Exclusions Case Analysis

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It should be assumed that this decision is limited to employers that are also Indian casinos, and thus, exempt from worker’s compensation laws. Nevertheless, if one accepts the court’s reasoning as sound, the only logical result is that private employers’ general liability policies also provide coverage for injuries such as this, even though they should only be covered by worker’s compensation insurance.

The language in the policy is standard and unremarkable. The insurer is not liable for injuries “arising out of and in the course of his or her … employment.”

The only reasonable explanation for the choice of these particular words in the exclusion is to make indisputably clear that it excludes coverage for any injury that would be covered by worker’s compensation.

Nevertheless, the court disregards this, and concludes the language should be interpreted by the definition of a reasonable lay person reading the language.

This ignores that lay persons do not purchase public entity general liability policies. Public entities do, and invariably, they have attorneys who must be presumed to be familiar with the basics of worker’s compensation laws.

“Arising out of and in the course of his or her … employment,” has a distinct meaning in this context that should be obvious to any public entity purchasing a policy of this nature — the phrase means whatever LIRC or the Wisconsin Supreme Court says it means in the context of the worker’s compensation laws.

The court’s reasoning has a superficial appeal because, as an Indian tribe, the worker’s compensation laws are irrelevant to it. But that does not change the fundamental questions that the court is considering: what are the intentions of the parties?; and what would a reasonable person in the position of the insured understand the term to mean? Garriguenc v. Love, 67 Wis.2d 130, 134-135, 226 N.W.2d 414 (1975).

The intentions of the parties are fairly easy to discern. The insurer put the exclusion in for the same reason it does in every such policy it issues — so that it does not have to cover any injury that would be covered by worker’s compensation. Meanwhile, the tribe set up a self-insurance plan with CBSA to cover just those sorts of injuries, even though it is not subject to Wisconsin’s worker’s compensation laws.

It is patently unreasonable to conclude anything other than that the parties contemplated that the CBSA plan would pay for any injuries that normally would be covered by worker’s compensation.

Turning to the reasonable person’s interpretation of the exclusion, had the court applied the proper standard, it would have found the understanding of a layperson of the phrase to be patently irrelevant in a public entity liability policy.

It’s not a homeowner’s policy at issue; it’s a public entity policy. The policy does not use unusual language; it uses language that any attorney practicing in Wisconsin would know and understand.

Unfortunately, by looking to a layperson’s understanding of the phrase, rather than the understanding of a reasonable public entity represented by counsel, the court threatens to create havoc for general liability policies for private businesses that use identical language.

	Links Wisconsin Court of Appeals Related Article Slip and fall does not arise from employment

It seems impossible that any court would actually extend the court’s reasoning in this case to such a policy. Any reasonable businessperson would know that the purpose of the exclusion is to prevent concurrent coverage for injuries also covered by worker’s compensation.

Nevertheless, if one accepts the reasoning of the court of appeals as sound, then, logically, there is no legitimate basis to make such a distinction. The holding in this case does not ultimately turn on the status
of the employer as an Indian tribe, but on the court’s conclusions of what a reasonable layperson would interpret the “arising out of” language to mean.

If an Indian tribe running a casino worth millions of dollars and, presumably, employing a whole staff of attorneys, is to be treated as no more sophisticated than a layperson, it would not be reasonable or just to hold the average small businessperson to a higher standard.

Thus, while it is unlikely any court would extend the reasoning of the court of appeals in that way, the logical conclusion of the court’s decision in this case is that general liability insurers throughout the state are responsible for enormous liabilities that they reasonably believed they had excluded.

Admittedly, the exclusive remedy provisions of the worker’s compensation laws would bar double recovery on an employee’s part. But if an employer allowed its worker’s compensation insurance to lapse, but kept its general liability insurance, then arguably, the latter insurer could be liable for an injury such as the one in the case at bar, unless the employee exclusion makes explicit reference to the worker’s compensation laws.

– David Ziemer

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David Ziemer can be reached by email.