Key Takeaways
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The New Jersey Supreme Court has confirmed the enforceability of an endorsement within an employer’s liability policy precluding coverage for “intentional wrong” claims
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The court also ruled that the New Jersey-specific endorsement does not violate public policy
On December 12, the New Jersey Supreme Court ruled that there was no coverage available to an employer for its employee’s workplace personal injury lawsuit under the employer’s workers’ compensation and employer’s liability policy. Notably, the Supreme Court affirmed the application of a New Jersey-specific endorsement within the employer’s liability coverage part that precludes coverage for so-called “intentional wrong” claims against an employer.
In Rodriguez, an employee was injured while performing the employer’s work and filed a petition against the employer for workers’ compensation benefits for his injuries, then filed a civil lawsuit against the employer to recover damages for the injuries. The civil complaint alleged that the employer was negligent, grossly negligent, and reckless, and also alleged that the employer acted intentionally in failing to prevent his injuries. The employer’s insurer agreed to provide coverage for the workers’ compensation claim under the workers’ compensation coverage part of its policy (Part One) but denied coverage for the civil claim under the policy’s employer’s liability coverage part (Part Two). The insurer based its denial under the employer’s liability coverage part on policy exclusions for “any obligation imposed by a workers’ compensation … law” and for “bodily injury intentionally caused by [the employer]” and on a separate New Jersey-specific endorsement that excluded coverage for claims made pursuant to the “intentional wrong” exception of the New Jersey Workers’ Compensation Act’s exclusive remedy provision. The employer sued the insurer to compel coverage, and the trial court granted the insurer’s motion to dismiss the insured’s claims because it found no coverage was owed under the insurer’s policy. The Appellate Division and then the Supreme Court affirmed.
The Supreme Court ruled that Part One of the policy did not provide coverage for the civil lawsuit because that coverage part applies only to claims seeking benefits under the workers’ compensation lawsuit and the civil lawsuit sought money damages based on tort claims.
As to Part Two of the policy, that part’s Insuring Agreement stated that the insurer owed no defense obligation for claims not covered by the coverage part. The court ruled that the exclusion within Part Two for “any obligation imposed by a workers ‘compensation … law” barred coverage to the employer for the employee’s negligence, gross negligence, and recklessness claims because it found that such claims are “processed exclusively through workers’ compensation” and thus were obligations imposed under the workers’ compensation law. While recognizing that employer’s liability coverage is traditionally thought of as a “gap filler” for the insured, to cover employee workplace injury claims not subject to state workers’ compensation statutes, the Supreme Court found that there was no “gap” in the employer’s coverage for the civil lawsuit because the insurer already provided coverage for the negligence, gross negligence, and recklessness claims through the provision of workers’ compensation benefits under Part One of the policy.
The Supreme Court further ruled that the employee’s intentional act claims were expressly excluded by both the Part Two exclusion for “bodily injury intentionally caused by” the employer and by the New Jersey-specific endorsement that bars coverage for claims alleging an intentional wrong by the employer. The Supreme Court also ruled that the New Jersey-specific endorsement did not violate public policy because New Jersey courts have long enforced exclusions for intentional conduct and because the endorsement was specifically developed by the New Jersey entity charged with changing forms within workers’ compensation/employer’s liability policies to respond to prior New Jersey case law requiring express language to bar coverage for intentional act claims.
