Wade Clark Mulcahy LLP

In Zurich American Insurance Company v. Citizens Insurance Company of America, No. CV 24-1879, 2024 WL 4194319 (E.D. Pa. Sept. 13, 2024), the District Court for the Eastern District of Pennsylvania addressed a dispute between the insurers of a general contractor and subcontractor, arising of a jobsite injury to an employee of the subcontractor.

The factual background of the case is a common one in Philadelphia: SEPTA hired a general contractor to perform construction work on a subway station, and that general contractor in turn hired a subcontractor to perform a portion of the work. The general contractor and the subcontractor were each covered by their own liability insurance policy, and the general contractor was named as an additional insured on the subcontractor’s policy for injuries caused in whole or in part by the subcontractor. An employee of the subcontractor was injured at the job site, and he sued the general contractor (but not the subcontractor, which was protected by Pennsylvania’s Workers’ Compensation Act). The subcontractor’s insurer denied the general contractor’s request for defense in the employee’s lawsuit. The general contractor’s insurer (Zurich) sued the subcontractor’s insurer (Citizens) seeking a judicial determination.

In brief, the insurance coverage dispute arose because the injured plaintiff was not permitted to sue his employer, and therefore there was no allegation that the injuries were caused in whole or in part by the subcontractor as required in the additional insured endorsement.

Although the underlying allegations did not directly attribute fault to the subcontractor, the court found that Pennsylvania law permits the legal analysis to account for the Workers’ Compensation Act. Nevertheless, the Eastern District held that it “can infer in the absence of the Act, [the plaintiff] would have pleaded more detail concerning [the subcontractor]’s negligence in his underlying complaint” and found that the plaintiff alleged negligence on the part of his employer even without including that entity as a defendant in the lawsuit.  In short, the plaintiff was only at the job site because he was employed by the subcontractor to perform construction work.

The court entered judgment on the pleadings for the general contractor’s insurer, declaring that the subcontractor’s insurer must reimburse the general contractor’s insurer for defense costs and take over the defense of the general contractor. The court also noted that the question of indemnity in the underlying lawsuit was not yet ripe.