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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Arsonist Tried To Represent Himself, Failed, and Sought Habeas Relief
Post number 5357
Read the full article at https://www.linkedin.com/pulse/he-who-acts-his-own-lawyer-has-idiot-client-barry-zalma-esq-cfe-d4bwc, See the full video at and at and at https://zalma.com/blog.
Karacson’s Arson for Profit Attempt Required Skill & Experience to Succeed
In Steve Ellis Karacson v. David Shaver, Warden, No. 25-1089, United States Court of Appeals, Sixth Circuit (May 20, 2026) Steve Karacson was convicted in Michigan state court of arson and insurance fraud after evidence showed he burned his own insured home. Investigators found multiple points of origin, gasoline odor, and evidence tying him to the scene, including cell-phone location data and a receipt showing he had purchased a gas can and gloves shortly before the fire.
FACTS
Karacson initially had appointed counsel, but his relationships with both appointed attorneys ...
Foolish to Repeatedly Disobey Court Orders
All That Remains For Trial Is Plaintiff’s Damages On Each Of These Claims And Establishing Proximate Causation Of Those Damages.
Post number 5348
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In Linh Wang v. Esurance Insurance Company, No. C24-0447-JCC, United States District Court, W.D. Washington, Seattle (May 1, 2026) John C. Coughenour, United States District Judge, found that throughout this case, culminating with its briefing on Plaintiff’s renewed motion and that Defendant has subjected Plaintiff to unnecessary motion practice for clearly discoverable information and made dubious representations (including to the Court).
FACTUAL BACKGROUND
This case involves an underinsured/uninsured motorist insurance bad faith claim arising from a 2017 motor vehicle collision. The plaintiff, Linh Wang, alleges that Esurance Insurance ...
The Right to Negotiate with Insurer is Not an Assignment of Claims
Post number 5347
Read the full article at https://www.linkedin.com/pulse/ambiguous-contract-repair-assignment-barry-zalma-esq-cfe-2xppc, see the full video at https://rumble.com/v79is1s-ambiguous-contract-to-repair-not-an-assignment.html and at and at https://zalma.com/blog plus more than 5300 posts.
Nebraska Requires an Actual Assignment to Allow Contractor to Sue Insurer
In Millard Gutter Company, a corporation doing business as Millard Roofing and Gutter v. Farmers Mutual Insurance Company of Nebraska, also known as Farmers Mutual Insurance, also known as Farmers Mutual, No. A-24-818, Court of Appeals of Nebraska (May 5, 2026) Millard sued Farmers as an assignee of Jane Anzalone who had hired Millard Gutter to repair the roof of her home and agreed to allow Millard Gutter to coordinate with her insurer, Farmers Mutual, concerning reimbursement for repairs authorized under her insurance policy.
FACTUAL BACKGROUND
In ...
Qui Tam Case Without Evidence to Prove Fraud Fails
Post number 5369
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In People Of The State Of California Ex Rel. Heath & Yuen, APC v. Silver Bird Auto Leasing, LLC et al., B342847, California Court of Appeals, Second District, Eighth Division (June 5, 2026) Heath & Yuen, APC defended parties in an automobile collision case involving a McLaren and a tour van. After that case settled for $25,000, the firm filed a qui tam action under California’s Insurance Frauds Prevention Act (IFPA) against Silver Bird Auto Leasing, LLC, X-Law Group, PC, and Filippo Marchino. The firm alleged three fraudulent acts in the underlying litigation:
1. the complaint falsely stated the McLaren was making a “legal turn,”
2. respondents produced a fraudulent repair bill/estimate, and
3. respondents failed to disclose Marchino’s GEICO insurance and its payment for repairs....
Full Faith and Credit Act Controlled
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Posted on June 9, 2026 by Barry Zalma
Post number 5368
Posted on June 9, 2026 by Barry Zalma
In Prime Insurance Company, Inc. v. Medicab Transportation, LLC, Jason Rhodes, and Dale Johnson v. Prime Insurance Company, Inc and Prime Property & Casualty Insurance, Inc. No. 2:24-cv-421-SPC-KRH, United States District Court, M.D. Florida, Fort Myers Division (June 3, 2026) Medicab, a paratransit company, bought two policies in 2021: a Business Auto Policy from PPCI and a Commercial Liability Policy from Prime. Both policies, as originally written, appeared to cover injuries arising from loading and unloading patients from Medicab vans.
After a patient, Margaret St. Aubin, fell while being unloaded from a van and suffered injuries, her Estate made a $1 million demand. Prime and its claims administrator concluded that the Commercial Policy’s loading/unloading language had been included by mutual mistake, because...
Full Faith and Credit Act Controlled
Read the full article at https://lnkd.in/evHXiiFE and at https://zalma.com/blog.
Posted on June 9, 2026 by Barry Zalma
Post number 5368
Posted on June 9, 2026 by Barry Zalma
In Prime Insurance Company, Inc. v. Medicab Transportation, LLC, Jason Rhodes, and Dale Johnson v. Prime Insurance Company, Inc and Prime Property & Casualty Insurance, Inc. No. 2:24-cv-421-SPC-KRH, United States District Court, M.D. Florida, Fort Myers Division (June 3, 2026) Medicab, a paratransit company, bought two policies in 2021: a Business Auto Policy from PPCI and a Commercial Liability Policy from Prime. Both policies, as originally written, appeared to cover injuries arising from loading and unloading patients from Medicab vans.
After a patient, Margaret St. Aubin, fell while being unloaded from a van and suffered injuries, her Estate made a $1 million demand. Prime and its claims administrator concluded that the Commercial Policy’s loading/unloading language had been included by mutual mistake, because...
