5/24/2017

The Ultimate Loss

Workers compensation offers death benefits, but clients can still be dragged into wrongful death and injury liability lawsuits.

By Melissa Hoffman-Schartel

This article originally appeared in the Spring 2017 issue of CLM sister publication, Construction Claims magazine. All rights reserved.

Workers compensation insurance is the standard method of protecting employers from financial disaster due to workplace death, but there are limits to that protection, especially if plaintiffs prove the employer was intentionally negligent or active in the cause of death. From a failure to provide security to a failure to stop workplace bullying that escalates into injury or death, employers may find themselves on the defense end of a wrongful death or any injury liability claim.

The exclusive remedy doctrine of workers compensation has been under attack in many jurisdictions. Many states—such as North Carolina, Florida, Oklahoma, Texas, New York and California—have made significant reforms to their workers compensation systems. As a result of these reforms, plaintiff’s attorneys see an opportunity to carve out additional exceptions to the exclusive remedy concept. Many courts have agreed to carve out exceptions to the exclusivity requirement of workers compensation by incorporating a dual capacity doctrine and intentional tort exceptions into the analysis of workers compensation claims. In addition, in a few other jurisdictions courts have included exceptions, which include fraudulent concealment, employer assault or ratification, and uninsured employer.

Intentional Tort Exception
The intentional tort exception to the workers compensation exclusive remedy rule imposes civil liability on the employer. When an employer intentionally engages in misconduct knowing it is substantially certain to cause serious injury or death to employees and an employee is injured or killed by that misconduct, that employee, or the personal representative of the estate, may pursue a civil action against the employer. The misconduct by the employer is tantamount to an intentional tort, and civil actions based thereon are not barred by the exclusivity provisions of the workers compensation act.

Consider the decision of the North Carolina court in Woodson v. Rowland, which involved a wrongful death action arising from a work-related trench cave-in which killed the decedent, Thomas Alfred Sprouse. The decedent’s employer, Rowland Utility, was retained by the general contractor, Davidson and Jones, to dig trenches for sewer lines. The foreman for the Davidson and Jones crew would not allow his men to work in the trenches because they were not sloped, shored or braced and did not have a trench box as required by OSHA. The decedent’s employer, Rowland Utility, procured a trench box for the Davidson crew but not for his own crew. The following morning, only the Rowland Utility crew reported to work at the site. At 9:45 a.m., one side of the trench collapsed, completely burying the decedent and partially burying the man next to him. The North Carolina Supreme Court allowed the action against the employer to proceed based upon its intentional conduct.

While the employer’s failure to provide a trench box was construed as intentional in the Rowland Utility matter, contrast this outcome to the decision of the court in Pereira vs. St. Joseph’s. In Pereira, the court stated that an employer’s act must be intentional and directed to cause harm to the employee or the employer must have acted deliberately with the specific intention of injuring the worker. The New York Appellate Division stated that, while an intentional tort may give rise to a cause of action outside the ambit of the workers compensation law, the complaint must allege an intentional or deliberate act by the employer directed at causing harm to this particular employee.

In the Pereira case, the plaintiff was employed as a caretaker by the defendant, St. Joseph’s Cemetery. He alleged that his fellow employees intentionally caused him to trip and fall and that he was injured. The plaintiff alleged that St. Joseph’s was negligent in failing to take any action against the plaintiff’s fellow employees to prevent their behavior despite being informed of their prior tortious conduct against the plaintiff. Initially, the Supreme Court of New York indicated that an intentional tort may give rise to a cause of action outside the ambit of the workers compensation law. Ultimately, the Appellate Division reversed the decision of the lower court indicating that, in order to constitute an intentional tort, the conduct must be engaged in with the desire to bring about the consequences of the act. Further, mere knowledge and appreciation of a risk is not the same as the intent to cause the injury. Therefore, the employer was ultimately insulated from civil liability, as there was no specific intent to cause the injury.

The Dual Capacity Exception
An employer may face civil liability under the dual capacity exception to the workers compensation statute. This exception recognizes that employers may have multiple duties toward their employees whether based upon common law or statute. Workers compensation is the exclusive remedy only in those cases where the injury arises out of conditions of employment. Otherwise, the worker may pursue a civil claim against the employer based upon a duty that the employer has which arises independently of the employment relationship.

This dual capacity doctrine was recognized in Bell v. Industrial Vangas. In Bell, the plaintiff’s employer was subject to strict liability. The plaintiff, William Bell, was employed by Industrial Vangas as a route salesman. He was severely injured in a fire which occurred when he delivered a flammable gas to the premises of a customer, Long Chemical. The plaintiff brought suit against Industrial Vangas and Long Chemical and others as joint tortfeasors with strict manufacturers liability as defined in California products liability law. The plaintiff alleged that the defendants were engaged in the business of designing, manufacturing, purchasing, producing, constructing, assembling, processing, preparing, testing, impacting repairing installing and otherwise marketing defective products that proximately caused his injuries. The trial court granted Industrial Vangas’s motion for summary judgment on the ground that Bell’s exclusive remedy against Industrial Vangas was workers compensation. The plaintiff filed an appeal.

The appellate court analyzed whether the product that injured the employee was sold to the general public rather than used solely for the employer’s business. The court ruled in this instance that the employer who also occupies the role of the manufacturer of the product has a duty to his employees who use the product in their work as much as to the public that buys the product for its own use. This policy aims to ensure that manufactured products are safe for use. Injuries sustained by the employee due to a defective product will not insulate the employer from a products liability action. The prevailing wisdom relating to the dual capacity doctrine allows employees to pursue common law actions in products liability cases which will ultimately force the employer to operate a safer workplace.

