When a legally employed minor is injured in the course of employment

By smassmann

FC&S Online


Question of the month

When a legally employed minor is injured in the course of employment, the workers compensation insurance mechanism functions in the same fashion as in any employee injury situation. That is, the insured minor is eligible for all benefits prescribed by the state's workers compensation law, to be paid by the employer's workers compensation insurance. However, when illegally employed minors are injured in the course of employment, employers can find themselves in difficult situations regarding insurance coverage, particularly when the employer has knowingly permitted the illegal employment.

Employers and the insurance professionals that handle the workers compensation exposures should be familiar with the employment laws of the state concerning minors, and the scope of coverage under the workers compensation and employers liability insurance for minors employed contrary to law. The article on the Workers Comp B.2 pages provides general information on the subject, as well as court cases from various states dealing with claims by minors who have been injured on the job. (This information can be especially helpful now since summertime is approaching and with it, the great influx of minors into the job market.)

Medical expense coverage amid questionable accident

Reinhardt made a claim under her auto insurance policy for medical and funeral expenses for her son arising out of an accident. The son was pulled over for speeding while driving Reinhardt's car and when the investigating officer left the son (Adam) unattended momentarily to retrieve a breathalyzer, the son attempted to flee. Adam started the car, put it in reverse, knocked down the police officer and ran over his leg, and then pinned another officer between Reinhardt's car and the policy vehicle. The pinned officer fired six shots at Adam, fatally wounding him; the officer stated that he did this to prevent Adam from running over the downed officer again.

Reinhardt submitted a claim for the med pay expenses and claimed the injuries suffered by Adam were the result of an auto accident. The insurer declined the claim and Reinhardt filed a lawsuit. The district court granted the insurer's motion for summary judgment based on the actions and resulting injuries of Adam not being accidental, and the insured appealed. This case is Reinhardt v. Metropolitan Property & Casualty Insurance Company, 2009 WL 97165 (Neb.App.). (Note that this opinion is not designated for permanent publication.)

The insured made assignments of error that the appeals court addressed. Reinhardt said that the court erred in failing to define accident solely from the perspective of the party acted upon or affected thereby. And, she said the court erred in finding that there was no accident because Adam's death resulted from Adam's intentional actions.

The appeals court noted that the parties' primary dispute here was whether Adam's injuries and death were the result of an accident. The trial court defined an accident as an incident that was not expected, intended, or foreseen by any of the parties involved, and that if one person acted intentionally, there was no accident as to the other persons affected by the incident. In this case, the court found that the policeman intentionally shot Adam and hence, there was no accident. The appeals court concluded this was not correct and that it was necessary to examine whether there was an accident from Adam's perspective because he was the party acted upon.

However, looking at the incident from this point of view, the appeals court still found that there was no accident. The insured contended that the incident was an accident because Adam did not intend to be shot and killed; but the appeals court said that Adam's injuries and death were the foreseeable result of his actions. The court stated that "where the party acted upon was the aggressor and provoked the foreseeable use of deadly force, there is no accident". Since Adam voluntarily put his life at stake, he deliberately took the chances of getting killed.

The court held that the facts of the incident showed that Adam's death was the probable consequence of his actions. He continued to back his vehicle when, at the very least, he must have known that continuing to do so was very likely to cause the downed officer serious injury or death. Adam also must have known that he had pinned the other policeman between the cars, and it was foreseeable that policy officers will react with deadly force when they believe that their lives and the lives of others are threatened. Therefore, as a matter of law, Adam's injuries and death were not the result of an accident.

Because of Adam's actions and because the medical provision of the policy only covered accidents, the judgment of the trail court was affirmed.

Scrivener's error, mutual mistake, and insurable interest

In the case of Tiger Fibers, LLC. v. Aspen Specialty Insurance Company, 2009 WL 122753 (E.D.Va.), the insureds brought an action against the insurer to recover under a property/casualty insurance policy. All the parties involved filed cross-motions for summary judgment and the district court granted some and denied some. However, the appeal of this case is found in the court's discussion of three items in particular: scrivener's error, mutual mistake, and insurable interest.

