Post-Occurrence Remedy of Workers’ Comp Coverage Lapse Saves Employer from Negligence Claim
Just over two weeks after cancelation of an employer’s worker's compensation policy, an employee was seriously injured on the job. Four days after the injury the employer wired the premium payment to its workers’ comp carrier and the policy was reinstated with no lapse in coverage. The employee subsequently received medical and wage-loss benefits. Nevertheless, the employee sued the employer for negligence because on the date he was injured, the company did not have workers’ comp insurance required by state law. Michigan law allows an employee to sue for negligence in addition to receiving compensation for available employer’s benefits when an employer fails to obtain workers’ comp coverage but the dollar amount of any benefits collected is subtracted from any amount awarded. The courts agreed the employer had fulfilled its obligation under the law when it corrected an accidental lapse and secured coverage for an injured employee. The appeals court admonished employers that its “proposed reading of the statute does not create a legal loophole through which employers may avoid the obligation to consistently carry 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.”