Employee or Independent Contractor Affects Insurance Coverage for NY Plumber


From Independent Insurance Agents & Brokers of New York, Timothy Dodge reports a case where a plumber was caught between two insurance companies — his insurance company claimed he was an employee of another plumbing company; while the other plumbing company claimed he was an independent contractor.  Upon appeal, the appellate justices did not agree on whether he was an employee or independent contractor at the time the damage occurred, although the majority said he was an employee.  Timothy writes:

An insurer provided commercial general liability coverage for a sole proprietor in the plumbing business. This individual frequently did work for another plumbing company, which was insured by a different insurer. While the sole proprietor was working at a residence, a fire started and damaged the home. The sole proprietor looked to his insurer for coverage. However, the insurer denied coverage, arguing that he was acting as an employee of the other plumbing company at the time of the loss. Meanwhile, the insurer for the plumbing company also denied him coverage on the grounds that he wasn’t an employee (and therefore not an insured under its liability policy.) Suffice to say that our sole proprietor was not feeling the love from anyone.

The majority of judges on the appellate court, however, saw it differently:

Here, we conclude that the Dryden policy unambiguously provides coverage for Goessl in the underlying action. The Dryden policy states that, “if the named insured is an individual, both the individual and his/her spouse are insureds but only with respect to the conduct of a business of which he/she is the sole proprietor.” “Business” is broadly defined in the Dryden policy as “a trade, profession, or other occupation, including farming, all whether full or part time.” The record in this case establishes that Goessl was the sole proprietor of S & K Plumbing and that, at the time of the fire, he was engaged in the conduct of his “trade, profession, or other occupation” as a plumbing subcontractor for AP Daino. Because the injury in the underlying action allegedly arose out of the conduct of Goessl’s plumbing business, plaintiff is obligated to defend and indemnify him in the underlying action

… the record establishes that AP Daino and Goessl intentionally structured their business relationship as a long-term subcontracting arrangement rather than an employment relationship. AP Daino did not provide Goessl with health insurance or other employee benefits, and did not withhold taxes or pay social security or unemployment taxes on his behalf. Goessl determined his own hourly rate, submitted invoices to AP Daino on behalf of S & K Plumbing, and received a Form 1099-MISC, for miscellaneous income, as opposed to a W-2 wage statement. At AP Daino’s request, Goessl obtained his own liability coverage, which is further evidence that neither party considered Goessl to be an “employee” under the MSA policy.

Although it is undisputed that Goessl was an insured under AP Daino’s workers’ compensation policy, the record indicates that the workers’ compensation carrier required AP Daino to include uninsured subcontractors on its policy, and Goessl was listed as an uninsured subcontractor, not as an employee, on the policy. …

I take some comfort in the fact that, when I have trouble figuring out whether someone is an employee or not, even judges can’t agree. It will be interesting to see whether this decision gets to the New York State Court of Appeals.

Read the full story at Employee or Independent Contractor – That is the Question – Ask Tim.

See Dryden Mut. Ins. Co. v. Goessl, 117 A.D.3d 1512 (Supreme Court, Appellate Division, Fourth Department, New York, 2014).


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