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November 1, 2009

Employee Liability Exclusion Not Against Public Policy

In Utica First Insurance Company vs. Santagata, Appellate Division, First Department, October 20, 2009, the Court affirmed an order of the lower court declaring that the plaintiff had no obligation to defend or indemnify its insureds in an underlying liability action in connection with a construction accident.

The plaintiff's liability policy included an employee exclusion excluding coverage in cases of bodily injury to an employee of the insured or an employee of a contractor hired by the insured occurring during the course of employment.

The insured attempted to circumvent the policy exclusion by arguing that such a limitation violated the public policy of the State of New York. The Appellate Court rejected the argument. "[W]hen statutes and Insurance Department regulations are silent, [courts] are reluctant to inhibit freedom of contract by finding insurance policy clauses violative of public policy***.

There is no statutory requirement for commercial liability coverage which would prohibit insurers from limiting their contractual liability in the manner done so here***."

This decision highlights the fact that an employee exclusion in a personal injury liability policy does not violate the public policy of the State of New York.

If you require further information regarding the information presented in this Legal Alert and its impact on your organization, please contact any of the members of the Practice Area.

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