The AMA has initiated an educational effort to inform members about the discovery of a specific clause in certain insurance policies, referred to as the Employee Injury Exclusion (EIE). The EIE clause specifically excludes coverage for injuries to employees, which can be a critical issue for businesses.

The AMA has chosen not to single out any specific entities such as advertising agencies, advertisers, insurance carriers, brokers, or any ongoing legal cases. The intention behind this approach is to maintain neutrality and focus on the broader educational goal.

The primary aim is to raise awareness among members who are involved in commercial and photographic productions that utilize wrap-up insurance coverage about the presence of the EIE clause and understand its potential impact.

Why is the existence of an EIE in an excess liability policy problematic?

While workers compensation benefits are the sole remedy an injured worker can collect between themselves and their employer, the injured worker can still bring a claim against a non-employer third party that may have been partly responsible for their injury (even though they are receiving workers compensation benefits).

In many instances, the claim against the third party could then trigger a contractual indemnification obligation between the non-employer third party and the injured worker’s employer. I. Examples of contracts that routinely include an indemnification provision are location, stage, equipment, prop and vehicle rental and client/agency agreements.

It is the provisions of the indemnification clause that allow a third-party claim to be tendered to the employer of the injured employee.

Depending on the type of claim, the wrap up program’s commercial general liability or automobile liability policy will respond to the matter if the provisions of the indemnity agreements fall within the definition of an “insured contract” in the respective policies.

Both the commercial general liability (“CGL”) and automobile liability policies contain an Employer’s Liability Exclusion which excludes coverage for claims for injuries to employees that would be covered under a separate Workers Compensation policy. Normally, the Employer’s Liability exclusion in the commercial general liability and automobile liability policies, would exclude coverage for claims brought by an injured employee against a third party unless the indemnification provision triggers the insured contract provision.

The Employee Indemnification and Employer’s Liability exclusion is absolute, and it states that the policy will not cover claims arising from the employment of the insured or performing the duties related to the conduct of the insured’s business. However, the exclusion is further qualified by the following words: This exclusion does not apply to liability assumed by the insured under an "insured contract".

The words “This exclusion does not apply to liability assumed by the insured under an “insured contract” is how coverage for claims by an injured employee against a non employer third party are afforded coverage in the CGL and Auto policies, so long as the contractual indemnification agreement between the employer and the non-employer third party is deemed to be an “insured contract”. The excess liability policy does not contain

the same exception to the exclusion which reads “This exclusion does not apply to liability assumed by the insured under an "insured contract" that exists in the commercial general liability and automobile liability policies. It is the absence of these words in the excess liability policy that is the crux of the problem.

Without the employee injury exclusion in an excess liability policy (e.g. the employee injury exclusion is removed, or the policy contains an exception to the exclusion as illustrated above), the excess liability policy would afford excess limits above the $1,000,000 primary policy limits for these same types of claims so long as the claim triggered coverage in the primary policies.

While the employee injury exclusion does not exist in all wrap-up excess liability policies, the fact that it still remains in some polices is troubling. Why would any agency/advertiser knowingly allow a production company to produce projects without the full excess liability limit being available in the event of a claim, especially if that claim could ultimately adversely affect the agency or advertiser?

The advertising agencies, advertisers, production companies and wrap-up insurance brokers should all be on the same side regarding the desire to have the employee injury exclusion removed from any excess liability policies containing such an exclusion. Together, you can use your voice to make sure those exclusions which still exist are removed as quickly as possible. It is in everyone’s mutual interest and benefit for there to be as high an insurance limit available when these types of claims present themselves.

Thank you in advance for your support and cooperation.

Following are the Employer’s Liability Exclusions from the CGL and Automobile Liability policies:
CGL Employer’s Liability Exclusion

"Bodily injury" to:

(1) An "employee" of the insured arising out of and in the course of:

(a) Employment by the insured; or

(b) Performing duties related to the conduct of the insured's business; or

(2) The spouse, child, parent, brother or sister of that "employee" as a consequence of Paragraph (1) above.

This exclusion applies whether the insured may be liable as an employer or in any other capacity and to any obligation to share damages with or repay someone else who must pay damages because of the injury. This exclusion does not apply to liability assumed by the insured under an "insured contract".

"Insured contract" means:

a. A contract for a lease of premises. However, that portion of the contract for a lease of premises that indemnifies any person or organization for damage by fire to premises while rented to you or temporarily occupied by you with permission of the owner is not an "insured contract";

b. A sidetrack agreement;

c. Any easement or license agreement, except in connection with construction or demolition operations on or within 50 feet of a railroad;

d. An obligation, as required by ordinance, to indemnify a municipality, except in connection with work for a municipality;

e. An elevator maintenance agreement;

f. That part of any other contract or agreement pertaining to your business (including an indemnification of a municipality in connection with work performed for a municipality) under which you assume the tort liability of another party to pay for "bodily injury" or "property damage" to a third person or organization. Tort liability means a liability that would be imposed by law in the absence of any contract or agreement.

