The employee exclusions in the employer's CGL and Umbrella policies barred coverage. Piatt v. Indiana Lumbermen's Mut. Ins. Co., 2015 Mo. LEXIS 32 (Mo. April 28, 2015).
Linda Nunley was killed while working for Missouri Hardwood Charcoal, Inc. The kiln's large steel door had been removed and was leaning upright against another kiln when it blew over and crushed Ms. Nunley. Her family filed a wrongful death suit against Junior Flowers, the company's sole owner, director, and executive officer. The complaint alleged that Flowers was negligent in ordering employees to lean the kiln doors upright, even though he knew it was unsafe. The complaint further alleged that Flowers breached a personal duty of care owed to Ms. Nunley and that his actions were "something more" that a breach of the company's duty to provide a safe workplace.
Flowers requested a defense under CGL and Umbrella policies issued by Lumbermen's. The policies insured Missouri Hardwood and its executive officers, but excluded liability for a work-related injury to an "employee of the insured." The policies also had a "separation of insureds" provision, stating that the insurance applied "separately to each insured against whom claim is made or suit is brought." Lumbermen's denied coverage.
Flowers and the underlying plaintiffs agreed, pursuant to a Missouri statute, to run through a trial where Flowers waived his right to testify or make arguments and agreed to assign his claims against Lumbermen's to plaintiffs. A bench trial resulted in the trial court entering a $7 million judgment in favor of the plaintiffs.
The plaintiffs then sued Lumbermen's for breach of contract for refusal to defend. The trial court granted summary judgment to Lumbermen's. It found that Flowers was Ms. Nunley's employer within the meaning of the insurance policies and based its ruling on the policies' employee exclusions.
The Missouri Supreme Court affirmed. The employer's exclusion in the CGL policy stated the insurance did not apply to "bodily injury to an employee of the insured arising out of employment by the insured; or performing duties related to the conduct of the insured's business." The separation of insureds provision stated that the insurance applied "as if each named insured were the only named insured; and separately to each insured against whom claim is made or suit is brought."
The wrongful death judgment held that Flowers was liable for negligently maintaining his company policy of leaning the heavy doors against the kilns. This was a claim of failure to provide a safe workplace, which was exclusively the employer's duty. Regardless of whether Flowers was also an employee of the company, the plaintiffs' claim could only have been asserted against him in this capacity as agent for Ms. Nunley's employer. The policies did not cover Flowers' liability for Ms. Nunley's death while she was on the job because he was acting as her employer.
Further, the separation of insureds language did not prevent Flowers from being considered the employer. Without a separation of insureds provision, an insurer could avoid liability under an employee exclusion just because some insured was the injured person's employer, regardless of who was seeking coverage. Separation of insureds provisions prevented this by confining the protections offered by the employee exclusions to situations where the employer was actually claiming the benefit of the policy.