SDV Insights

Texas Confirms Employer's Liability Coverage Is Only Available If The Injured Worker Is An Employee Of The Named Insured

In Gemini Insurance Company v. Indemnity Insurance Company of North America, the U.S. District Court for the Southern District of Texas found an employer's liability policy only provides coverage for bodily injury claims brought against the Named Insured by its own employees and NOT employees of its subcontractors. 

The case arose from the death of Echo Maintenance, LLC’s (“Echo”) employee, Yesenia Espinoza (“Espinoza”) while working on ExxonMobil Oil Corporation’s (“Exxon”) hydrocarbon processing facility located in Beaumont, Texas. Exxon hired Bechtel Oil, Gas and Chemicals, Inc. (“Bechtel”) and Bechtel, in turn, hired Echo Maintenance, LLC (“Echo”). 

Espinoza’s estate filed suit against Bechtel and Echo (the “Underlying Action”). Indemnity Insurance Company of North America (“IINA”) provided Echo with a defense under its Worker’s Compensation and Employer’s Liability (“WC/EL”) policy. Echo’s general liability insurer, Gemini Insurance Company (“Gemini”), provided Bechtel with a defense as a potential additional insured under Echo’s policy. Notably, IINA also provided WC/EL coverage to Bechtel, but denied coverage for Bechtel in connection with the Underlying Action. Gemini ultimately settled the Underlying Action and then brought the present lawsuit against IINA, alleging IINA breached its contractual obligations when it denied Bechtel a defense under its WC/EL policy.

Who Is An "Employer" Under an Employer's Liability Policy? 

To determine if IINA owed Bechtel a defense, the court analyzed the insuring agreement of Bechtel’s WC/EL policy and the Voluntary Compensation Insurance (“VCEL Endorsement”).1  First, the insuring agreement states the policy provides coverage for bodily injury that “arises out of and in the course of the injured employee's employment by you.” The word “you” refers to Bechtel as the named insured on the WC/EL policy. The Court found that this language restricts coverage to bodily injury claims by Bechtel’s employees during the policy period, provided that the employment is necessary or incidental to Bechtel’s work in Texas.

Next, the VCEL Endorsement adds coverage for any employees included within the endorsement’s schedule, which in this case read as “employees of a contractor with whom the named insured has executed a written contract to provide workers compensation insurance in connection with the designated premises.” Genimi argued that this endorsement broadens coverage to include not only the employees of Bechtel, but of Bechtel’s subcontractors, including Echo. IINA argued that the scheduled language only includes employees of Bechtel’s subcontractors if Bechtel “borrows” them, making Bechtel the employee’s actual employer under the borrowed employee doctrine.

A contractor may be deemed the temporary employer of a temporary employee under the borrowed employee doctrine if the temporary employer exhibits control over the temporary employee.2 Generally, there are three factors to determine if the temporary employee is an employee of the temporary employer and therefore responsible for providing workers’ compensation insurance:

  1. Did the temporary employee and temporary employer enter into a contract of hire, either express or implied?
  2. Was the temporary employee’s work essential to that of the employer?
  3. Did the temporary employer have control over the temporary employee’s work?

Applying the relevant policy language to the allegations in the Underlying Action, the court concluded that while it was alleged that Bechtel maintained control over the worksite and activities at the worksite when the fatal accident occurred, there were no allegations that Bechtel controlled the deceased worker’s activities to support a finding that she was Bechtel’s borrowed employee. Therefore, because there was no employee/employer relationship alleged, the court held that IINA had no duty to defend Bechtel in the Underlying Action.

This case demonstrates the importance of understanding the scope of one’s WC/EL coverage. Consistently using coverage counsel to review all policies and insurance programs for every construction project will protect against these types of issues.

For more information, contact Anna Perry at

1 Under Texas law, the duty to defend is determined under the “eight corners rule” which requires the court to look exclusively at the allegations in the pleadings and the insurance policy. Also, under Texas law, the language of an insurance policy is given its ordinary meaning unless the insurance policy shows that the words were meant in a technical or different sense. The paramount rule is that unambiguous language is enforced as written.
2 Each state may apply the borrowed employee doctrine differently and the effects it has on workers compensation insurance may differ as well.


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