The California Court of Appeal has held that an employment practices liability exclusion in a CGL policy did not apply where a subcontractor’s employees sued the insured for a wrongful employment practices and false imprisonment. (North American Bldg. Maintenance, Inc. v. Fireman’s Fund Ins. Co. 2006 WL 563121)
Facts
North American Building Maintenance, Inc. (NABM) entered into janitorial service contract with Target Corporation, Inc. (Target), and then subcontracted the work to with California Building Management Services (CBMS).
Three CBMS employees filed suit against CBMS, NABM and Target, alleging generally that “the defendants” had failed to pay janitorial workers the promised hourly wage and/or pay them for all the hours they worked; had failed to give the workers an accurate report of their hours and wages; had failed to provide workers with required meal breaks; and had falsely imprisoned the workers by locking them inside the stores at night while they were working, and sometimes after their shifts had ended.
NABM tendered the defense of the workers’ suit to its liability insurer, Fireman’s Fund Insurance Company, asserting there was a potential for coverage under Fireman’s Fund’s CGL policy for the workers’ false imprisonment claim.
Fireman’s Fund denied NABM’s tender, asserting that even though the false imprisonment claim fell within the policy’s “personal injury” coverage, the workers’ claims were nevertheless excluded by the policy’s employment practices liability (“EPL”) exclusion. The EPL exclusion precluded coverage for “personal injury” arising out of any employment-related practices, and applied whether the insured could be held liable “as an employer or in any other capacity.”
NABM argued that the EPL exclusion applied only to claims by its own employees, not to claims by a subcontractor’s employees. In contrast, Fireman’s Fund argued that the phrase “as an employer or in any other capacity” meant the exclusion applied even to claims by a subcontractor’s employees.
Holding
The Court of Appeal agreed with NABM, finding that the phrase “as an employer or in any other capacity,” had “no unmistakable meaning.” The Court held that the EPL exclusion was generally directed toward claims relating to prospective, actual or former with the insured, and that the exclusion did not apply to the claims another company’s employees make against an insured.
Comment
This case again demonstrates that California courts remained committed to the principle that exclusions must be plainly and clearly worded, and must be conspicuously placed in the policy.