On certification to the Superior Court, Appellate Division, whose opinion is reported at 380 N.J. Super. 193 (2005).
(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized).
This appeal involves the interpretation of an exclusion contained in the liability portion of an employer's Workers' Compensation and Employers Liability Insurance Policy (Policy).
Malden A. Homar was employed by Liberty Bureau Steel, a division of Charles Beseler Company (collectively, Beseler). Homar was assigned to work on a large press brake machine, which bends metal into library shelves. Unexpectedly, the machine compressed and amputated eight of his fingers.
Homar filed workers' compensation and common-law claims against Beseler. To avoid having his common-law claims barred by the exclusive remedy provision of the Workers' Compensation Act, Homar asserts that Beseler committed an intentional wrong; specifically that Beseler's actions created a substantial certainty that he would be injured. Among other things, the complaint alleges that the employer removed certain safety guards and warnings on the press brake machine.
Prior to Homar's injury, Beseler had purchased a Workers' Compensation and Employers Liability Insurance Policy from New Jersey Manufacturers Insurance Company (NJM). Part One of the Policy requires NJM to pay workers' compensation benefits and to defend any suit against Beseler involving a claim for workers' compensation benefits. Part Two of the Policy requires NJM to defend Beseler if any employee properly files a common-law action against the company. Specifically, Part Two covers "bodily injury by accident or bodily injury by disease," but also contains Paragraph C.5., which excludes "bodily injury intentionally caused or aggravated by [the employer]."
Beseler asked NJM to defend it against Homar's common-law claims. NJM refused, believing that the phrases, "intentionally caused" in the C.5. exclusion and 'intentional wrong" in the exception created in N.J.S.A. 34:15-8 in respect of the exclusivity of the workers' compensation remedy, were coextensive in meaning. Based on that premise, NJM reasoned that the C.5. exclusion relieved it of the duty to defend Beseler against Homar's "substantial certainty" claim because the latter was the equivalent of the "intentional wrong" contemplated by N.J.S.A. 34:15-8.
Beseler filed a declaratory judgment action with the trial court seeking, among other things, to require NJM to defend in the common-law action filed by Homar. The parties cross-moved for summary judgment and the motion court held in favor of Beseler, requiring NJM to defend. On appeal, the Appellate Division affirmed, rejecting NJM's interpretation and holding that the exclusion does not apply in this case. The panel determined that the C.5. language excludes 'injuries intentionally caused, and not the type of act alleged in this case -- an unintended injury caused by an intentional wrong."
The Supreme Court granted certification.
HELD: The C.5. exclusion of New Jersey Manufacturer's Workers' Compensation and Employers Liability
Insurance Policy does not apply to the type of conduct alleged in this case -- an unintended injury caused by an intentional wrong.
1. Where there is ambiguity in the language of an insurance contract, courts must interpret the contract in accordance with the reasonable expectations of the insured. Policy exclusions must be narrowly construed, with the burden on the insurer to bring the matter within the exclusion. (Pp. 4-5)
2. The workers' compensation system provides for a "trade-off," whereby employees give up their right to pursue common-law remedies against the employer in exchange for prompt and automatic entitlement to benefits for work-related injuries. Nonetheless, when a worker's injuries are caused by the employer's "intentional wrong," that tradeoff is void and the employee may seek both workers' compensation benefits and common-law remedies. (P. 5)
3. In Laidlow v. Hariton Mach. Co., Inc., this Court clarified that an "intentional wrong" included "actions taken with a subjective desire to harm" as well as "instances where an employer knows that the consequences of those acts are substantially certain to result in such harm." In this case, the Appellate Division determined that an intentional wrong qualifying for exception to the surrender of common-law remedies under N.J.S.A. 34:15-8 was broader than the C.5. exclusion from employer-liability coverage for injuries intentionally caused by the employer. The appellate panel separated intentional wrong into injuries that the employer subjectively intended to cause and injuries that the employer was substantially ...