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Third Department, January 14, 2010
APPEARANCES OF COUNSEL
Gibson & Behman, P.C., New York City (Ron L. Langman of counsel), for appellant.
Gregory J. Allen, State Insurance Fund, White Plains (Kelly A. O'Neill of counsel), for Brenner & McHugh, Inc. and another, respondents.
{**71 AD3d at 245} OPINION OF THE COURT
Garry, J.
In 2001, claimant was injured in a logging accident while employed by Mark Holmes, a subcontractor doing business as Four Seasons Logging. Four Seasons had no workers' compensation insurance. Claimant died from complications of his injuries in 2005. The general contractor on the project, Brenner & McHugh, Inc., had been hired by the landowner to develop the property. At the time of the accident, Brenner had workers' compensation insurance through the State Insurance Fund (hereinafter SIF). Brenner entered into a subcontract with Mid Hudson Hardwoods, Inc. by which Mid Hudson agreed to purchase and harvest timber on the land. Mid Hudson subcontracted with Four Seasons to cut the timber.
Mid Hudson's human resources functions, including payroll, employee benefits, and workers' compensation benefits, were managed by Hudson Valley Staff Limited (hereinafter HVSL), a professional employer organization (hereinafter PEO). Under the PEO arrangement, Mid Hudson selected its employees. HVSL then hired them, acted as their employer or coemployer of record, and leased them back to Mid Hudson. At the time of the accident, Mid Hudson's leased employees were covered by a workers' compensation and employers' liability insurance policy obtained by HVSL and issued by American Zurich Insurance Company (hereinafter Zurich), on which the named insured was HVSL as labor contractor for Mid Hudson. The policy provided, in pertinent part: "This policy provides coverage for the workers leased to the client [Mid Hudson] . . . This policy does not satisfy the client's duty for the complete payment of any obligations it may have under the Workers' Compensation Law for non-leased employees." The policy language was derived from provisions pertaining to leased employees in the New York Manual for Workers' Compensation and Employers' Liability Insurance.{**71 AD3d at 246} The certificate of liability insurance for the policy similarly provided that "[c]overage is provided for only those employees leased to but not subcontractors of Mid Hudson."
After an initial hearing on claimant's application for workers' compensation benefits, a Workers' Compensation Law Judge (hereinafter WCLJ) found that Mid Hudson had coverage under the Zurich policy and continued the case. After further hearings, a WCLJ issued a decision that found that Mid Hudson did not have coverage on the date of the accident extending to Four Seasons and that, since Four Seasons and Mid Hudson had failed to provide coverage for claimant, SIF was obligated under Workers' Compensation Law

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