This principle was also applied in recent California appellate court decisions, including one in which the dual capacity doctrine was applied to a defendant who occupied the dual positions of employer and manufacturer of a defective product sold to the public. In Douglas vs. E. & J. Gallo Winery, the defendant was both an employer and a manufacturer of scaffolds sold to the general public. The court held the defendant liable for damages in the role as a manufacturer due to the injury of the plaintiff employee related to using the scaffold.

Workplace Violence
In Texas, a statutory exception is provided to the workers compensation exclusive remedy rule. If a death is caused by the intentional act or omission of the employer or by the employer’s gross negligence, a civil action may proceed against the employer. In Urdiales vs. Concord Technologies, the court stated that direct assaults by the employer on an employee may fall within the intentional injury exception to the workers compensation exclusive remedy rule.

In addition to the risk of injury to employees relating to construction worksite accidents, OSHA reports that two million employees are victims of workplace violence each year. Workplace violence includes a physical assault such as in the Urdiales matter, verbal threats, written threats, threatening body language, physical assaults and aggravated assaults including rape and homicide. Statistics show that homicide due to workplace violence is a major cause of worker death and is the second leading cause of workplace death in the United States. In fact, one out of six violent crimes occurs in the workplace.

As a result, employers are increasingly subject to liability for hiring and retaining dangerous employees. In an effort to guard against liability, employers must probe into the backgrounds, qualifications, and mental stability of current and potential employees to evaluate their suitability for employment.

OSHA may issue citations to employers it finds failed to provide employees with adequate safeguards against workplace violence. In one instance, after a worker’s death, OSHA cited a substance abuse treatment facility for not providing training to staff on how to respond to a threat or physical assault and for not having adequate safety measures to protect the staff from physical assault.

Lawsuits over negligent security which normally follow violent incidents are on the rise. The lawsuits may involve employers as well as landlords and property management companies that operate the buildings where the incidents occur. Additional theories of liability advanced against employers include negligent hiring, negligent supervision and negligent retention.

Another potential area of liability for employers in the workplace violence arena relates to employment references for employees with known violent tendencies. An employer who provides a neutral reference regarding an employee who poses a known danger can be liable for failure to warn or negligent misrepresentation if an organization relies on the reference and hires an individual who is then involved in a violent incident. In Jerner vs. Allstate Insurance Company, Paul Calden was employed by Allstate. During his employment, he was observed behaving strangely, including making death threats to co-workers. Allstate terminated the employee after he was found carrying a gun to the workplace in his briefcase. Allstate provided the employee with a neutral letter of reference stating that he had voluntarily resigned because his position was eliminated in a restructuring. A subsequent insurer hired the former Allstate employee based in part on Allstate’s neutral letter of reference. After he was terminated by the second insurer, the employee shot five supervisors who were involved in his firing, which caused fatal injuries to three of the five supervisors. The survivors of the victims sued Allstate for failure to disclose the true work history of Calden. The Florida appellate court held that there could be a cause of action against Allstate for misrepresentation. This matter was ultimately settled by Allstate for an undisclosed sum.

Workplace Death Trending Up
Workplace fatalities appear to be on the increase, based on recent data provided by the Occupational Safety and Health Administration. Fatalities have increased both in the construction setting and due to workplace violence. The OSHA statistics involving fatal workplace injuries are staggering. In 2014, 4,821 workers were killed on the job. On average, this constitutes more than 92 workers a week or 13 deaths every day. Since OSHA was created, over 200,000 workplace-related deaths have occurred.

Examining the statistics, out of the 4,821 work-related fatalities in private industry, approximately 20.5% involved construction-related accidents. The leading cause of private sector worker deaths in the construction industry relate to falls, followed by electrocution, falling objects and construction workers who sustained fatal injuries when they were caught in between or compressed by equipment or objects, and struck, caught or crushed in a collapsing structure.

OSHA reports that the top employer violations include lack of fall protection in construction, defective scaffolding, and failure to control hazardous energy, but there are many other violations. Under Title 29 U.S.C. Section 666E, OSHA provides criminal penalties for any employer who willfully violates a safety standard prescribed pursuant to the Occupational Safety and Health Act where that violation causes the death of any employee. In addition to the potential exposure from a liability standpoint, the imposition of criminal penalties is a further cause of concern for employers.

Historically, workers compensation coverage was sufficient to provide protection to an employer for one of the workplace fatalities described above. In the early 20th century, the prevailing tort system made it difficult for injured employees to recover against employers. In an effort to address this issue, the courts established a system of workers compensation laws to effectively remove civil suits brought by injured employees from the tort system. The theory behind the workers compensation system is that the state workers compensation statutes provide the exclusive relief granted for injuries arising out of an individual’s employment.

In summary, employers can be subject to liability under a variety of legal theories for worksite accidents and workplace violence. Workplace violence can impact the productivity of an organization and leave it vulnerable to potential liability. Implementing effective risk management strategies appears to be the prudent course of action in an effort to prevent such incidents. While risk management and prevention are the best strategies, adequate insurance coverage is the best secondary option in the event of a workplace injury or death.



Melissa Hoffman-Schartel is a claims manager at Markel. She can be reached at mscharte@markelcorp.com.

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