Many businesses rely on professionals and laborers retained and assigned through staffing agencies. In a recent decision, the Fourth Circuit Court of Appeals ruled that insurance coverage for the negligent acts of those borrowed employees turns on the language of the insurance policy at issue, not the terms of the staffing agreement between the staffing agency and its client.
In Interstate Fire and Casualty Company v. Dimensions Assurance Ltd., No. 15-1801 (4th Cir. Dec. 6, 2016) (applying Maryland law), a staffing agency provided nurses to a hospital. The parties’ staffing agreement stated that all nurses assigned to the hospital were the employees of the hospital, not the agency. The hospital had the responsibility for the policies and procedures used by the nurses and the right to fire any nurses provided by the agency.
An agency-provided nurse was sued for malpractice and a dispute ensued as to whether the hospital’s professional liability insurance policy covered her conduct. The policy covered “present and former employees” but provided no definition for who would be considered “employees.” The Court found that the ordinary and accepted meaning of “employee” would include the agency-assigned nurse. The Court also found that the nurse was the hospital’s “employee” under the common law “right to control” test.
The hospital, however, argued that the terms of the staffing agency agreement between the hospital and agency should control the determination of the nurse’s status for insurance coverage purposes. The Court disagreed. The fact that the agreement provided that the assigned nurses would be treated as the employees of the agency, not the hospital, was irrelevant to the insurance coverage question. While the agreement may be controlling in a dispute between the parties themselves, the insurance contracts were entirely separate from that agreement. The parties’ contract, the Court stated, could not diminish or alter the plain words of the insurance policy and coverage provided through it. Under the law, only the terms of the policy could be considered and not collateral documents such as the parties’ contract.
This case gives rise to several important takeaways:
A contract with a staffing agency may not control an agency-assigned worker’s status in disputes with third-parties;
The “right to control” test for determining a worker’s employer is alive and well; and
Insurance policies must be carefully reviewed to confirm that they cover all types of workers under the control of an insured, such as staffing agency hires, volunteers, and interns.
As president of Hirschler and head of the firm's litigation section, Courtney knows how to lead people and projects to a successful outcome.
Leveraging deep experience in the construction industry, Courtney advises public and ...
Kelly’s practice focuses on construction law, commercial and product liability law, with an emphasis on dispute resolution—including mediation, arbitration, jury and bench trials in state and federal court. She routinely ...
Nate fully engages in each case and shoulders his clients’ needs. Communication, efficiency and careful judgment define his practice. In every case, he investigates competing claims to thoroughly understand their strengths ...
A professional engineer (P.E.) and an experienced lawyer, Webb began practicing at Hirschler following four years of work as a consulting engineer. His multidisciplinary practice focuses on general business and corporate law ...
SubscribeSubscribe to Hirschler by Email
- Tools to Protect Construction Businesses from the Effects of a Third Party Bankruptcy
- The Death of “Pay-When-Paid” in Virginia: Truth or Rumor?
- A New Trap for Unwary Contractors: Holding Payment on One Project for Claims in Another
- What Employers Need To Know About the OSHA Emergency Temporary Standard on COVID-19 Vaccination and Testing
- Kelly Bundy Appointed to the Virginia Safety and Health Codes Board
- Jaime Wisegarver Outlines Labor Department Guidance on Travel Time Pay in Construction Executive
- New Defense to Joint Liability Available to Contractors
- What Employers Need to Know About Virginia’s New Overtime Wage Act
- OSHA Increases Amounts of Civil Penalties for 2021
- Have Force Majeure Defenses Based on COVID-19 Been Successful This Year?
- Mechanic's Liens
- Occupational Safety and Health Act (OSHA)
- COVID-19, Coronavirus Outbreak
- Dispute Resolution
- Government Contracts
- Department of Labor (DOL)
- Little Miller Act
- Workforce Development
- Department of Professional and Occupational Regulation (DPOR)
- Miller Act
- Fair Labor Standards Act
- Lien Waivers
- Virginia Employment Commission (VEC)
- Force Majeure
- Virginia Workers' Compensation Commission
- Joint Checks
- Unjust Enrichment
- Uniform Statewide Building Code
- Change Orders
- May 2023
- May 2022
- March 2022
- November 2021
- August 2021
- June 2021
- April 2021
- January 2021
- October 2020
- August 2020
- July 2020
- June 2020
- May 2020
- April 2020
- March 2020
- February 2020
- January 2020
- November 2019
- August 2019
- June 2019
- April 2019
- February 2019
- January 2019
- December 2018
- October 2018
- September 2018
- June 2018
- May 2018
- April 2018
- March 2018
- February 2018
- November 2017
- October 2017
- September 2017
- July 2017
- June 2017
- May 2017
- April 2017
- March 2017
- February 2017
- January 2017
- December 2016
- November 2016
- October 2016