03 Feb CGL Coverage for “Leased Workers”
Over the past few years, employers have been leasing workers from employee leasing companies. I recently received this question from one of my agent friends:
“One of my clients has a small law firm and is considering leasing employees from an employee leasing company. From a general liability standpoint, are there any coverage gaps for businesses that use leased workers? Any feedback that you can provide on this would be greatly appreciated.”
The third paragraph of the introductory language of the CGL states, the word “insured” means any person or organization qualifying as such under Section II – Who Is an Insured.
Part 1 of Section 2 describes who is considered “you” as designated in the declarations, depending on the type of entity – individual; partnership or joint venture; limited liability company; an organization other than a partnership; joint venture; limited liability company (e.g., a corporation); or a trust.
Part 2 of Section 2 describes “automatic” insureds other than “you.” Part 2a lists “employees,” other than “executive officers” and managers of LLCs, for “acts within the scope of their employment by you while performing duties related to the conduct of your business.”
The definition of “employee” includes a “leased worker” but not a “temporary worker.” A “leased worker” is a person leased to you by a labor leasing firm under an agreement between you and the labor leasing firm to perform duties related to the conduct of your business. A “temporary worker” is a person who is furnished to you to substitute for a permanent “employee” on leave or to meet seasonal or short-term workload conditions. An example would be someone hired from a temporary employment service.
As an “insured,” a “leased worker” would have the same coverage as other “insureds” but would also be subject to the policy exclusions and conditions. “Leased workers” would have no coverage for “bodily injury,” “property damage,” or “personal and advertising injury” to other “insureds,” or for providing professional health care services.
Exclusion e. Employer’s Liability precludes coverage for “bodily injury” to an “employee” of the insured arising out of and in the course of employment by the insured, or performing duties related to the conduct of the insured’s business. It also precludes coverage for consequential “bodily injury” to the spouse, parent, brother, or sister of the “employee.” These would be covered by employers liability coverage in a workers’ compensation policy.
In most states, the business for which a “leased worker” is performing work is considered the “special” employer of that worker for workers’ compensation purposes. However, in some states, this is not the case, and a business that uses “leased workers” will not have workers’ compensation coverage for job-related injuries. This creates a coverage gap when exclusion e. Employer’s Liability removes coverage for injury to these “leased workers.”
The CG 04 24 Coverage for Injury to Leased Workers endorsement is used to remove leased workers from the scope of the CGL Employer’s Liability exclusion and close the coverage gap. By attaching the endorsement, the CGL policy will respond to liability for work-related injuries to “leased workers.”