Readying for the Return: Employers Should Review Insurance Policies for These Protections

Re-opening the workplace may expose employers to potential liabilities, particularly if an employee contracts the virus from a workplace exposure.  Some companies are already becoming involved in such lawsuits and they may present some challenges from an insurance perspective. A recent lawsuit filed in Illinois, Estate of Evans v. Walmart, involves the survivors of a Walmart employee who died after contracting the virus, allegedly while at work.  The complaint alleges that the Walmart location involved failed to provide masks, gloves and other protective equipment to its workers and did not properly sanitize the store. The lawsuit charges Walmart with negligence and wrongful death and claims that the store failed to follow guidelines issued by the Centers for Disease Control and the U.S. Department of Labor for maintaining a safe workplace. What is key about this case is that it was not filed in the Workers’ Compensation Court, where claims against employers are ordinarily brought. This case was filed in the civil court and seeks damages for pain and suffering that are not available in the compensation setting.

Employers that provide Workers’ Compensation insurance, which is mandated by statute, are precluded from civil suit for non-economic damages (pain and suffering).  Some states, including New Jersey, recognize an exception to the bar from suit where it can be shown that an employer intended for his employee(s) to be injured.  The “intentional wrong” exception has been interpreted narrowly to preserve the goal of the compensation statute- i.e. to provide the automatic entitlement to benefits for work-related injuries.  In order to meet the burden, an employee is required to show a “deliberate intention” to injure by the employer. Such an intent to injure has been rarely found by the courts. However, if a court should find that an employer intentionally put profit over worker safety such an employer can find himself on the wrong side of a liability claim.  These cases could find their into the civil courts simply because a particular state’s compensation statute excludes claims for exposures to natural diseases.

If such a civil suit is filed, be aware that it will not be covered under a general liability insurance policy, which is only intended to cover claims for negligence against a company by third parties.  Those policies exclude coverage for any claim of injury to an employee.  Insurance coverage for these types of claims will only be found in Part B of a Workers’ Compensation insurance policy.  Part B affords coverage for bodily injury or disease caused by accident to an employee.  Be aware that most Part B coverages have a low liability limit that may be inadequate to cover the losses that an employer might be compelled to pay in the event of a serious COVID-related claim, leaving the employer to fund any excess verdict out of its own pocket.

Now would be the perfect opportunity to review any insurance program with a broker.  Employers can consider increasing Part B liability limits to protect their company from any potential excess liability for a COVID-related claim.  In addition, employers should review the terms of any excess or umbrella coverage that it purchased  to make sure that it provides coverage over their Part B workers’ compensation coverage. Taking this simple step now could protect the company against a significant future exposure.

The United States Senate may be weighing in on this shortly as discussions are taking place to insulate employers from liability for COVID exposure employee claims as part of the next federal relief package.  There is substantial opposition to these proposals from the plaintiffs’ bar and employee rights groups. We will continue to follow any developments.

As the law continues to evolve on these matters, please note that this article is current as of date and time of publication and may not reflect subsequent developments. The content and interpretation of the issues addressed herein is subject to change. Cole Schotz P.C. disclaims any and all liability with respect to actions taken or not taken based on any or all of the contents of this publication to the fullest extent permitted by law. This is for general informational purposes and does not constitute legal advice or create an attorney-client relationship. Do not act or refrain from acting upon the information contained in this publication without obtaining legal, financial and tax advice.  For further information, please do not hesitate to reach out to your firm contact or to any of the attorneys listed in this publication.