Opinion ID: 6498271
Heading Depth: 3
Heading Rank: 1

Heading: Workers’ Compensation Exclusion

Text: Under an exclusion entitled “Workers’ Compensation And Similar Laws,” RLI’s policy provides that “[t]his insurance does not apply to”: “Any obligation of the insured under a workers’ compensation, disability benefits or unemployment compensation law or any similar law.” Id., PageID 1112. The parties agree that this text prohibits Motor Express from seeking reimbursement for Marshall’s workers’ compensation benefits. We need only consider whether it covers Motor Express’s separate $2.4-million settlement of Marshall’s tort suit. The parties also agree that the tort settlement qualified as an “obligation” of the “insured.” This case thus turns on the question whether this settlement “obligation” was “under” Pennsylvania’s “workers’ compensation” “law.” It was not. Both parties cite Ohio cases to interpret RLI’s policy, so we may simply assume that Ohio contract law applies. Cf. Masco Corp. v. Wojcik, 795 F. App’x 424, 427 (6th Cir. 2019). That law directs us to interpret the words in the policy according to their ordinary, everyday meaning. See Wilkerson v. Am. Fam. Ins. Co., 997 F.3d 666, 669 (6th Cir. 2021) (citing Ohio N. Univ. v. Charles Constr. Servs., Inc., 120 N.E.3d 762, 766 (Ohio 2018); Nationwide Mut. Fire Ins. Co. v. Guman Bros. Farm, 652 N.E.2d 684, 686 (Ohio 1995)). If, moreover, the words are unambiguous, we must apply the policy as written and cannot resort to outside-the-contract evidence to interpret it. See Guman, 652 N.E.2d at 686. Nos. 21-3412/3442 P.I. & I. Motor Express, Inc. v. RLI Ins. Co. Page 7 We thus start by asking how the average policyholder would understand the phrase “obligation . . . under a workers’ compensation . . . law.” Ins. Pol’y, R.58-6, PageID 1112. The key word—under—has nearly a page’s worth of dictionary definitions. See Webster’s New International Dictionary of the English Language 2765–66 (2d ed. 1934). Thus, as the U.S. Supreme Court has repeatedly recognized when interpreting statutes that include the word, we must look to the specific context in which this linguistic “chameleon” is used to identify its meaning. Kucana v. Holder, 558 U.S. 233, 245 (2010); see, e.g., Pereira v. Sessions, 138 S. Ct. 2105, 2117 (2018); Nat’l Ass’n of Mfrs. v. Dep’t of Def., 138 S. Ct. 617, 630 (2018); Fla. Dep’t of Revenue v. Piccadilly Cafeterias, Inc., 554 U.S. 33, 39–41 (2008). In RLI’s policy, this preposition connects an obligation to a law. When used in this way, the word most naturally conveys that the obligation arises “‘pursuant to’ or ‘by reason of the authority of’” the law. Nat’l Ass’n of Mfrs., 138 S. Ct. at 630 (quoting St. Louis Fuel & Supply Co. v. FERC, 890 F.2d 446, 450 (D.C. Cir. 1989) (R.B. Ginsburg, J.)); see In re Hechinger Inv. Co. of Del., 335 F.3d 243, 252 (3d Cir. 2003) (Alito, J.). That is, the obligation must exist “because of” the law or, stated the other way, the law must be the source of the obligation. Webster’s, supra, at 2765. If, for example, someone says that a federal agency enacted a regulatory requirement “under” a statute, the person is conveying that the statute is what gave the agency the authority to enact the requirement. See Nat’l Ass’n of Mfrs., 138 S. Ct. at 630. Or if someone says that the plaintiff filed a claim “‘under’ 42 U.S.C. § 1983,” the person is conveying that § 1983 is what gave the plaintiff the right to bring this claim. See Hechinger, 335 F.3d at 252. This reading poses a problem for RLI. The $2.4-million settlement arose from a suit that Marshall brought against Motor Express under Pennsylvania’s common law of torts. So the commonwealth’s judge-made tort law—not its statutory workers’ compensation law—is what gave Marshall the ability to seek this money (and what gave Motor Express the duty to pay it). The workers’ compensation statute, if anything, went a long way toward eliminating this common-law duty. The statute generally bars employees from filing tort suits against statutory employers that have workers’ compensation insurance. 