- Employees Injured On the Job in New Jersey - Are You Sure You Are Covered?
- July 2, 2012 | Author: Jonathan A. Cass
- Law Firm: Cohen Seglias Pallas Greenhall & Furman PC - Philadelphia Office
ABC, a general contractor, is working on a multi-story building in New Jersey. While constructing the building, Bob, one of ABC's employees, sustains serious brain damage when he is struck in the head by construction debris falling from an upper floor of the building. It turns out that the debris had been thrown from the building by another ABC employee who was trying to hit a dumpster located on the ground near where Bob was walking. So long as ABC has workers' compensation insurance, ABC is going to have insurance coverage for any claims that Bob brings against ABC, right? Surprisingly, the answer can be no if Bob decides to bring an action against ABC outside of the workers' compensation system, something that is happening more frequently due to recent developments in New Jersey law.
To understand this unfortunate state of affairs, it is necessary to understand the New Jersey Workers' Compensation Act, N.J.S.A. 34:15-1 et seq. ("Act"). Under the workers' compensation system, an employee injured (or killed) on the job is entitled to have the medical care necessary to treat his injuries paid for, and to receive payment of a percentage of his gross weekly wages during the period of time he is unable to work. Although the injured employee is entitled to receive benefits even if the accident was his fault, he is not entitled to receive compensation for the pain and suffering associated with his injury.
An employer insures itself from workers' compensation claims by purchasing a workers' compensation and employers liability insurance policy ("WC policy"). The WC policy will pay for the legal costs and expenses associated with defending a workers' compensation claim, and any benefits awarded to the injured employee. It also includes employers liability coverage (referred to as "Part Two" coverage), which is intended to provide coverage for claims outside of the workers' compensation system - such as a claim brought by an employee alleging that his injury was caused by the employer's negligence or failure to provide a safe workplace.
The benefits provided under the Act are intended to be the injured employee's exclusive remedy against both the employer and any co-employees who were responsible for his injuries. This means that an employee cannot file a lawsuit against the employer and co-employee who caused the accident asserting common-law claims (such as a tort-based claim for negligence) outside of the workers' compensation system. However, the Act does provide a single exception that permits the employee to bring an action against his employer outside of the workers' compensation system when his injury was caused by his employer's "intentional wrong."
The so-called "intentional wrong" exception was recently interpreted by the Supreme Court of New Jersey in Laidlow v. Hariton Machinery Company, Inc. In Laidlow, the plaintiff employee sustained a hand injury when his gloved hand was pulled into a mill machine that he was operating. Laidlow brought an action in the Superior Court of New Jersey against his employer (and his supervisor) arguing that his injury had been caused by his employer's "intentional wrong."
During the discovery phase of the lawsuit, Laidlow established that a guard on the machine had been intentionally disabled by the employer. For more than twelve years, Laidlow repeatedly asked his supervisor to restore the guard because it was unsafe to operate the machine without it. However, Laidlow's requests were ignored. The employer admitted that the guard had been removed for "speed and convenience," and an engineer retained by Laidlow certified that the employer knew there was a "virtual certainty of injury" to Laidlow "arising from the operation of the mill without a guard."
In response to the lawsuit, the employer sought to dismiss the case on the grounds that Laidlow's injuries had not been caused by the employer's "intentional wrong." The Court held it is necessary to perform a two-part analysis to determine whether an employer has committed an "intentional wrong." The first step is to determine whether there is sufficient evidence for a jury to conclude that the "employer acted with knowledge that it was substantially certain that a worker would suffer an injury." If the answer is in the affirmative, then the court must take the second step to determine whether the facts of the accident "constitute a simple fact of industrial life or are outside the purview of the condition the Legislature could have intended to immunize under the Workers' Compensation bar."
The Laidlow decision essentially removed the requirement that the employee prove that his injury resulted from an intentional act of the employer. As a result, plaintiff's attorneys have filed many more lawsuits outside of the workers' compensation system on behalf of employees who had been injured or killed on the job.
Employers who were sued sought coverage under the employers liability section of their WC policy. The employers liability coverage has an exclusion for "bodily injury intentionally caused or aggravated" by the employer. This exclusion had been traditionally used by insurance companies to deny insurance coverage for lawsuits brought by employees alleging that their employer had committed an "intentional wrong." However, in a victory for employers, a subsequent decision by the New Jersey Supreme Court held that the "intentionally caused or aggravated" exclusion did not apply to the new "substantially certain" standard established by Laidlow, thereby providing coverage for such claims under the employers liability coverage portion of the WC policy.
In response to this development, the New Jersey Compensation Rating and Inspection Bureau, the entity that regulates workers' compensation insurance in New Jersey, issued a new policy endorsement titled "New Jersey Part Two Employers Liability Endorsement" ("New Endorsement"). The New Endorsement excludes coverage for lawsuits brought by employees under the "substantial likelihood" standard.
Laidlow and the Bureau's response created the worst of both worlds for New Jersey employers. It increased the likelihood that a severely injured employee will attempt to circumvent the exclusive remedy provision of the Act by suing his employer in the Superior Court of New Jersey, while at the same time triggering the creation of the New Endorsement that eliminated the insurance coverage needed for those lawsuits.
What should employers working in New Jersey do to protect themselves? First, employers should advise their insurance brokers and agents of this issue and determine whether their workers compensation carriers will agree to issue a policy without the New Endorsement. If the insurance carrier is willing to do so, there will likely be an increased premium charge since the carrier is assuming a greater potential risk. Second, employers should emphasize work-place safety and ensure that employees are not put in a position of having to work under dangerous conditions where injury is "substantially certain." In the event that you find yourself facing such a situation, contact an attorney for the purpose of trying to obtain coverage for such a lawsuit.