No Workers' Comp Immunity! No Insurance! Sure Is a Problem

25 August 2014 Labor & Employment Law Perspectives Blog

In many states, workers’ compensation benefits are ordinarily the exclusive remedy for an employee injured or killed on the job. In exchange for these benefits, often awarded on a “no fault” basis, the employee generally forfeits the right to bring civil suit (subject to limited exceptions) against his employer. However, this expected employer immunity may not always be there with serious implications.

A recent order from a Florida state court illustrates the point. The court concluded that the exclusive remedy provision of the Florida Workers’ Compensation Act is unconstitutional because the benefits available to employees have been so eroded over time by the legislature they no longer are an adequate alternative to civil suit. Included in the 20-page opinion are references to cases in Colorado and Missouri where the courts found some portion of their state workers compensation laws unconstitutional.

Thankfully for now, this decision will not be binding on other courts in Florida unless ultimately upheld by the state’s Supreme Court. However, there is already another case pending with the Florida Supreme Court on the constitutionality of the Florida Workers’ Compensation Act. These cases suggest a trend which has been gaining some momentum across the country as employees struggle to find a way to reverse the reduction in benefits which have been imposed by legislatures over many years.

The prospect of having workers compensation immunity held unconstitutional would not be of such concern if employers could be assured that in the absence of that coverage some other form of insurance coverage would apply. But that is not necessarily so because other insurance typically procured by employers, such as general comprehensive liability and employee liability coverage, have been designed with the expectation that, barring exceptional circumstances, workers’ compensation coverage would be available and there is no need to duplicate coverage.

Workers’ compensation immunity, in constitutional form, has a limited exception when an employer intends to injure an employee. Rationally it may seem that this is something which would never happen, or rarely so. But that never stops enterprising plaintiff’s attorneys from becoming very creative and enthusiastic about what is “intentional.” In this circumstance, again, there may be no coverage for the employer due to exclusions related to this very exception and intentional acts, among others. Accordingly, an employer could be sued by an employee, or the estate of an employee, claiming he was intentionally injured and also by its insurance carrier contending that there is no coverage requiring either defense or indemnity pertaining to the employee suit. To compound matters, the employee might bring a punitive damage claim which almost surely would not be covered by insurance coverage.

If the Florida workers compensation law is found unconstitutional, the state legislature may fix it and the insurance industry may adapt, but the employer might have a gap in time where there is no coverage and employees are rushing to court to secure what they believe to be a superior option. This could foreshadow an emerging legal issue that employers might be wise to keep an eye on nationwide. It may advisable for employers to confer with their counsel and insurance brokers, specifically convey the perceived risk for which protection is desired, and seek their assistance in reducing or eliminating this risk.

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