Continental Ins. Co. v. State Ins. Fund, 1 N.Y.3d 190 (2003)
An election to exclude executive officers from Workers’ Compensation coverage also eliminates a corporation’s coverage for third-party claims arising from injuries to those officers under the Employer’s Liability portion of the same insurance contract.
Summary
This case addresses whether excluding executive officers from Workers’ Compensation coverage under Workers’ Compensation Law § 54(6) also eliminates Employer’s Liability coverage for injuries to those officers. Thomas Murray, an executive officer excluded from his company’s Workers’ Compensation policy, was injured and sued a general contractor, Concept Construction. Concept, in turn, sought indemnification from Murray’s company. When the State Insurance Fund denied coverage based on the exclusion, Concept’s insurer, Continental, sued. The Court of Appeals held that the exclusion applied to both Workers’ Compensation and Employer’s Liability, as these coverages are inextricably linked, and extending Employer’s Liability without corresponding Workers’ Compensation would contradict legislative policy.
Facts
Thomas and Timothy Murray owned T & T Murray Company, Inc., and served as its only executive officers. They purchased a Workers’ Compensation and Employers’ Liability policy from the State Insurance Fund. T & T elected to exclude the Murray brothers from Workers’ Compensation coverage under Workers’ Compensation Law § 54(6). Thomas Murray was injured while working on a roofing job and sued Concept Construction Corp., the general contractor. Concept was later awarded a judgment against T & T based on common-law indemnification.
Procedural History
The State Insurance Fund denied coverage to T & T based on the exclusion. Continental Insurance, as equitable subrogee to Concept’s rights, sued the State Insurance Fund in the Court of Claims. The Court of Claims granted summary judgment to the State Insurance Fund, dismissing the claim. The Appellate Division affirmed. The Court of Appeals granted leave to appeal.
Issue(s)
Whether an election to exclude executive officers from “coverage under this chapter” pursuant to Workers’ Compensation Law § 54(6) eliminates coverage for third-party claims arising from injuries to those officers under the Employers’ Liability portion of the same compensation insurance contract.
Holding
Yes, because Employers’ Liability insurance is inextricably linked to Workers’ Compensation coverage, and allowing Employers’ Liability coverage without corresponding Workers’ Compensation would contradict the legislative policy.
Court’s Reasoning
The court reasoned that Workers’ Compensation and Employers’ Liability insurance are jointly defined under the Insurance Law as comprehensively insuring employers for claims of injury to or death of an employee (Insurance Law § 1113[a][15]). An insurance contract providing exclusively for Employers’ Liability coverage, without corresponding Workers’ Compensation coverage, is void under Workers’ Compensation Law § 54(4). The court stated that Workers’ Compensation Law § 54(6) is an exception to the exclusion of executive officers from the definition of “employee” under the Workers’ Compensation Law (§ 2[4]). Once the Murray brothers elected to be excluded from Workers’ Compensation coverage, they were no longer considered employees, meaning that T & T’s Employers’ Liability insurance, which covers injuries to employees, did not extend to Thomas Murray’s injury. The court noted the policy itself stated the corporation