The California Court of Appeal has held that, despite uncertainty as to who actually employed a worker who was killed in an accident, a subsequent wrongful death action against an insured did not trigger a defense obligation under the insured’s “employers’ liability” coverage. ( Power Fabricating, Inc. v. State Compensation Ins. Fund (2008) 167 Cal.App.4th 1446)
Facts
Power Fabricating, Inc. (Power) and a related entity, Temp Power Systems, Inc. (Temp), were in the business of providing temporary electrical power to construction sites. A developer requested that Temp re-route electrical power at a construction site. In performing this task, apprentice electrician Jonathon Kryzak (Kryzak) came into contact with an energized electrical line and was fatally electrocuted. A question existed as to whether, at the time of the accident, Kryzak worked for Power, for Temp, or for a “joint venture” comprised of the two entities.
Power and Temp were listed as “employer” under a workers’ compensation / employers’ liability policy issued by State Fund Insurance Company (State Fund). State Fund paid Kryzak’s widow statutory death benefits under the workers compensation part of the State Fund policy.
Subsequently, Kryzak’s widow brought a wrongful death action against Power. She alleged that Power negligently failed to confirm that the developer had de-energized the electrical system before Kryzak began work, failed to inspect Kryzak’s work, failed to implement safety procedures, and failed to provide a safe workplace.
Power tendered the wrongful death action to State Fund under the employers’ liability section of the State Fund policy. The employers’ liability section of the policy provided that the insurer would indemnify and defend an insured against a claim for covered “bodily injury to your employee that arises out of and in the course of employment….” The employers’ liability section of the policy specifically excluded coverage “ any obligation imposed by a workers’ compensation … law…. ”.
State Fund refused to defend Power in the wrongful death brought by Kryzak’s widow. As a result, Power sued State Fund for breach of contract and bad faith. The trial court granted summary judgment in favor of State Fund. Power appealed.
Holding
On appeal, Power contended that there was a “triable issue of fact” as to whether Kryzak was an employee of Power, Temp, or a joint venture comprised of the two entities. Specifically, Power argued that the widow’s claims against Power could fall within the employers’ liability coverage, but outside the workers’ compensation exclusion, if either: (1) Kryzak, as the employee of a Temp / Power joint venture , was injured by the negligent acts of Power; or (2) Kryzak, as an employee of Power, was injured by the negligent acts of the Temp / Power joint venture.
The Court of Appeal rejected this argument. According to the appellate court, if Kryzak was not Power’s employee, then the employers’ liability coverage would not be triggered in the first instance. Conversely, if Kryzak was Power’s employee, then the workers’ compensation exclusion would apply. In either scenario, there was no potential for coverage under the employers’ liability section of the policy. Because there was no potential for coverage, State Fund had no duty to defend Power in the underlying wrongful death action.
Comment
Employers’ liability insurance is traditionally written in conjunction with workers’ compensation policies. It is intended to serve as a “gap-filler,” providing protection to the employer in those relatively rare situations where either the employee is not subject to the workers’ compensation law, or the employee has a right to bring a tort action against the employer despite the provisions of the workers’ compensation statute. Here, neither situation was present.