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Insurance – CGL – Oklahoma Law – ‘Any Employer’ – Contractor’s Employee

Naylor Concrete Construction Co. v. Mid-Continent Casualty Co.  (Lawyers Weekly No. 14-16-0086, 34 pp.) (Sam Ervin IV, J.) Appealed from Mecklenburg County Superior Court (W. Erwin Spainhour, J.) N.C. App. Unpub.

Holding: The plaintiff-subcontractor’s commercial general liability insurance policy treated the general contractor as an additional insured, and the policy’s “Employer’s Liability” exclusion said there would be no coverage for bodily injury claims arising out of employment by “any insured.” Consequently, there was no coverage when one of the contractor’s employees was struck and injured by a backhoe operated by one of the plaintiff’s employees.

We affirm summary judgment for the defendant-CGL carrier.

Defendant is an Oklahoma corporation which is not registered to do business in North Carolina, and the policy in question was both issued and delivered in Oklahoma. The only connection between the policy and this state is the fact that the construction project is located in North Carolina. We agree with the parties that Oklahoma law applies in this case.

Under Oklahoma’s “reasonable expectations” doctrine, if an insurer or its agent creates a reasonable expectation of coverage in the insured which is not supported by policy language, the expectation will prevail over the language of the policy. However, the “reasonable expectations” doctrine only applies to cases in which the policy language is ambiguous and to situations where, although clear, the policy contains exclusions masked by technical or obscure language or hidden exclusions.

Plaintiff contends that, in accordance with the “reasonable expectations” doctrine, the employer’s liability exclusion must be construed so as to give effect to the parties’ expectations, which were, according to plaintiff, that the exclusion would only apply to claims for which the named insured’s workers’ compensation coverage was available.

However, the policy has both an employer liability exclusion and a separate exclusion applicable to situations in which workers’ compensation coverage is available, a fact which severely undercuts plaintiff’s suggestion that the employer exclusion was only intended to operate in instances in which the named insured’s workers’ compensation coverage had been implicated.

The clear language of the employer liability exclusion demonstrates that defendant was not obligated to provide coverage in any situation in which the injured party was employed by a named insured.

Although the applicable version of the employer liability exclusion was adopted via a modification on page 53 of the endorsements that follow the policy (changing “the insured” to “any insured”), the policy had been renewed on multiple occasions, and a number of endorsements had been added. The policy includes a list of endorsements. The endorsement at issue states at the top of the page, “THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY.” The manner in which the endorsement was implemented put plaintiff on notice that the policy had been changed.

The expression “any insured” is neither technical nor obscure.

We cannot conclude that the endorsement at issue here was couched in “obscure and technical” language or “hidden” from plaintiff. As a result, we conclude that the endorsement does justify the use of the “reasonable expectations” doctrine to interpret the employer liability exclusion in the manner contended for by plaintiff.

Plaintiff also argues that the policy’s severability clause was ambiguous enough to permit us to construe the policy in a manner favorable to plaintiff. This argument was specifically rejected in BP America, Inc. v. State Auto Property & Casualty Insurance Co., 148 P.3d 832 (2005).

Affirmed.

 


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