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Insured Contract Exclusion Requires A Third-Party

October 28, 2022

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In <a href="https://www.wcmlaw.com/wp-content/uploads/2022/10/Stevanna-Towing-Inc.-et-al.-v.-Atlantic-Specialty-Ins.-Co..pdf"><em>Stevanna Towing, Inc., et al. v. Atlantic Specialty Ins. Co</em>.</a>, No. 21-1420, 2022 WL 12241451 (3d Cir. Oct. 21, 2022), a Stevanna employee was injured when the boat he was deckhand on— which was being piloted by an employee of Georgetown Sand &amp; Gravel—bumped into a barge. Stevanna, among others, resolved the suit with the employee and then sought reimbursement for the costs associated with its defense and settlement. Atlantic Specialty Insurance Company (“Atlantic”) denied coverage.

Among the many issues was whether the insured contract exception to the employer-liability exclusion applied to provide coverage to certain additional parties. The Atlantic policy’s definition of insured contract included “that part of any other contract or agreement pertaining to [Stevanna’s] business . . . under which [Stevanna] assume[d] the tort liability of another party to pay for ‘bodily injury’ . . . to a third person or organization.” The court stated that for the exception to apply, Stevanna needed to have assumed the tort liability for injuries caused by another party; however, the indemnification agreement in question was for liability for injuries “caused in whole or in part by the negligence of Stevanna, its agents and employees.” Hence, as the “insured contract” did not expressly purport to assume the tort liability of another party, the court held the exception for insured contracts did not apply.

Also noteworthy was the Third Circuit’s refusal to entertain the argument that Atlantic waived the implementation of the employer-liability exclusion by not referencing it in its denial letter nor in its answer to the complaint. The court stated “those omissions do not amount to an implied waiver under Pennsylvania law.”

Thanks to Richard Dunne for his contribution to this article.  Should you have any questions, contact <a href="mailto:mcare@wcmlaw.com">Matthew Care</a>.

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