Workers’ Compensation Availability Eliminates Cover Under D&O Policy
Post 5069
Sexual Harassment in the Workplace is Subject to Workers’ Compensation Law
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Rice Enterprises, LLC (“Rice”) appealed the District Court’s order dismissing its claims for insurance coverage against Zenith Insurance Company and partially dismissing its claims against RSUI Indemnity Company. Rice argued the District Court erred in applying two exclusions from the Zenith policy and in finding that coverage under RSUI’s “Umbrella” policy had not been “triggered.”
In Rice Enterprises, LLC v. RSUI Indemnity Co and Zenith Insurance Company, No. 24-1880, United States Court of Appeals, Third Circuit (April 30, 2025) affirmed the decisions of the District Court.
FACTS
Rice operated eight McDonald’s franchises in Allegheny County, Pennsylvania. On September 21, 2021, Rice’s former employee, L.H., sued Rice in the Allegheny County Court of Common Pleas for negligence. L.H. alleged Rice had hired a manager who was a “Lifetime Offender” under Megan’s Law, who proceeded to sexually harass and ultimately rape L.H.
Rice sought coverage with respect to L.H.’s suit under three insurance policies: one issued by Zenith and two by RSUI. The Zenith policy was the “Employers’ Liability” half of a dual “Workers’ Compensation and Employers’ Liability” policy, which covered liability due to “bodily injury . . . aris[ing] out of and in the course of [an] injured employee’s employment.” RSUI’s two policies were a “Directors and Officers Liability” policy and a “Commercial Umbrella” liability policy.
The Umbrella policy, the only RSUI policy provided for a defense if: a. The applicable limits of insurance of the “underlying insurance” and other insurance have been used up in the payment of judgments or settlements; or b. No other valid and collectible insurance is available to the insured for damages covered by this policy.”
Zenith moved to dismiss all claims against it, and RSUI moved to dismiss Rice’s claims only as to the Umbrella policy. The District Court granted both motions.
THE DISTRICT COURT DECISIONS
As to the Zenith policy, the District Court ruled that two exclusions applied. The first, termed “C.4,” excluded coverage for “[a]ny obligation imposed by a workers’ compensation, occupational disease, unemployment compensation, or disability benefits law, or any similar law.” The District Court interpreted C.4 to bar coverage for any claim falling within the exclusive domain of Pennsylvania’s Workers’ Compensation Act and it determined L.H.’s suit was such a claim because “the injuries and damages alleged by L.H. occurred during the course of L.H.’s employment and at L.H.’s Rice employment worksite.”
The second exclusion, “C.7,” barred coverage for “[d]amages arising out of coercion, criticism, demotion, evaluation, reassignment, discipline, defamation, harassment, humiliation, discrimination against or termination of any employee, or any personnel practices, policies, acts or omissions.” Because all allegations in L.H.’s complaint described harassing conduct by her supervisor, the District Court concluded C.7 applied.
As to the RSUI Umbrella policy, the District Court determined that coverage was not “triggered” because there was no allegation that other insurance had been used up or was unavailable.
ZENITH POLICY
Rice argued the District Court erred in applying C.7 because Rice’s liability arose out of “sexual misconduct” rather than “harassment.” However, instances of physical contact have the potential to be among the most severe and psychologically damaging types of sexual harassment.
The Third Circuit concluded that Rice’s claims against Zenith were properly dismissed.
RSUI Umbrella Policy
The RSUI Umbrella policy provides for a defense if other insurance policies have been used up or are unavailable. Rice’s complaint does not allege that either condition was met. The Third Circuit concluded Rice’s claims under the RSUI Umbrella policy were properly dismissed.
While Rice conceded that “the underlying insurance policies had not yet been exhausted,” Rice nevertheless argued that the RSUI Umbrella policy should have been kept in the case for convenience which argument was summarily rejected.
ZALMA OPINION
It continues to amaze me that lawyers will bring cases to an appellate court when faced with clear and unambiguous policy exclusions and even ask to keep an umbrella insurer as a defendant “for convenience” when the underlying policy had not been exhausted. Insurance policies are contracts and must be interpreted, as did the Third Circuit, as they are written.
(c) 2025 Barry Zalma & ClaimSchool, Inc.
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Convicted Criminal Seeks to Compel Receiver to Protect his Assets
Post number 5291
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The Work of a Court Appointed Receiver is Constitutionally Protected
In Simon Semaan et al. v. Robert P. Mosier et al., G064385, California Court of Appeals, Fourth District, Third Division (February 6, 2026) the Court of Appeals applied the California anti-SLAPP statute which protects defendants from meritless lawsuits arising from constitutionally protected activities, including those performed in official capacities. The court also considered the doctrine of quasi-judicial immunity, which shields court-appointed receivers from liability for discretionary acts performed within their official duties.