A scrivener is one whose occupation is to draw up contracts, write deeds and contracts, and to prepare other species of written instruments. So, of course, a scrivener's error is when a contract writer makes a mistake in the wording of the contract. A court looks at a scrivener's mistake as a narrow and demanding exception to the general rule that a court is not permitted to rewrite a document or add terms not included by the parties to the contract; the thinking is that a scrivener's error is difficult to prevent and no useful social purpose is served by enforcing mistaken terms.

In this case, the insurer's claim of a scrivener's error being grounds for denying coverage for a fire loss was denied by the court because a careful examination of the facts showed there was nothing on the face of the policy that would suggest that the coverages were intended to be different that what is listed. Moreover, under Virginia law, whether there is a scrivener's error must be decided based on the policy itself and not on any parol evidence; the documents cited by the insurer fell outside the four corners of the insurance contract. And, the facts showed that the policy was reviewed multiple times by different people with the insurance company before its issuance and this review process produced no claims of any typographical or clerical error.

The insurer also sought reformation of the policy (and hence, no coverage) on the grounds of mutual mistake. Reformation of a contract provides relief against a mistake of fact in a written instrument where clear and convincing evidence demonstrates that both parties entered into the written agreement mistakenly believing it reflects their antecedent bargain. In determining whether a mutual mistake of fact existed at the time of the contract, the inquiry is whether each party held the same mistaken belief with respect to a material fact at the time the agreement was executed. In this case, the court found that the insurer had not demonstrated by clear and convincing evidence that either party to the insuring agreement intended not to provide insurance coverage for the building that burned.

As for the insurable interest item, the insurer argued that the lessee lacked any insurable interest in the property that burned and so, the insuring agreement is void. The United States District Court found that Virginia courts have not ruled on whether a commercial lessee has an insurable interest in a rented building under the circumstances particular to this case. However, the state courts have ruled under other circumstances that an insurable interest need not be a legal or equitable title, but that a substantial economic interest is an insurable interest if it is lawful; in other words, the definition of an insurable interest contemplates an expansive reach. (The district court then offered a review of cases from other jurisdictions that have addressed the issue of insurable interest -- Iowa, Florida, and Indiana.

On these bases, the court decided that the primary inquiry into insurable interest should be to what extent the economic interests of a party are exposed to a pecuniary loss. The lessee here had a financial risk imposed upon it in the event of damage to the property and so, it had a clear economic interest in the property. The interests of the lessee were lawful, substantial, and economic and as such, the statutory definition of an insurable interest was met.

Your work exclusion and "that particular part"

Gore Design Completions, Ltd. v. Hartford Fire Insurance Company, 538 F.3d 365 (USCA 5th Cir. 2008) is a case where the insured brought a declaratory judgment action seeking partial summary judgment on the insurer's duty to defend in an arbitration proceeding. However, the court of appeals hearing this case also delved into the "your work" exclusion and the "that particular part" language in the general liability policy, and the court's views on these items are worth reviewing.

This was a case where the insured was hired to work on a business jet and then subcontracted the installation and engineering of an in-flight entertainment system to another company. During the installation of the system, an alleged mistake in the wiring occurred and the aircraft was damaged. After the ensuing lawsuit was filed, the insurer asserted some exclusions that it said prevented any coverage for the damage claims.

The first exclusion was the care, custody, or control exclusion. The court noted that under Texas law, only the area being repaired by an insured is considered to be in that insured's care, custody, or control. Based on the facts of this incident, the court said that while one could argue that the electrical system was generally in the control of the insured, it did not follow that the entire plane was. So, there is an ambiguity here as to whether the exclusion applies and under a liberal construction, the exclusion has to be rejected as a basis to deny coverage.

