Oregon Worker's Compensation Immunity Does Not Eliminate Additional Insured Coverage

In a February 22, 2010 summary judgment ruling in Clarendon Insurance Company v. American States Insurance Company (.pdf), United States District Court Judge Richard Jones addressed an issue that frequently arises between liability insurers for construction site injury claims: To what extent may the liability insurer of an immune subcontractor avoid coverage owed to a general contractor named as an additional insured pursuant to contract provisions and a "blanket" endorsement? T

The general contractor and its insurer Clarendon had settled a personal injury claim filed by a subcontractor's employee.  The subcontractor was insured by American States and its policy included a "blanket" additional insured endorsement.     But American States had refused to participate in the general contractor's defense or settlement and Clarendon filed an equitable contribution claim.

The court rejected all arguments by the American States to avoid coverage based upon the immunity to an employer against liability for employees' workplace injuries. First, the court found that the immunity afforded by the statute (ORS 656.018) does not extend to an insured employer's contractual obligation to procure insurance for another party.

Second, the court declined to apply an exclusion in the "blanket" endorsement, which states:

No coverage will be provided if, in the absence of this endorsement, no liability would be imposed by law on you. Coverage shall be limited to the extent of your negligence or fault according to the applicable principles of comparative fault.

The court did not explain its reasoning. Instead, Judge Jones only mentioned the other insurer’s argument that the second sentence limits the exclusion to comparative fault issues and then indicated that he agreed with Judge Janice Stewart's decision in Richardson v. Howard S. Wright Construction (D. Or. May 18, 2007) to reject application of the exclusion to this circumstance.
 

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