In the context of workers’ compensation, there are two classifications of employees: (1) actual employees; and, (2) statutory employees. A contractor who sublets part of its work to a subcontractor develops a statutory employment relationship with the employees of that subcontractor. Under Florida law, statutory employees are treated identically to actual employees for purposes of the standard employee exclusion clauses in insurance policies. See, generally, Florida Ins. Guar. Ass’n, Inc. v. Revoredo, 698 So.2d 890, 891-92 (Fla. 3rd Dist. Ct. App. 2006) and Michaels v. U.S. Fidelity & Guar. Co., 129 So.2d 427 (Fla. 2nd Dist. Ct. App. 1961).
In Revoredo, the Florida Third District Court of Appeals discussed the reasoning why there was no differential treatment between the two types of employees for purposes of the exclusion:
The logic in the exclusion from coverage of both types of employees is simple and compelling: the only coverage intended, and for which the premium has been paid, is the liability of the insured to the public as distinguished from liability to the insured’s employees whether or not they are protected by the workers’ compensation law . . . [the statute] does not make the statutory employer-employee relationship contingent on the securing of workers’ compensation for the employee.
Revoredo, 698 So.2d at 891. See, also, Amerisure Ins. Co. v. Orange & Blue Construction, Inc., 545 Fed.Appx. 851, 855 (11th Cir. 2013) (“unlike workers’ compensation insurance or employers liability insurance, which exist to provide employers for coverage for injuries that occur to employees during the scope of employment, the sole purpose of commercial general liability insurance is to provide coverage for injuries that occur to the public-at-large”).
In Stephens v. Mid-Continent Cas. Co., 749 F.3d 1318 (11th Cir. 2014), the United States Court of Appeals for the Eleventh Circuit held that a CGL employee exclusion applied to both actual and statutory employees and that the employee exclusion barred coverage for the worker’s fatal injuries. The case involved a situation where the representative of the deceased worker’s estate as the insured contractor’s assignee, brought an action against Mid-Continent Casualty Company alleging it wrongfully refused to indemnify the insured in the underlying wrongful death action.
The Court began its analysis by noting that the District Court below had correctly concluded that Florida’s law required that the employee exclusion clause in Mid-Continent’s policy be construed as applying both to actual and statutory employees of the insured employer, Anchorage Homes, LLC. Having resolved that issue of contract interpretation, the Court then turned its analysis to whether Mid-Continent had a duty to defend and indemnify Anchorage in the state court proceeding.
In the civil complaint filed in Florida state court, the representative of the decedent worker’s estate, Jennifer Stephens, alleged that Anchorage was hired to supply and install a modular home on property owned by Jeffrey and Connie Kirkland. At the time the decedent’s direct employer was “Team Fritz.” Stephens alleged that Anchorage’s gross negligence in failing to maintain the premises in a safe condition and to alert workers and employees of dangerous conditions, resulted in the death of Charles Becker, the decedent, who was performing installation work on behalf of his employer, Team Fritz. The allegations in the complaint did not indicate there was an employment relationship between Becker and Anchorage. The Court noted that at first blush, the allegations in the complaint would seem to have fairly and potentially brought the suit within coverage of Anchorage’s policy, which provided general liability coverage for personal injury claims brought against Anchorage. However, the District Court had discerned sufficient facts with the complaint itself to come to the conclusion that Anchorage had a contractor/subcontractor relationship with Team Fritz and, by extension, a statutory relationship with Becker, thereby triggering the policy’s employee exclusion, which relieved the insurer’s duty to defend. The District Court observed that the complaint alleged that Anchorage was “hired to supply and install a modular home,” and that Team Fritz also was “hired to install a modular home.” Those allegations, the District Court reasoned, suggested a subletting of Anchorage’s duties to Team Fritz. The Eleventh Circuit Court of Appeals doubted that the allegations in the state court complaint were sufficient in themselves to place the claims outside of policy coverage for purposes of a duty to defend. However, the Court found that it did not need to resolve that question, nor did it need to address the more difficult question of whether the resort to extrinsic evidence might be appropriate in the case. The Court sidestepped these issues because the record evidence established that, regardless of whether there was a duty to defend, Mid-Continent had no duty to indemnify Anchorage for claims arising from Becker’s death.
The Eleventh Circuit Court of Appeals found that Mid-Continent’s duty to indemnify Anchorage depended on whether Becker was Anchorage’s statutory employee and, therefore, the issue turned on the actual relationship between Anchorage and Team Fritz, i.e., whether Team Fritz was Anchorage’s subcontractor. Mid-Continent argued that Anchorage acted as a general contractor on the Kirkland project, and that Anchorage sublet part of its contractual obligation to Team Fritz. However, Stephens maintained that the Kirklands never hired a general contractor, because they acted as their own general contractor and their employment of Anchorage was merely the employment of a subcontractor. Under Stephens’ theory, both Anchorage and Team Fritz were subcontractors working side-by-side for the Kirklands. If this was true, it would preclude any statutory employment relationship between Anchorage and Team Fritz’s employees. However, the Eleventh Circuit Court of Appeals rejected this theory.
After reviewing Anchorage’s written contract with the Kirklands, which referenced Anchorage as a general contractor, and which indicated that Anchorage would furnish materials and perform all of the work shown on the construction documents for the construction of the Kirklands’ home, the Court concluded that Anchorage was a general contractor. The Court’s conclusion was supported by other evidence discussed in the opinion which is not directly relevant here. The Court concluded that there was overwhelming evidence establishing that Anchorage was the general contractor on the Kirkland project, and was in a vertical contractor/subcontractor relationship with Team Fritz. Because Anchorage was the statutory employer of Charles Becker under Florida law, see, Florida’s Workers’ Compensation Law, Fla. Stat. § 440.01 et seq., and Motchkavitz v. L.C. Boggs Indus., Inc., 407 So.2d 910, 912 (Fla. 1981), overruled on other grounds Employers Ins. of Wausau v. Abernathy, 442 So.2d 953, 954 (Fla. 1983), Anchorage was not entitled to indemnification under its general liability insurance policy for damages arising from Becker’s death on the job. Therefore, Stephens could not establish that Mid-Continent had a duty to indemnify Anchorage under Florida law and the underlying lawsuit.
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