Facts
In September 2021, the State of California filed felony charges against Simon Semaan, alleging violations of Insurance Code section 11760(a) for making...
When There are Two Different Other Insurance Clauses They Eliminate Each Other and Both Insurers Owe Indemnity Equally
Post number 5289
In Great West Casualty Co. v. Nationwide Agribusiness Insurance Co., and Conserv FS, Inc., and Timothy A. Brennan, as Administrator of the Estate of Pat- rick J. Brennan, deceased, Nos. 24-1258, 24-1259, United States Court of Appeals, Seventh Circuit (February 11, 2026) the USCA was required to resolve a dispute that arose when a tractor-trailer operated by Robert D. Fisher (agent of Deerpass Farms Trucking, LLC-II) was involved in a side-impact collision with an SUV driven by Patrick J. Brennan, resulting in Brennan’s death.
Facts
Deerpass Trucking, an interstate motor carrier, leased the tractor from Deerpass Farms Services, LLC, and hauled cargo for Conserv FS, Inc. under a trailer interchange agreement. The tractor was insured by Great West Casualty Company with a $1 million policy limit, while the trailer was insured by Nationwide Agribusiness Insurance Company with a $2 million ...
Opiod Producer Seeks Indemnity from CGL Insurers
Post number 5288
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Insurers Exclude Damages Due to Insured’s Products
In Matthew Dundon, As The Trustee Of The Endo General Unsecured Creditors’ Trust v. ACE Property And Casualty Insurance Company, et al., Civil Action No. 24-4221, United States District Court, E.D. Pennsylvania (February 10, 2026) Matthew Dundon, trustee of the Endo General Unsecured Creditors’ Trust, sued multiple commercial general liability (CGL) insurers for coverage of opioid-related litigation involving Endo International PLC a pharmaceutical manufacturer.
KEY FACTS
Beginning as early as 2014, thousands of opioid suits were filed by governments, third parties, and individuals alleging harms tied to opioid manufacturing and marketing.
Bankruptcy & Settlements
Endo filed Chapter 11 in August 2022; before bankruptcy it ...
Passover for Americans
Posted on February 19, 2026 by Barry Zalma
“The Passover Seder For Americans”
For more than 3,000 years Jewish fathers have told the story of the Exodus of the enslaved Jews from Egypt. Telling the story has been required of all Jewish fathers. Americans, who have lived in North America for more than 300 years have become Americans and many have lost the ability to read, write and understand the Hebrew language in which the story of Passover was first told in the Torah. Passover is one of the many holidays Jewish People celebrate to help them remember the importance of G_d in their lives. We see the animals, the oceans, the rivers, the mountains, the rain, sun, the planets, the stars, and the people and wonder how did all these wonderful things come into being. Jews believe the force we call G_d created the entire universe and everything in it. Jews feel G_d is all seeing and knowing and although we can’t see Him, He is everywhere and in everyone.We understand...
Passover for Americans
Posted on February 19, 2026 by Barry Zalma
Read the full article at https://www.linkedin.com/pulse/passover-americans-barry-zalma-esq-cfe-5vgkc.
“The Passover Seder For Americans”
For more than 3,000 years Jewish fathers have told the story of the Exodus of the enslaved Jews from Egypt. Telling the story has been required of all Jewish fathers. Americans, who have lived in North America for more than 300 years have become Americans and many have lostthe ability to read, write and understand the Hebrew language in which the story of Passover was first told in the Torah.
Passover is one of the many holidays Jewish People celebrate to help them remember the importance of G_d in their lives. We see the animals, the oceans, the rivers, the mountains, the rain, sun, the planets, the stars, and the people and ...
You Get What You Pay For – Less Coverage Means Lower Premium
Post number 5275
Posted on January 30, 2026 by Barry Zalma
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When Experts for Both Sides Agree That Two Causes Concur to Cause a Wall to Collapse Exclusion Applies
In Lido Hospitality, Inc. v. AIX Specialty Insurance Company, No. 1-24-1465, 2026 IL App (1st) 241465-U, Court of Appeals of Illinois (January 27, 2026) resolved the effect of an anti-concurrent cause exclusion to a loss with more than one cause.
Facts and Background
Lido Hospitality, Inc. operates the Lido Motel in Franklin Park, Illinois. In November 2020, a windstorm caused one of the motel’s brick veneer walls to collapse. At the time, Lido was insured under a policy issued by AIX Specialty Insurance Company which provided coverage for windstorm damage. However, the policy contained an exclusion for any loss or damage directly or indirectly resulting from ...
