Insurance Should Never Apply to Indemnify Insured for its Intentional Acts
Post 4838

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Slyvia Melania Tejada de Tapia was injured at work and filed a workers’ compensation claim against her employer, 74 Industries, Inc. (74 Industries), which was settled pursuant to an order approving settlement with dismissal under statute called the Section 20 Settlement resulted in the dismissal of plaintiff’s workers’ compensation claims with prejudice. Workers’ Compensation is an exclusive remedy for an employee injured at work without fault.

In Sylvia Melania Tejada De Tapia v. 74 Industries, Inc. and Velcro USA, Inc., et al. v. New Jersey Manufacturers Insurance Company, No. A-2643-21, Superior Court of New Jersey, Appellate Division (July 12, 2024) the Appellate Division explained why workers’ compensation has no effect on tort law.

FACTS

Plaintiff suffered an injury after she was bitten or stung by an insect during the course of her employment as a sewing machine operator with 74 Industries. According to plaintiff, insects routinely infested the packages of fabric and materials that employees handled and frequently bit and stung employees. Plaintiff was hospitalized for treatment related to the infection she suffered as a result of the insect bite. The infection caused her right leg to swell and form green open sores.

New Jersey Manufacturers Insurance Company’s (NJM) had issued a standard workers’ compensation insurance policy (the Policy) to 74 Industries and recommended settlement of plaintiff’s workers’ compensation claim. Prior to the settlement, however, plaintiff had also filed a complaint in the Law Division alleging intentional torts against 74 Industries. 74 Industries filed a third-party complaint against NJM seeking coverage under the Policy for plaintiff’s claims of intentional wrong asserted against 74 Industries. NJM denied coverage citing policy exclusions for intentional torts and moved to dismiss 74 Industries’s third-party complaint. The Law Division judge granted NJM’s motion to dismiss 74 Industries’s third-party complaint for failure to state a claim.

NJM defended 74 Industries in workers’ compensation court and eventually recommended 74 Industries settle plaintiff’s case for a lump sum payment of $25,000 by way of an order approving settlement with dismissal.

Prior to the entry of the Section 20 settlement, however, plaintiff had filed an action in the Law Division alleging her injuries were caused by 74 Industries’s intentional misconduct under the principles explained by the Court in Laidlow v. Hariton Mach. Co., 170 N.J. 602, 14 (2002).

Plaintiff had filed a series of amended complaints, each of which included the same four counts against 74 Industries.

The court further found that plaintiff’s allegations fell squarely within the Policy’s C5 exclusion for “intentional wrongs” and rejected 74 Industries’s contention the Policy was ambiguous because the C7 exclusion and C7 endorsement provided coverage for “bodily injuries” under Part Two of the Policy.

DISCUSSION

The interpretation of an insurance policy, like any contract, is a question of law. In attempting to discern the meaning of a provision in an insurance contract, the plain language is ordinarily the most direct route. The plain and unambiguous language in the C5 endorsement clearly covers plaintiff’s intentional tort claims that result from a subjective intent to injure and those that are substantially certain to have caused injury.

As the motion court acknowledged, plaintiff asserts that she was threatened with adverse employment action if she left the jobsite for medical treatment, which based on a fair reading of the complaint suggests a cause of action for coercion. Defendant’s claim that it is entitled to coverage under the C7 exclusion fails because plaintiff’s causes of action are founded on intentional wrongs.

Lastly, the Appellate Division rejected 74 Industries’s argument that public policy supports coverage for intentional wrongs as New Jersey courts have consistently held that exclusions for intentional wrongs contained in insurance policies are legally valid.

Therefore there was no basis to support 74 Industries’s argument that public policy favors coverage for plaintiff’s intentional wrongs filed in Law Division. Therefore the court could discern no basis to conclude NJM had a duty to defend or indemnify 74 Industries against plaintiff’s intentional wrong claims made in the Law Division fourth-amended complaint.

ZALMA OPINION

Insurance, by definition, only insures against fortuitous conduct, an accident. Intentional acts, like those pleaded by Ms. Tejada de Tapia are not fortuitous but intentional and not insurable. The insurer, to be safe, added an exclusion for intentional acts which made clear its position and the requirement of fortuity.

(c) 2024 Barry Zalma & ClaimSchool, Inc.

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