Safety and OSHA News

Workers’ comp insurance lapsed, employee injured: Can he sue company?

An employer accidentally let its workers’ comp insurance policy lapse, and it was temporarily canceled. During that time, an employee was seriously injured. Can the employee sue the company? 

Lawrence Walrath was seriously injured on June 14, 2014 while working at Witzenmann USA LLC in Michigan. He was operating a “10-ton hydraulic burst tester” when the material being tested flew out and struck Walrath in the face. He suffered multiple fractures, sinus damage, brain injury and post-traumatic stress disorder.

The company missed its workers’ comp insurance premium payment due on May 1, 2014, and on May 6, the insurer mailed a notice of pending cancellation. The insurance company didn’t receive a payment, and cancelled the policy on May 29, 2014.

On June 18, 2014, the employer wired a premium payment to the insurance company, and its policy was reinstated with “no lapse in coverage.” Walrath received medical and wage-loss benefits.

Nevertheless, he sued the company for negligence because on the date he was injured, the company didn’t have any workers’ comp insurance as required by state law.

In Michigan, when an employer doesn’t obtain workers’ comp coverage, an injured employee can sue for negligence “in addition to receiving compensation for available benefits from the employer.” The only caveat: The dollar amount of any benefits collected is subtracted from any amount awarded in court.

In this case, Witzenmann USA argued that since its policy was reinstated without a lapse in coverage, it had secured coverage for Walrath. A trial court agreed and threw out the negligence lawsuit. Walrath appealed.

The state appeals court agreed with the trial court. It said the employer had fulfilled its obligation by law when the policy was reinstated without a lapse in coverage. The court wrote:

“The question is whether the employer secured compensation of benefits not whether the employer was insured when the employee sustained injury. When an employer corrects an accidental lapse and secures coverage for an injured employee, it simply has not violated [Michigan law].”

The appeals court added this note the case for all Michigan employers:

“This proposed reading of the statute does not create a legal loophole through which employers may avoid the obligation to consistently carrying workers’ compensation insurance coverage … An employer will find itself hard-pressed to obtain workers’ compensation coverage from an approved insurer backdated to cover an injury that has already occurred.”

(Lawrence W. Walrath v. Witzenmann USA LLC, Michigan Court of Appeals, No. 331953, 6/8/17)

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