Supreme Court of Texas Rules That Coverage Was Precluded by Policies’ “Leased-In Worker” Exclusion

July 19, 2016 | Insurance Coverage

The Supreme Court of Texas has ruled that a “leased-in worker” exclusion in commercial general liability insurance policies precluded coverage of a claim brought by parents whose son had died in an accident on a drilling rig.

The Case

After an accident on a drilling rig, a deceased worker’s parents sued the company that owned the rig. The drilling company demanded that its commercial general liability insurers defend it in the litigation. The insurers denied that coverage existed, relying on a condition excluding “leased-in employees or workers.”

The parents obtained a judgment against the drilling company, which assigned its rights against its insurers to the parents. The parents sued the insurers, and a jury returned a verdict in the parents’ favor.

The court of appeals reversed the trial court’s judgment and rendered judgment that the parents take nothing.

The parents appealed to the Texas Supreme Court.

The Texas Supreme Court’s Decision

The court affirmed, finding that the evidence was conclusive that the deceased worker was a “leased-in” worker and, therefore, that coverage under the policies was precluded as a matter of law.

In its decision, the court explained that a leased-in worker was a person who performed work for the insured under an agreement with another allowing temporary use of the worker, even though the leased worker would not be an employee of the insured.

Here, the court continued, the evidence showed that the parents’ son worked for a company that agreed that it would provide workers to the drilling company “as needed” depending on the project. The court said that even if that company was an independent contractor to the drilling company, and even if the parents’ son was an independent contractor to the drilling company, he still was considered a “leased-in worker” under the policies.

Because their son was a leased-in worker as a matter of law, the parents’ claim was excluded from coverage under the policies and their action failed as a result, the court concluded.

The case is Seger v. Yorkshire Ins. Co., Ltd., No. 13-0673 (Tex. June 17, 2016).

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