77 Pa. Stat. & Cons. Stat. Ann. § 481(a); see Fonner v. Shandon, Inc., 724 A.2d 903, 905–07 (Pa. 1999). And while Motor Express failed Nos. 21-3412/3442 P.I. & I. Motor Express, Inc. v. RLI Ins. Co. Page 8 to obtain this insurance, its failure merely eliminated what would have otherwise been its statutory immunity from the tort suit. See 77 Pa. Stat. & Cons. Stat. Ann. § 501(d); Bowman, 65 A.3d at 908. But the absence of this immunity does not change the fact that Marshall brought his suit pursuant to the common law of torts, not “a workers’ compensation . . . law.” Ins. Pol’y, R.58-6, PageID 1112. To be sure, the word “under” can also mean “[i]n accordance or conformity with.” Webster’s, supra, at 2765; Pereira, 138 S. Ct. at 2117. And RLI argues that Marshall’s tort suit was “in conformity with” the workers’ compensation statute because the statute permitted Marshall to seek this relief in light of Motor Express’s lack of insurance. But this reading proves too much. For example, it is obvious that the workers’ compensation statute also permits customers (who are not employees) to bring tort suits against businesses for injuries suffered on their premises. Because a customer’s suit would be in “conformity” with the workers’ compensation statute (since the statute would not prohibit the suit), would the suit fall within the workers’ compensation exception too? That view would leave RLI’s policy with nothing to cover. An analogy reinforces this interpretation. The U.S. Constitution grants the states sovereign immunity from damages suits, but Congress can sometimes abrogate this immunity. Compare Tennessee v. Lane, 541 U.S. 509, 530–34 (2004), with Kimel v. Fla. Bd. of Regents, 528 U.S. 62, 91–92 (2000). The Americans with Disabilities Act, for instance, permits the disabled to seek damages from a state if it violates the Act’s provisions regulating public services. Lane, 541 U.S. at 516–17. The U.S. Supreme Court has held that the Constitution permits this waiver of immunity. Id. at 530–34. Yet an ordinary person would not describe a disabled individual’s damages suit as “under” the Constitution merely because the suit was in conformity with the Constitution. Rather, the person would say that the individual sued “under” the Act—the suit’s source of authority. In the same way, Marshall’s suit was “under” the common law. The suit was not “under” the workers’ compensation statute merely because the statute permitted the common-law suit. Nevertheless, we may assume that this exclusion might be ambiguous if read by itself. Ohio law would then require us to ask whether one reading of the exclusion best fits the contract Nos. 21-3412/3442 P.I. & I. Motor Express, Inc. v. RLI Ins. Co. Page 9 “as a whole” before conclusively finding it ambiguous. See Sauer v. Crews, 18 N.E.3d 410, 413 (Ohio 2014). And here, our narrower reading of “under” makes more sense when the exclusion is read against the entire insurance policy. As the district court persuasively explained, see P.I. & I., 499 F. Supp. 3d at 500–01, a different part of the policy shows that RLI knows how to exclude a tort liability that gets triggered by an insured’s failure to comply with a workers’ compensation law. The policy includes “stop-gap” coverage for certain types of Ohio claims. Ins. Pol’y, R.58-6, PageID 1130–33; see generally 3 Pat Magarick & Ken Brownlee, Casualty Insurance Claims § 40:7 (4th ed.), Westlaw (database updated Nov. 2021). This otherwise irrelevant Ohio coverage contains an identical exclusion for an “obligation” “under” a “workers’ compensation” “law.” Ins. Pol’y, R.58-6, PageID 1131. Critically, though, it also contains an additional exclusion entitled “Failure to Comply With ‘Workers’ Compensation Law.’” Id. This separate exclusion disqualifies from coverage an insured’s tort liability if the insured’s “failure to secure [its] obligations or other failure to comply with any ‘workers’ compensation law’” “[d]eprived” the insured of “common law defenses” or subjected the insured to a “penalty[.]” Id. This separate exclusion has great significance here. If, as RLI claims, the workers’ compensation exclusion already prohibits coverage for a common-law liability that arises from the failure to comply with a workers’ compensation law, the separate exclusion serves no purpose. But when an ambiguous contract term can be read in two ways, one of which will render another term “meaningless” and the other of which will give it “meaning and purpose,” Ohio courts prefer the latter interpretation. Sunoco, Inc. (R & M) v. Toledo Edison Co., 953 N.E.2d 285, 295 (Ohio 2011); Wilkerson, 997 F.3d at 671. This interpretive guidepost means that we should stick with our narrower reading of “under” because it gives both exclusions effect. Notably, moreover, RLI’s policy contains this separate exclusion—the one covering an insured’s failure to comply with a workers’ compensation law—only in the Ohio-specific stopgap coverage. It thus cannot bar coverage for Motor Express’s failure to comply with Pennsylvania law in this case. In response, RLI does not rely on the policy’s text; it jumps straight to precedent. We admit that some courts have read similar workers’ compensation exclusions as RLI would have us read its exclusion. As the Kentucky Supreme Court noted, “[e]very jurisdiction that has Nos. 21-3412/3442 P.I. & I. Motor Express, Inc. v. RLI Ins. Co. Page 10 considered this issue has held that a ‘workers’ compensation’ exclusion” in this type of policy “precludes coverage when the insured employer is exposed to tort liability solely because of its failure to procure a policy of workers’ compensation insurance.” Brown v. Ind. Ins. Co., 184 S.W.3d 528, 534–35 (Ky. 2005) (collecting cases). RLI identifies four Ohio cases that it suggests follow this rule. See Crum & Forster Indem. Co. v. Ameritemps, Inc., 976 N.E.2d 957, 961–62 (Ohio Ct. App. 2012); Sharp v. Thompson, 2008 WL 4382678, at  (Ohio Ct. App. Sept. 25, 2008); Scott v. Levans, 2000 WL 1643518, at –2 (Ohio Ct. App. Nov. 3, 2000); Westfield Ins. Co. v. Malvern Wood Prods., Inc., 1994 WL 501762, at  (Ohio Ct. App. Sept. 12, 1994). But these cases are all distinguishable for a simple reason: none of them so much as hinted that the relevant policies included a separate exclusion for tort liabilities arising from an insured’s failure to comply with a workers’ compensation law. So these courts did not have to worry about whether their broader reading would leave another exclusion superfluous. Here, by contrast, we must attempt to avoid this superfluity problem. See Sunoco, 953 N.E.2d at 295. And RLI has only a weak response to it. RLI points out that this separate exclusion applies only to the Ohio stop-gap coverage that is not at issue here. Yet Ohio courts generally presume that identical contract language means the same thing across the whole contract. See Wells Fargo Bank, N.A. v. Allstate Ins. Co., 784 F. App’x 401, 404–05 (6th Cir. 2019); see also Penn Traffic Co. v. AIU Ins. Co., 790 N.E.2d 1199, 1204 (Ohio 2003). Because we must interpret the workers’ compensation exclusion narrowly in the stop-gap coverage to give effect to the separate exclusion, we should give the same workers’ compensation exclusion this narrower reading wherever we find it in the policy. For this reason, we need not decide whether we would have disagreed with the cases that RLI cites. None of them considered a contract like the one before us. The four Ohio cases do not help RLI for an additional reason. The policy in three of the cases contained a broader exclusion. It barred coverage for “any obligation for which the ‘insured’ . . . may be held liable under any workers’ compensation . . . law[.]” Ameritemps, 976 N.E.2d at 959 (emphasis added); Scott, 2000 WL 1643518, at ; Malvern, 1994 WL 501762, at . One could read this text to reach conduct that may have arisen under a workers’ Nos. 21-3412/3442 P.I. & I. Motor Express, Inc. v. RLI Ins. Co. Page 11 compensation law—even if a worker sued in tort. Here, by contrast, the exclusion covers only obligations that actually arise “under” a workers’ compensation law. Ins. Pol’y, R.58-6, PageID 1112. As for the fourth Ohio case, it did not address the issue that we face. The employer argued only that the injured worker raised an intentional-tort claim, which would have removed the claim from the workers’ compensation exclusion under then-controlling precedent. Sharp, 2008 WL 4382678, at –4. Sharp held that the employee’s complaint did not plead such a claim; it said nothing about the coverage that applies if an employer does not buy workers’ compensation insurance. See id. Lastly, some of RLI’s cited decisions invoke policy concerns. No matter the contract language, they reason, courts should deny coverage in this setting to incentivize employers to buy workers’ compensation insurance and to ensure that employers are not “rewarded” for failing to do so. Brown, 184 S.W.3d at 535 (citation omitted). But the Ohio Supreme Court determines a contract’s meaning by looking to the parties’ intent, not external policy considerations. See Westfield Ins. Co. v. Galatis, 797 N.E.2d 1256, 1261 (Ohio 2003); Hamilton Ins. Serv., Inc. v. Nationwide Ins. Co., 714 N.E.2d 898, 900–01 (Ohio 1999). And when a contract contains clear text, this text conclusively establishes that intent. See Galatis, 797 N.E.2d at 1261. In that respect, perhaps RLI subjectively meant to exclude a claim like Motor Express’s because, as it sees things, its commercial general liability policy is not a workers’ compensation policy and should not cover anything related to workers’ compensation. We must respond to this argument the same way that the Ohio Supreme Court responded when a policyholder asserted that it subjectively meant for coverage to apply: “this is an argument” for RLI’s policy drafters, who need only write a broader exclusion. Ward v. United Foundries, Inc., 951 N.E.2d 770, 774– 75 (Ohio 2011). But the exclusion that RLI did write—when read against its policy as a whole— does not cover an obligation whose source is the common law of torts, not a workers’ compensation statute. The exclusion thus does not apply to Motor Express’s tort-suit settlement. Nos. 21-3412/3442 P.I. & I. Motor Express, Inc. v. RLI Ins. Co. Page 12