of the employment and arising out of some other non-work personal activity? For example, if an at-home employee stops writing in the middle of a report to answer the doorbell or to change a child's diaper, is the course of employment broken? If an employee working at home accidentally slices his hand fixing lunch, did this injury arise out of the employment?

The answer is that old, time-worn response: It all depends on the facts of the particular situation. A carefully drafted work from home policy that is agreed upon by all parties involved (employer, employee, and workers' comp insurer) would go a long way towards preventing disputes over workers' compensation coverage. Subjects like specific work hours and employee conduct, break periods and non-employee visitations, work areas on premises and leaving the premises (for example, to pick up some paper for the company printer) could all be part of the policy. Such an agreement would present strong evidence of the intentions and responsibilities of the parties.

Now, case law might also serve as a guidepost in trying to clarify the workers' compensation situation. When this article was orignially written, there was not much case law on the subject.  Any court rulings are state-specific due to the nature of the workers' compensation system, but the following case from Tennessee does offer some help.

In Wait v. Travelers Indemnity Company of Illinois, 240 S.W. 220 (Tenn. 2007), an employee working from home sought workers' compensation benefits after a neighbor assaulted her while she was preparing lunch in her home, a home where she had an employer-approved office. The workers' compensation insurer denied coverage, claiming that the employee's injuries did not arise out of or occur in the course of employment. The Tennessee Supreme Court ruled that in all respects, the employee's home functioned as her work place. Her personal break for lunch was well within the course of employment since personal breaks and other incidental acts (such as drinking coffee, smoking, and seeking toilet facilities) are reasonable parts of an employee's work duties. However, the Court continued, for a compensable injury to arise out of employment, it must emanate from a peculiar danger or risk inherent to the nature of the employment. In this particular incident, the assault was in no way connected to the employment. The assault did not occur because of any association the employee had with the employer. The employee was not attacked because she was an employee or because she was performing a job duty. The employee was not attacked because she was protecting the employer's property or otherwise advancing the employer's interests. The Court ruled that the facts in this case did not provide the required causal connection between the injury and the employment and so, while this injury did occur during the course of employment, it did not arise out of that employment. Workers' compensation benefits were denied.

In Schwan Food Co. v. Frederick, 241 Md. App. 628 (Court of Special Appeals of Maryland, 2019) Frederick worked as a customer service rep for Schwan. His normal work day including using his personal car to drive to local grocery stores, meet Schwan delivery drivers, and inventory the orders. One day, while downloading his work route for the day, Frederick slipped and fell on ice, causing injury to his right leg. Frederick filed a workers' comp claim, but the Workers' Compensation Commission ("WCC") denied the claim because Frederick's injuries did not arise out of and and in the course of his employment. Frederick appealed, requesting a jury trial. The Circuit Court reversed the WCC's decision and granted Frederick's motion for judgment because they found that he had been working from his home office. Schwan appealed. The Court of Special Appeals reversed the Circuit Court ruling because there was sufficient dispute of material fact as to whether F's home qualified as a "home work site."

Conversely, in Bramall v. Workers' Comp. Appeals Bd., 78 Cal. App. 3d 151 (Court of Appeal of California, Fourth Appellate District, 1978) the court found for the worker. Bramall worked as a legal secretary; part of her job was translating depositions from Spanish to English. On the evening of the incident, she was taking home two 50-page depositions she had to translate; the matter was of particular urgency because the person who had given the depositions was a migrant farm worker who was preparing to leave the area. Work-related distractions prevented Bramall from giving the depositions her full attention after 5 p.m., so she took them home. Her employer knew this was part of Bramall's routine with translating depositions and approved of the practice, partly due to his timely expectations. Bramall had a car wreck on her way home and suffered injuries. The workers' comp judge ("Judge") found that Bramall's injuries had been sustained in the course of employment and awarded compensation. On reconsideration, the workers' comp board decided that Bramall's compensation was barred by the "coming-and-going rule" and reversed her award. Bramall appealed. The Fourth District Appellate Court of California reversed, ruling that Bramall had been within the "dual purpose exception" to the coming-and-going rule; this exception states that when an employee is concurrently attending to both her own interests and her employer's interests, an inquiry concerning the business in which she was engaged at the time of the accident is impermissible.

Another case found in favor of the worker involves the family pet, something that is often wondered about when talking about hazards of working from home. The case is Sandberg v. JC Penney Co. (In re Sandberg), 243 Ore. App. 342 (Court of Appeals of Oregon, 2011) Sandberg worked as a custom decorator for JC Penney Company ("JC Penney"). JC Penney had a studio where Sandberg and worked one day per week; the rest of her time was spent off-site with clients. Due to the need to have current fabric samples, books, and prices at will, and because she had previously been in trouble for not having all available samples with her, Sandberg "was required to 'have an office' in her [van]." On the day of the accident, Sandberg needed to remove the previous week's fabric samples from her van to make room for the new ones she would be picking up. As she stepped out of her house to go to the garage, she stepped on her dog; she shifted her weight to her other foot, fell, and suffered a broken right wrist. Sandberg filed a workers' comp claim, which JC Penney denied. Both an administrative law judge and the workers' comp board ("Board") affirmed the denial upon appeal; the Board reasoned that Sandberg's injuries did not arise out of her employment and thus did not answer the question of whether the injury was in the scope of employment. Sandberg appealed. The Court of Appeals of Oregon reasoned that, even though Sandberg's injury was not due to the nature of her work, her work environment and home environment were sometimes one and the same. As Sandberg was going to her garage solely to do work, her injury arose out of her employment. The concern about the causal risk being outside of the employer's control was dismissed because JC Penney had control of whether Sandberg worked away from the studio, and therefore exposed Sandberg to risks outside of JC Penney's control.

As with many things, courts went both ways, with some finding for the employer and some for the employee. As always the devil is in the details, and in part will vary by jurisdiction. Working from home has become widely popular over the past several years, and knowledge of the risk exposures needs to be reviewed. This is knowledge that risk managers, insurers, and insureds should all seek.

Original article by David D. Thamann, JD, CPCU, ARM

From the April 2008 issue of Claims Magazine

Revised May 30, 2012 by Christine G. Barlow, CPCU

Revised March 4, 2020 by Christine G. Barlow, CPCU