Insurance Coverage for Employee Direct Action Asbestos Claims


Title: Insurance Coverage for Employee Direct Action Asbestos Claims


Employee bodily injury claims against employers traditionally are required to be brought under a state’s applicable workers compensation laws. This limits the amount an employee could recover, especially for asbestos and other occupational disease claims. Changes to the law in Pennsylvania and Illinois now permit employees to bring latent occupational injury and disease claims in the regular tort system. Martin v. Goodrich Corp., 2025 IL 130509; 820 ILCS 310/1.1 (P.A. 101-6, §10, eff. May 17, 2019); Herold v. Univ. of Pittsburgh – of the Commonwealth Sys. of Higher Educ., 329 A.3d 1159 (Pa. 2025).

Typically, a defendant corporation purchased both Workers Compensation / Employers Liability (WC/EL) insurance for their employee claims and General Liability (GL) policies for third-party claims brought in the regular tort system. Working in tandem, these policies are tailored to provide comprehensive coverage for bodily injury claims brought against the company either by third-parties or employees and former employees.

When the Illinois legislature and the Pennsylvania Supreme Court elected to allow long-tail employee claims to be brought in the regular tort system, they created a potential gap leaving employers uninsured for these risks. WC/EL coverage frequently contains time limits that a latent injury plaintiff cannot satisfy. At the same time, GL coverage frequently contains exclusions for claims related to bodily injury of an employee arising out of or in the course of his or her employment. Insurers invoke these time limits and employee exclusions to deny direct employee claims brought under the new laws.

A policyholder whose claim is denied due to an employee exclusion has limited options.

Employers’ Liability (EL): Workers Compensation policies usually include EL insurance that covers employee claims not covered under the applicable workers’ compensation laws. However, it is common that these coverages require the claims be brought within three years of the policy’s lapse or require that an employee’s “last day of last exposure” to the conditions causing an occupational disease occur during the policy period. Given asbestos’ long latency period, insurers use these provisions in the EL policy to deny asbestos and occupational disease claims.

General Liability (GL): Any potentially available historical GL policy without an asbestos exclusion should be scrutinized as to whether it has an employee exclusion. Some GL policies contained endorsements that deleted the employee exclusion and/or expressly provided employers’ liability coverage. If the policy did contain an employee exclusion the language should be closely scrutinized. The details of the claim should also be carefully considered as there may be grounds to press for coverage. For example, in cases involving insulators, the former employee may have been exposed to the employer’s former work sites while working for another employer. This would trigger the duty to defend and potentially create an indemnity duty. Also, coverage could be triggered if there is a credible basis to claim that the employee was exposed on a “take-home” basis because there was asbestos on the clothes he/she wore home.

Umbrella Policies: If there is no coverage under the primary general liability or the employers’ liability policies the policyholder should consider tendering the claim to its umbrella insurer. Umbrella insurance typically “drops-down” to provide a defense and indemnity when a claim is not covered by the underlying primary GL or WC/EL insurance. The drop-down language of the umbrella should be closely scrutinized to determine if it “follows-form” to the underlying employee exclusions or if it contains its own employee exclusion. If it does not incorporate an employee exclusion the umbrella carrier may have the obligation to defend and indemnify as if it was the primary carrier.

Thoughts: With long-tail claims there is an infinite variety of policies and language over time that might provide coverage. Thus, all potentially available coverage should be closely reviewed by an experienced professional to determine if a policyholder is entitled to at least a defense. In addition to potentially seeking a legislative fix to the insurance issue, policyholders in coverage litigation may consider making a public policy argument that it is inequitable to deny it coverage when it brought all available coverages with the understanding that all of its employee exposures were insured.