Thought Leadership

Key Points:

• A workers’ compensation insurance carrier normally does not have a duty to pay benefits for an intentional injury claim.
• Depending on the policy language, a carrier may not be obligated to defend against an intentional injury claim, regardless of its merit.
• An insurance policy exclusion against owing a duty to defend an intentional injury claim is not against public policy.

The New Jersey Supreme Court has affirmed lower court decisions regarding an insurance carrier’s obligations with regard to defending intentional injury claims in workers’ compensation cases. 

In Dionicio Rodriguez v. Shelbourne Spring, LLC, 259 N.J. 385 (Dec. 12, 2024), SIR Electric, an electrical contractor, employed Dionicio Rodriguez. The Hartford had issued a Workers’ Compensation and Employers’ Liability Policy to SIR. Part One of the policy provided “benefits” under workers’ compensation law for New Jersey. Part Two of the policy provided employers’ liability insurance for “damages because of bodily injury,” but it excluded from coverage bodily injury intentionally caused by SIR. 

After suffering compensable work injuries while working for SIR, Rodriguez received New Jersey workers’ compensation benefits from Hartford. Rodriguez also filed a personal injury complaint against SIR, alleging negligence, gross negligence, and reckless behavior by SIR. SIR requested that Hartford also defend the personal injury complaint. 

Hartford denied the request to the defend the personal injury complaint, determining it was not required to defend the intentional injury claims as they were essentially all intentional injury claims. SIR then filed a third-party complaint against Hartford, claiming that, while Rodriguez’s complaint included allegations of intentional wrongdoing, it also included specific allegations of “gross negligence” and “simple negligence,” which SIR contended were covered by the policy. After several motions and appeals, the New Jersey Appellate Division affirmed the orders dismissing SIR’s third-party complaint against Hartford, denying SIR’s cross-motion for summary judgment, and denying SIR’s motion to amend its third-party complaint. SIR then appealed to the New Jersey Supreme Court. 
    
The Supreme Court began its analysis by reviewing some long-standing principles. A carrier’s duty to defend is broader than its duty to indemnify. Danek v. Hommer, 100 A.2d 198, 204 (App. Div. 1953). A duty to defend “comes into being when the complaint states a claim constituting a risk insured against,” regardless of the claim’s likelihood of success. Voorhees v. Preferred Mut. Ins. Co., 607 A.2d 1255, 1259 (N.J. 1992). The duty to defend will arise even if “the claims are poorly developed and almost sure to fail,” id., so long as they “comprehend an injury which may be within the policy,” Abouzaid v. Mansard Gardens Assocs. LLC, 23 A.3d 338, 346 (N.J. 2011). But a carrier has no duty to defend against a claim, “which measured by the pleadings, even if successful, would not be within the policy coverage.” Danek. Courts cannot “engage in a strained construction to support the imposition of liability or write a better policy for the insured than the one purchased.” AC Ocean Walk, LLC v. Am. Guarantee & Liab. Ins. Co., 307 A.3d 1174, 1184 (N.J. 2024) (quoting Chubb Custom Ins. Co. v. Prudential Ins. Co. of Am., 948 A.2d 1285, 1289 (N.J. 2008)).
    
In a workers’ compensation claim in New Jersey, an injured employee’s recovery is limited to medical, disability, and permanency benefits. The only exception to the “exclusivity bar” or “workers’ compensation bar” is for injuries caused by “intentional wrongs,” for which an employee may still seek redress under common law causes of action. Schmidt v. Smith, 713 A.2d 1014, 1016 (N.J. 1998). In Laidlow v. Hariton Mach. Co., Inc., 790 A.2d 884, 897-899 (N.J. 2002), the court clarified the test to determine when an employer’s conduct rises to the level of an “intentional wrong” under N.J.S.A. 34:15-8. The court held: (1) the employer must know that his actions are substantially certain to result in injury or death to the employee, and (2) the resulting injury and the circumstances of its infliction on the worker must be (a) more than a fact of life of industrial employment and (b) plainly beyond anything the Legislature intended the Workers’ Compensation Act to immunize. The “substantial certainty” test is still a high standard to meet: to avoid allowing employees to circumvent the Act, courts “must demand a virtual certainty” before employees can proceed under the intentional wrong exception to sue their employer in tort. Van Dunk v. Reckson Assocs. Realty Corp., 45 A.3d 965, 978 (N.J. 2012).
    
Here, the Supreme Court noted that the trial judge concluded the entirety of Rodriguez’s allegations amounted to a Laidlow claim. The court disagreed and concluded the negligence-based claims were different from Rodriguez’s intent-based Laidlow claims. The court then went into a detailed review of Rodriguez’s complaint, which had included more than 70 individual counts. 

