The purpose of this lecture is to provide an introduction to the pitfalls facing the practitioner who is involved in litigation where an employer has failed to procure a worker’s compensation insurance policy. Although many of the same conventions are in place, the resulting problems facing an injured worker as well as a putative uninsured employer are complex. Procedural devices exist to provide protection to the employer which, as we shall discuss below, create unique obstacles to claimants and their attorneys in the prosecution of their claims.
The extensive litigation involved in the average uninsured claim result from the statutory requirement that all employers in New York must provide workers’ compensation coverage for their employers. The procedural difficulties result from balancing the remedial nature of the statute and the constitutional rights of employers. These difficulties are further exacerbated by the rising cost of compensation insurance which has led many small employers to operate their businesses without insurance. Although the Workers’ Compensation Board has gone to great lengths to address the inequities faced by claimants involved in these claims, the delays encountered by claimants are often devastating, especially when the injuries sustained are severe and permanent.
We will attempt to provide a brief outline of the relevant statutory requirements which shall include practice tips for practitioners representing claimants as well uninsured employers. The balance of the lecture shall be dedicated to a discussion of the Uninsured Employer’s Fund’ including the enforcement and collection efforts that are conducted in an effort to reduce the damages caused by recalcitrant employers.
EMPLOYER/EMPLOYEE RELATIONSHIP
Workers’ Compensation Law Section 2: This section provides extensive description of what defines employers and employees within the meaning of the Workers’ Compensation Law. This becomes a complicated issue where an employer has failed to obtain insurance as it instantly becomes an issue that must be adjudicated before a finding of “no insurance” is made.
** Hazardous Employment
** Casual Employment – Section 2(4) defines casual employment which serves to primarily protect home owners from claims brought by individuals who perform tasks at their homes. This category includes part-time home health workers, repair men, etc. As will be discussed below, most home owner policies provide a casual emplohese sections provide coverage for workers specifically engaged in work as jockeys (and support workers including trainers) and black car operyment endorsement and will provide a defense.
** Corporate Officers – Generally speaking, executive officers of a corporation are covered by a standard w/c policy. Although you need not provide coverage for officers, an employer must specifically exclude officers to deny coverage. However, in a corporation which is solely comprised of one or two officers without employees, coverage need not be provided. (General partnerships.)
Workers’ Compensation Law Section 10: Requires every employer, as defined by Section 2, to provide insurance coverage.
Workers’ Compensation Law Section 17: Alien status does not relieve an employer from providing coverage for employees as ALL employees are protected.
Workers’ Compensation Law Section 14: Average weekly wage.
Workers’ Compensation Law Sections 18-a and 18-b: Tators. The circumstances created by these types of employment presented unique problems for employers and the Board. The creation of these funds have reduced litigation and provided coverage.
** PRACTICE TIPS – Proof of earnings
Corporate records
Contracts
Audits
EXCLUSIVITY OF REMEDY: EXCEPTIONS
Workers’ Compensation Law Section 11: Workers’ Compensation benefits are the exclusive remedy available to injured workers (assuming covered employment.) Even where an employer is uninsured, the WCL provides a mechanism for the adjudication of these claims. Nevertheless, where an employer fails to provide insurance coverage, a claimant is permitted to file a civil claim to recover based upon employer/employee relationship. An employer is barred from raising the affirmative defenses of assumption of risk, contributory negligence or fellow servant liability. The action can proceed simultaneously with an action before the Board in the UEF part.
** PRACTICE TIPS – Procedure/Retainer Statement
WCL Section 50 violation required
Statute of Limitations
` Election of Remedy – see Martin v. C.A. Prods. Co., 8 N.Y.2d 226 (1960).
Avoidance of penalties
Workers’ Compensation Law Section 29: This section provides relief for employers form third party tortfeasors. However, the practitioner must be aware of a WCL Section 11 defense. See Buchner v. Pines Hotel, Inc., 87 A.D.2d 691 (1982). (Joint venture)
THE UNINSURED EMPLOYERS FUND
Workers’ Compensation Law Section 26-a: This section is responsible for the creation of the Uninsured Employers’ Fund, which acts as a surety in instances where employers fail to provide insurance coverage as required by WCL Section 10. Upon the establishment of a claim, the UEF acts in the role of a carrier, paying medical costs and indemnity to injured claimants. It is operated through the Board and staffed by attorneys from the Office of General Counsel.
Workers’ Compensation Law Section 50: Security for payment of compensation. In conjunction with WCL Section10, Section 50 requires every employer to provide insurance either through the purchase of a policy or by complying with the requirements for self-insured status. In order for the UEF to pay an award, or for a civil action to proceed, the Board must determine that the putative employer violated this section.
Workers’ Compensation Law Section 52: There are attendant penalties as well as potential criminal charges, as an employer’s failure to provide coverage is a misdemeanor punishable by jail and/or fines. The Board also imposes civil penalties and requires indemnification from uninsured employers.
** PRACTICE TIPS – Corporate Liability
Avoidance of Penalties
Criminal prosecution
Coverage first = Significant delay
Litigation Costs
Workers’ Compensation Law Section 54: This section (54(5)) provides the procedure for the cancellation of a workers’ compensation policy. The most important concept to remember is that a carrier must strictly comply with the notice requirements contained within this section.
Workers’ Compensation Law Section 54-a: The Board can request security where coverage is an issue.
Workers’ Compensation Law Section 55: Acceptance of premium by carrier an estoppel.
Workers’ Compensation Law Section 56: This section provides for liability to be borne by general contractors where a subcontractor failed to obtain insurance coverage.
The policy was to force general contractors to hire subcontractors with the requisite insurance. The general contractor is provided with the remedy that it can seek indemnification from its subcontractor. Section 56 liability does not relieve a general contractor from third party liability. See Cutillo v. Emory Housing Corp., 190 N.Y.S.2d 502 (1959).
** PRACTICE TIPS – Agency. See Valverde v. N.Y.C. Housing Authority, 154 A.D.2d 756 (1989).
Broker Liability. See DelVecchio v. DelVecchio, 11 A.D.2d 574 (1960). Tavano v. Tavano Enterprises, 227 A.D.2d 836 (1996).
Improper Cancellation. Matter of Cruz v. New Millenium Construction & Restoration Corp., 17 A.D.3d 19 (2005).
Estoppel. See Winn v. Hudson Valley Equine Center, 215 A.D.2d 920 (1995).
Duty to Defend. See Sukup v. State, 19 N.Y.2d 519 (1967) – duty to defend on issue of coverage but not liable for litigation expenses. Great American Indemnity Co. v. Audlane Realty Corp., 296 N.Y.S. 655 (1937).
Jurisdiction.
Corporate Liabiltiy.
Premium audits.