The policy also excluded coverage for property damage to that particular part of any property that must be restored, repaired, or replaced because the work of the insured was incorrectly performed on it. The insurer contended that this exclusion applied to the entire aircraft and not just the electrical system. The court said that Hartford's interpretation of the exclusion reads out the words "that particular part." If work on any part of a property would leave an insured exposed for damages to the entire property, the court said that the exclusion should state: property damage to property that must be restored, repaired, or replaced because your work was incorrectly performed on any part of it. As it stood, though, the policy language was not clear enough to require a court to accept the insurer's interpretation, so this exclusion was held to not be applicable.

The final opinion of the appeals court was to reverse the district court's grant of summary judgment to the insurer.

Defective construction claim and the property damage exclusion

In this case, the insurer filed a declaratory judgment action seeking a determination that it had no duty to defend or indemnify its insured, a builder, from a lawsuit stemming from the insured's alleged defective construction. The case is Mid-Continent Casualty Company v. JHP Development, Inc., 2009 WL 189886 (C.A.5, Tex.). The trial court in the original hearing held that the exclusions put forth by the insurer did not apply to the damages being sought; the insurer appealed.

The appeals court noted that the construction plans called for the condominium units to remain partially unfinished until they were sold, so that the new owner could choose the finish for the unit. The model unit was completed in the spring of 2001 and the remaining units still required painting, flooring, plumbing, and electrical fixtures.

During this time, due to the insured's failure to properly water-seal the exterior finishes and retaining walls, large quantities of water penetrated the interior of the structure through ceilings and walls, under doors, and at other points, damaging contiguous building materials and interior finishes, drywall, stud framing, wiring, and wood flooring. This all happened prior to the final completion of the project as a whole.

The owner of the project sued for damages and the insured sought coverage from Mid-Continent. The insurer denied coverage and filed a declaratory judgment action and lost.

Mid-Continent claimed that the trial court's holding that two exclusions, j(5) and j(6), on the general liability policy did not apply was in error. Exclusion j(5) excludes property damage to that particular part of real property on which the insured is working if the property damage arises out of those operations. Exclusion j(6) excludes property damage to that particular part of any property that must be restored, repaired, or replaced because the work of the insured was incorrectly performed on it. Both exclusions are business risk exclusions, common to commercial general liability policies, and designed to exclude coverage for defective work performed by the insured.

The appeals court noted that both parties agreed that the use of the present tense in exclusion j(5) makes it clear that the exclusion only applies to property damage that occurs during the performance of construction operations by the insured. The disagreement is whether the insured was in fact performing operations when the water intrusion occurred. One party argued that the insured was not performing operations at the time of the damage because construction operations had been suspended and were not actively occurring over the period of time during which the water intrusion occurred. The insurer countered that the insured was performing operations at the time of the damage because the whole project had not yet been completed.

The court said that the ordinary meaning of "performing operations" is the active performance of work. The prolonged, open-ended, and complete suspension of construction activities pending the purchase of the condominium units does not fall within this ordinary meaning. This was not merely a brief, temporary halt to the work, but rather a total cessation of active construction work for the foreseeable future. Although the insured intended to eventually complete construction work once the units were sold, an actor is not actively performing a task simply because he has not yet completed it but plans to do so at some point in the future. Exclusion j(5) did not apply under this factual situation.

As for exclusion j(6), the defendant argued that the "that particular part" language in the exclusion makes it clear that the exclusion only applies to damage to the part of the condominium project that was itself the subject of the defective work and not to other parts of the condominium project that were damaged as a result of the defective work. The insurer said that the exclusion covers all property damage to the project that resulted from the defective work.

The appeals court saw the issue as this: whether the exclusion bars recovery for damage to any part of a property worked on by a contractor that is caused by the defective work, including damage to parts of the property that were the subject of only nondefective work, or whether the exclusion only applies to property damage to parts of the property that were themselves the subject of the defective work. The court chose the latter approach.

The findings of the trial court were affirmed.

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