New York State Seal
STATE OF NEW YORK
INSURANCE DEPARTMENT
25 BEAVER STREET
NEW YORK, NEW YORK 10004

George E. Pataki
Governor

Gregory V. Serio
Superintendent

The Office of General Counsel issued the following opinion on November 7, 2003, representing the position of the New York State Insurance Department.

RE: Exclusion in an Excess Line Policy.

Question Presented:

May a liability policy issued on an excess line basis in New York contain an endorsement that excludes coverage for employees of a subcontractor?

Conclusion:

Nothing in the Insurance Law or regulations thereunder precludes an endorsement in an excess line policy that excludes coverage for employees of a subcontractor.

Facts:

The inquirer represents a client in a third-party action, specifically a Labor Law § 240(1) claim. The general contractor was insured by ABC Insurance Company, which is not authorized to do an insurance business in New York.

The insurer issued a general liability insurance policy, which contained an endorsement entitled "Exclusion of Injury to Employees, Contractors and Employees of Contractors", a copy of which the inquirer supplied. The endorsement excludes "bodily injury" to any "employee" of the insured (as such terms are defined in the endorsement) arising out of or in the course of employment by any insured or performing duties related to the conduct of any insured’s business; or "to any contractor or any ‘employee’ of such contractor, arising out of or in the course of the rendering or performing services of any kind or nature whatsoever by such contractor or ‘employee’ of such contractor for which any insured may become liable in any capacity…"

The inquirer asked whether such an endorsement would be permissible in a general liability policy issued within New York. For the purposes of this response, we assume that, since the policy was issued by an unauthorized insurer, the policy was issued on an excess line basis, through an excess line broker, in accordance with New York Law. Hence, our response is limited to such a state of facts.

Analysis:

While New York authorized insurers are generally required under Article 23 of the Insurance Law to obtain the Superintendent’s approval to use their insurance policy forms in this state, insurance policy forms for policies issued by unauthorized insurers through a New York licensed excess line broker, in accordance with the provisions of N.Y. Ins. Law § 2105 (McKinney 2000 & Supp. 2003), N.Y. Ins. Law § 2118 (McKinney 2000 & Supp. 2003) and N.Y. Comp. Codes R. & Regs. tit. 11, Part 27 (1999) (Regulation 41), are not approved by the Superintendent of Insurance and are not subject to Article 23.

This does not mean that excess line policies may provide any kinds of terms and conditions that the insurer wants since a particular statute or regulation may be applicable to such policies. For example, N.Y. Comp. Codes R. & Regs. tit. 11, § 27.11(a) (1999) of Regulation 41 provides:

(a) No excess line broker shall procure coverage from an unauthorized insurer if such coverage is prohibited by law, including if such coverage:

(1) does not constitute insurance within the meaning of section 1101 or other sections of the Insurance Law;

(2) involves a kind of insurance not authorized under section 1113 or other sections of the Insurance Law;

(3) is not within the scope of section 2105 of the Insurance Law;

(4) is determined by any Appellate Division of the New York State Supreme Court or the New York State Court of Appeals to be against public policy in this State; or

(5) has been otherwise proscribed by law.

In regard to this particular exclusion, there is nothing in the Insurance Law that specifically restricts or otherwise limits the use of such exclusion in an excess line general liability insurance policy.

For further information you may contact Principal Attorney Paul A. Zuckerman at the New York City Office.