The court next reviewed Part One of the Hartford policy, which covered workers’ compensation claims. The court noted that Part One excluded money damages for negligence-based tort claims as they do not fall under the policy language, “benefits . . . required by a workers’ compensation law,” which, instead, include recovery of medical benefits under N.J.S.A. 34:15-15; death benefits for dependents under N.J.S.A. 34:15-13; and temporary disability benefits, permanent total benefits, or permanent partial benefits under N.J.S.A. 34:15-12(a) to (c), regardless of fault. Because money damages based on tort claims are not “benefits” and, thus, are not a covered risk, the court found that Hartford had no duty under Part One to defend SIR against Rodriguez’s claims seeking such damages. Rodriguez’s personal injury lawsuit did not seek benefits as defined by the Act; instead, it sought money damages as compensation for his workplace injuries. Rodriguez already recovered those benefits available under Part One of the Hartford policy for his injury, and Hartford satisfied its contractual obligation to SIR by providing Rodriguez with those workers’ compensation benefits separate from this action. Therefore, Part One of the Hartford Policy imposed no duty to defend SIR against any of Rodriguez’s claims.

The court then addressed Part Two of the policy that provided employers’ liability insurance, which is intended to serve as a gap-filler providing protection to the employer in those situations where the employee has a right to bring a tort action despite provisions of the workers’ compensation statute. This would include claims against the employer for sexual harassment or discrimination. After examining the policy language and exclusions in Part Two, the court also found no obligation to defend in this case. 

The C4 exclusion thus aligns with the purpose of requiring employers to carry both workers’ compensation insurance and employers’ liability insurance: it is a logical reflection of the gap-filling purpose of employers’ liability insurance because it excludes from coverage under Part Two claims that are already covered under Part One. There was no gap to be filled here for the negligence, gross negligence, and recklessness claims against SIR because Part One already provided the required workers’ compensation coverage—the exclusive remedy available—for those claims. See Rodriguez, 327 A.3d at 145 (citations omitted).

Turning to Rodriguez’s claims of intentional wrongdoing, Part Two imposed no duty on Hartford to defend SIR because those claims were not covered by the Hartford policy. The C5 exclusion specifically excluded from insurance coverage any claims for “[b]odily injury intentionally caused or aggravated by [SIR].” The EII exclusion elaborated on C5 by excluding “all intentional wrongs within the exception allowed by N.J.S.A. 34:15-8 including . . . bodily injury caused or aggravated by an intentional wrong . . . which is substantially certain to result in injury.” The Laidlow claims of intentional wrongdoing in the complaint were expressly excluded under the plain language of the Part Two exclusions as “intentionally caused or aggravated” by SIR under the C5 exclusion and as “substantially certain to result in injury” under the EII exclusion endorsement. Because the claims were not covered by the Hartford policy, they could not trigger a duty to defend on the part of the insurer. In sum, none of Rodriguez’s claims—whether for negligent, grossly negligent, or recklessly indifferent conduct or for intentional wrongdoing—fell within the coverage established in either Part One or Part Two of the Hartford policy. Rodriguez, 327 A.3d at 145-146.

The court finally denied SIR’s request to amend its third-part complaint against Hartford, indicating it would be futile. An amendment is futile “when the newly asserted claim is not sustainable as a matter of law. In other words, there is no point to permitting the filing of an amended pleading when a subsequent motion to dismiss must be granted.” Id. at 146 (citation omitted). 

At oral argument, SIR acknowledged that it filed its motion to amend only after the trial judge found Hartford did not owe it a duty to defend under Part Two. Contrary to SIR’s contention, the EII exclusion did not violate public policy. Amending the pleading to bring that argument would, therefore, have been futile. Exclusions from coverage for intentional acts are common. The New Jersey Supreme Court has consistently reiterated the principle that “[p]olicy provisions that exclude coverage resulting from intentional wrongful acts are ‘common,’ are ‘accepted as valid limitations’ and are consistent with public policy.” Id. (citing Harleysville Ins. Cos. v. Garitta, 785 A.2d 913, 917 (N.J. 2001)). 

While the Supreme Court’s decision now affirms when a carrier has a duty to defend, it also reinforces the employers’ defense against intentional injury claims. Intentional injury claims make up a large share of litigation that is tangentially related to workers’ compensation. There are no shortages of claims that attempt to pierce the workers’ compensation bar, while the courts have continuously upheld the high bar that is required to overcome the bar. 

While the impact of this decision remains to be seen, it would seem that it will increase litigation costs for employers since they will now have to pay for their own defense of intentional injury claims, despite their chances of success, as this court here acknowledges. 

If you have questions about how defend these claims, or if you have insufficient insurance coverage, reach out to your legal counsel now. Once a claim occurs, it may be too late.

*Bob is the managing attorney of the Workers’ Compensation Department in our Mount Laurel, New Jersey, office. 

_{Defense Digest, Vol. 31, No. 1, March 2025, is prepared by Marshall Dennehey to provide information on recent legal developments of interest to our readers. This publication is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. ATTORNEY ADVERTISING pursuant to New York RPC 7.1. © 2025 Marshall Dennehey. All Rights Reserved. This article may not be reprinted without the express written permission of our firm. For reprints, contact tamontemuro@mdwcg.com.}