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Denial of insurance coverage for injured employee, sued and screwed - I warned you about First Mercury
May 19, 2017
Denial of insurance coverage for injured employee, sued and screwed - I warned you about First Mercury

    I warned you about First Mercury.  You're still insured by First Mercury?  Here's what a Denial of Coverage looks like:
    "The purpose of this letter is to advise you that First Mercury does not owe a duty to defend or indemnity [you, the alarm company, our insured] or any other party with respect to this matter since the Policy includes an exclusion that bars coverage for this matter.  Consequently, there is no coverage for the matter under the Policy, and First Mercury has no obligation to provide the named insured or any other party either a defense to any lawsuit, or to indemnify or reimburse the insured for any damages in connection with any suit that might arise from this set of circumstances."
    What are the circumstances?  Well a pretty common occurrence; must be, I got two of these matters from two different clients in two weeks.  One carrier, First Mercury disclaimed, leaving the insured alarm company to fend for itself, and the other carrier Philadelphia Insurance, covered the claim.  [I don't know if Philadelphia insurance is more or less than First Mercury, but it's time you found out if you have First Mercury].  The facts are that the alarm company's employee got hurt on the job, working at the subscriber's premises [both commercial premises in these cases].  Yes, the employee applied for and collected Workers Comp, which is other insurance that is carried by the alarm company /  employer.  But when an employee is injured on the job there are circumstances when the employee can sue the property owner and other contractors on the job [in the Philly case there is a General Contractor and in the FM case only the subscriber].  How can the alarm company / employer be exposed? 

  • the alarm company may have agree to indemnify the owner and contractor [which it did in both cases]
  • the employee suffers grave injury

    Under ordinary circumstances the employee can not sue the employer directly; that's what Workers Comp is for.  
    You all know that sometimes you are compelled to sign the "subscriber's contract" or the general contractor's form agreement, and those agreements invariably require you to indemnify the owner and general contractor if your employee or anyone else sues them.  First Mercury is correct in its denial of coverage.  First Mercury's policy does not provide coverage for contractual indemnity.  FM does allow you to name additional insureds, and should therefore cover a contractual indemnity if coupled with additional insured status.  But, even under that circumstance, the FM policy excludes injury to the alarm company's employee.
    The Philadelphia Insurance policy will cover contractual indemnity and does not exclude injured employees.  Different coverage, and in this case, coverage that you really should have.  Check your policy and your insurance company now, before you get a claim.
    By the way, in the factual scenario above, injured employee suing owner or general contractor who then demands indemnity [and sues you for it by bringing you into the injured employees lawsuit as a Third Party Defendant], you will have coverage under the Workers Comp insurance, but only for common law negligence, and only for grave injury, The Workers Comp policy will not cover you for contractual indemnity claims.  Workers Comp law may be different in your state - above applies in NY.
    I'd like to hear from insurance brokers on The Alarm Exchange [and those who would like to be] why they recommend First Mercury and why they recommend other insurance companies to alarm companies.  Please address the issue of exclusions to coverage that may be available under competitor's policies.


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Ken Kirschenbaum,Esq
Kirschenbaum & Kirschenbaum PC
Attorneys at Law
200 Garden City Plaza
Garden City, NY 11530
516 747 6700 x 301
516 747 6700
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