Paragraph f. does not include that part of any contract or agreement:

(1) That indemnifies a railroad for "bodily injury" or "property damage" arising out of construction or demolition operations, within 50 feet of any railroad property and affecting any railroad bridge or trestle, tracks, road-beds, tunnel, underpass or crossing;

(2) That indemnifies an architect, engineer or surveyor for injury or damage arising out of:
(a) Preparing, approving, or failing to prepare or approve, maps, shop drawings, opinions, reports, surveys, field orders, change orders or drawings and specifications; or

(b) Giving directions or instructions, or failing to give them, if that is the primary cause of the injury or damage; or

(3) Under which the insured, if an architect, engineer or surveyor, assumes liability for an injury or damage arising out of the insured's rendering or failure to render professional services, including those listed in (2) above and supervisory, inspection, architectural or engineering activities.

Auto Employer’s Liability Exclusion

Employee Indemnification And Employer's Liability

"Bodily injury" to:

a. An "employee" of the "insured" arising out of and in the course of:

(1) Employment by the "insured"; or

(2) Performing the duties related to the conduct of the "insured's" business; or

b. The spouse, child, parent, brother or sister of that "employee" as a consequence of Paragraph a. above.

This exclusion applies:

(1) Whether the "insured" may be liable as an employer or in any other capacity; and

(2) To any obligation to share damages with or repay someone else who must pay damages because of the injury.

But this exclusion does not apply to "bodily injury" to domestic "employees" not entitled to workers' compensation benefits or to liability assumed by the "insured" under an "insured contract". For the purposes of the Coverage Form, a domestic "employee" is a person engaged in household or domestic work performed principally in connection with a residence premises.

"Insured contract" means:

a. A lease of premises;

b. A sidetrack agreement;

c. An easement or license agreement in connection with vehicle or pedestrian private railroad crossings at grade;

d. Any other easement agreement, except in connection with construction or demolition operations on or within 50 feet of a railroad;

e. An indemnification of a municipality as required by ordinance, except in connection with work for a municipality;

f. That part of any contract or agreement entered into, as part of your business, by you or any of your employees, pertaining to the rental or lease of any "auto"; or

g. That part of any other contract or agreement pertaining to your business under which you assume the tort liability of another to pay damages because of "bodily injury" or "property damage" to a third person or organization, if the contract or agreement is made prior to the "bodily injury" or "property damage". Tort liability means a liability that would be imposed by law in the absence of any contract or agreement.

An "insured contract" does not include that part of any contract or agreement:

a. That pertains to the loan, lease or rental of an "auto" to you or any of your employees, if the "auto" is loaned, leased or rented with a driver;

b. That holds a person or organization engaged in the business of transporting property by "auto" for hire harmless for your use of a covered "auto" over a route or territory that person or organization is authorized to serve by public authority; or

c. Under which the "insured" assumes liability for injury or damage caused by the dumping, discharge or escape of:

(1) Irritants, pollutants or contaminants that are, or that are contained in, any property that is:

(a) Being moved from the place where such property or pollutants are accepted by the "insured" for movement into or onto the covered "auto";

(b) Being transported or towed by the covered "auto";

(c) Being moved from the covered "auto" to the place where such property or pollutants are finally delivered, disposed of or abandoned by the "insured";

(d) Otherwise in the course of transit; or

(e) Being stored, disposed of, treated or processed in or upon the covered "auto" other than fuels, lubricants, fluids, exhaust gases or other similar pollutants that are needed for, or result from, the normal electrical, hydraulic or mechanical functioning of the covered "auto" or its parts.

(2) Irritants, pollutants or contaminants not described in Paragraph (1) above unless:

(a) The pollutants or any property in which the pollutants are contained is upset, overturned or damaged as a result of the maintenance or use of the covered "auto"; and

(b) The discharge, dispersal, release or escape of the pollutants is caused directly by such upset, overturn or damage

The Employee Injury Exclusion in the Excess Liability policy reads as follows:
Employee Injury Exclusion – Excess Liability

A. The policy does not apply to any liability arising out of any injury to: 1. Any employee of any Insured arising out of and in the course of: a. Employment by any Insured; or

b. Performing duties related to the conduct of any insured's business; or

2. The spouse, child, parent, brother, or sister of that employee as a consequence of section 1. above.

B. Section A. above applies:

1. Whether any Insured may be liable as an employer or in any other capacity; and To any obligation to share damages with or repay someone else who must pay damages because of the injury

The AMA Insurance Glossary is meant to provide clarity of terms that are commonly references when discussing Insurance.

Thank you to AMA Partner, Taylor & Taylor for providing this Glossary

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Trade Credit Insurance (TCI) sometimes referred to as accounts receivable insurance or export credit insurance protects businesses when a customer fails to pay because of bankruptcy, insolvency, or destabilizing political conditions.

Trade Credit Insurance can insure your receivables due to your company for up to 12 months, up to the policy limit of your choosing.

When a customer is unable to pay within the contracted terms (a protracted default), a trade credit insurance policy indemnifies a proportion (up to 95%) of the debt owed.

Insurance is designed for businesses with sales of at least $5 million per year, but companies with sales of as little as $1 million sometimes find this insurance to be a good fit. You will have to determine what is best for your company.

If you want to learn more speak with your insurance broker or you can reach out to AMA Partner Taylor + Taylor.

Ross Taylor - Rltaylor@taylorinsurance.com  

If you are considering this because you have experienced a bankruptcy issue (for example non-payment or a clawback) with a client, be sure to discuss the specifics of those citations with your broker to ensure your concerns will be addressed.

While the AMA is providing this information as a resource, the ultimate choice of insurance policies is yours based on your own independent determination as to what is best for your business. We encourage you to do your own research.