Policy Definitions, Temporary Workers, and Co-Employee Gross Negligence: Southern-Owners Ins. Co. v. Farrera

Introduction

Southern-Owners Insurance Company v. Juan Farrera, decided February 6, 2025 by the United States Court of Appeals for the Eleventh Circuit, clarifies how Commercial General Liability (“CGL”) policies interact with Florida’s workers’ compensation scheme when an injured party is a “temporary worker” and the alleged tortfeasor is a co-employee. The dispute arose from a roofing accident after Hurricane Michael. Juan Farrera, a laborer hired on short notice by DeLeon Construction, LLC (“DeLeon”), fell through a damaged roof while working on a project contracted by Jason Andrews Construction, Inc. (“JAC”). Although JAC’s insurer, Southern-Owners, agreed to defend under a reservation of rights, it filed a federal declaratory judgment action seeking to avoid a defense or indemnity obligation for Jason Andrews and JAC. The district court concluded that: (1) Andrews, as an executive officer of JAC, was an insured under the CGL policy; (2) the policy’s “Workers’ Compensation and Similar Laws” exclusion did not apply because Farrera sued Andrews in his capacity as a co-employee for gross negligence; and (3) the “Employer’s Liability” exclusion did not apply because Farrera was a “temporary worker,” a policy-defined category excluded from “employee.” Southern-Owners appealed, and the Eleventh Circuit affirmed in full.

Summary of the Judgment

The Eleventh Circuit affirmed the district court’s bench-trial ruling that Southern-Owners must defend Jason Andrews under the CGL policy. First, the court held that Andrews qualified as an “insured” because the policy defines a corporate executive officer as an insured “with respect to [his] duties as [an] officer.” Second, the court held that the policy’s workers’ compensation exclusion did not bar coverage for Farrera’s gross-negligence claims against Andrews because, under Florida law, fellow-employee immunity does not extend to co-employee gross negligence. Third, the court held that the employer’s liability exclusion, which bars coverage for injuries to “employees,” did not apply because the policy separately defines “temporary workers” (those hired to meet short-term workload demands) and excludes them from “employee.” Finally, the court rejected Southern-Owners’ argument that Florida’s statutory definitions should supplant the policy’s definitions of “employee” and “temporary worker,” confirming that courts must honor unambiguous contract terms even if they differ from statutory usage.

Analysis

Precedents Cited

The court relied primarily on Florida precedent interpreting both CGL policy construction and workers’ compensation immunity:

Taurus Holdings, Inc. v. U.S. Fid. & Guar. Co., 913 So. 2d 528 (Fla. 2005): Contracts are construed according to plain language; ambiguities resolve in favor of the insured.
Jones v. Florida Insurance Guaranty Association, 908 So. 2d 435 (Fla. 2005): An insurer’s duty to defend is broad and arises whenever the complaint’s allegations potentially fall within coverage, even on unsound legal theories.
Morales v. Zenith Insurance Co., 152 So. 3d 557 (Fla. 2014): Workers’ compensation exclusivity bars employer liability but does not apply to co-employee gross negligence claims.
Altman Contractors, Inc. v. Crum & Forster Specialty Ins. Co., 232 So. 3d 273 (Fla. 2017): A policy definition can encompass claims that would fall outside similar statutory definitions; insurers may contract for broader coverage.

The Eleventh Circuit also cited its own precedents on federal diversity-choice-of-law and duty-to-defend principles:

Travelers Indemnity Co. of Connecticut v. Richard McKenzie & Sons, Inc., 10 F.4th 1255 (11th Cir. 2021): Restates the “eight corners” rule and the rule that any doubt on duty to defend resolves in the insured’s favor.
EmbroidMe.com, Inc. v. Travelers Property Casualty Co. of America, 845 F.3d 1099 (11th Cir. 2017): Policy interpretation is a question of law reviewed de novo.

Legal Reasoning

The Eleventh Circuit’s reasoning unfolded in three steps:

Who Is an Insured? The policy’s “Section II—Who Is An Insured” identifies “an executive officer” of a corporate insured as an insured “but only with respect to [his] duties as [an] officer.” Jason Andrews testified—and Southern-Owners conceded—that he held an officer position in JAC. Under Florida law, unambiguous policy terms control coverage. The court thus held that Andrews was an insured for the purposes of these claims.
Does the Workers’ Compensation Exclusion Apply? The policy excludes “any obligation of the insured under a workers’ compensation . . . or similar law.” Florida law immunizes employers from suits by injured employees but carves out an exception for allegations of gross negligence or willful misconduct by co-employees acting furtherance of the employer’s business. Because Farrera sued Andrews, a fellow employee, for gross negligence, the immunity did not apply. Hence the policy exclusion did not bar coverage.
Does the Employer’s Liability Exclusion Apply? The policy excludes bodily injury “to . . . an ‘employee’ of any insured arising out of . . . employment.” But the policy separately defines “temporary worker” as “a person who is furnished to [the insured] to meet . . . short-term workload conditions” and expressly excludes “temporary workers” from “employee.” DeLeon and Andrews testified that Farrera was hired on a temporary, day-by-day basis after Hurricane Michael. The district court found those facts—not clearly erroneous—that Farrera was a temporary worker. Consequently, he was not a policy-defined “employee,” and the employer’s liability exclusion did not apply.

In addition, Southern-Owners argued that Florida’s workers’ compensation statutes define “employee” more broadly, but the court held that nothing in Florida law prohibits a policy from defining “employee” more narrowly. It thus rejected the insurer’s invitation to rewrite the policy with statutory definitions rather than honoring the plain contract language.

Impact

Southern-Owners v. Farrera establishes several important guideposts for future CGL coverage disputes in Florida and the Eleventh Circuit:

Contractual Definitions Control—Courts will enforce unambiguous policy definitions even if they diverge from statutory usage.
Temporary-Worker Exception—Insurers who wish to bar coverage for hired-hand exposures should carefully define and clearly incorporate “temporary worker” language or endorse exclusions that explicitly address such workers.
Executive Officers Are Insureds—Corporate officers are insureds under typical CGL policies “with respect to their duties as officers,” so insurers must analyze reservation of rights notices to executive officer exposures.
Co-Employee Gross Negligence—When an employee sues a fellow employee for gross negligence or willful misconduct arising out of the employer’s business, workers’ compensation immunity and related policy exclusions do not apply.

These principles will guide insurers in drafting policies, issuing reservations of rights, and evaluating duty-to-defend obligations. They also inform contractors and sub-contractors about the potential breadth of defense coverage when accidents involve multiple tiers of labor.

Complex Concepts Simplified

Duty to Defend vs. Duty to Indemnify—An insurer must defend any suit if the allegations could be covered; indemnity is decided later, based on the facts and final judgment.
Eight Corners Rule—We look only at the complaint and the policy first to decide if defense is owed. Only undisputed facts outside the complaint that destroy coverage can override it.
Fellow-Employee Immunity—Under Florida law, employers and supervisors are immune from employee suits unless the tortfeasor co-employee acted with gross negligence or worse.
Statutory vs. Policy-Defined “Employee”—Florida statutes define “employee” broadly for workers’ compensation, but insurance contracts can carve out narrower definitions if the terms are clear.
Temporary Worker Definition—A temporary worker is someone hired to meet short-term workload needs and is not a permanent or statutory employee under many CGL policies.

Conclusion

Southern-Owners Ins. Co. v. Farrera underscores that CGL policies must be read in their entirety, with each definition given full effect. Insurers cannot sidestep defense obligations by resorting to statutory definitions that conflict with clear policy language. Moreover, when an injured laborer sues a co-worker or supervisory executive for gross negligence, both workers’ compensation immunity and policy exclusions tied to “employees” will not shield the insurer from defending. The ruling emphasizes the importance of precise policy drafting—particularly around “temporary worker” and “employee” definitions—and delineates the interplay between coverage provisions and Florida’s workers’ compensation regime. Insurers, insureds, and practitioners should take heed: unambiguous contractual definitions and the nature of the alleged tortfeasor as a co-employee or officer can make all the difference in whether a defense is owed.