Ask Tim

Employers Liability Coverage is Unlimited in New York, Except When It's Not

Question from an IIABNY member: When a certificate lists employers liability at :

• 100,000 each accident
• 500,000 policy limit
• 100,000 each employee

I always tell insured that in New York Employers liability is unlimited per the statute. Do you have something that proves this?

Answer: This is actually a little complicated because there isn’t a statute that mandates this. It’s more of a longstanding tradition. Also, the EL limits on the dec page may actually apply in certain circumstances. 

There is a 1988 New York Insurance Department advisory legal opinion on this topic. The last opinion the department issued on this was in 1990, and I think the 1988 opinion provides a better explanation. The attorney wrote in part: 

The workers' compensation carrier must "pay all sums" that the insured employer is legally obligated to pay third parties with respect to an employee's injuries which arose out of and in the course of employment, provided that, both the insured employer and the employee are subject to the New York State Workers' Compensation Law. [EMPHASIS ADDED]

The workers' compensation carrier may not impose any limit of liability for compensable injuries. The unlimited liability language of the New York Workers' Compensation Policy has been in effect for more than 40 years. The New York State Department of Insurance has never approved a workers' compensation policy form that would impose a limit on a carrier's liability for a compensable injury which includes the employer's liability. It is interesting to note that, the unlimited coverage for liability contained within Coverage B is a continuation of the coverage prevalent at the time the standard compensation policy was revised in New York in 1954. The concept of unlimited liability coverage originated in the insurance industry and was accepted by the Insurance Department when workers' compensation policy forms were submitted to the Superintendent of Insurance for approval.

Therefore, EL coverage is unlimited with regard to injuries and employments that are subject to the New York Workers’ Compensation Law. For example, a worker is in a scissor lift installing overhead piping when the lift collapses. He collects WC benefits but also sues the lift’s manufacturer, who in turn sues the employer, alleging improper use or maintenance. The employer’s EL coverage is unlimited for this loss because the injury and employment are compensable under the New YorkWC law.

In contrast, a worker borrows a power saw without permission from his employer because the motor burned out on his own saw. While at home on a weekend, he amputates a finger when the guard on the saw falls off. He sues the saw’s manufacturer, who sues the employer, again alleging faulty maintenance. Because this injury is probably not compensable under the New York WC law, the EL coverage is subject to the limits shown on the dec page.

Another example: Recently, a public school teacher near here got burned when his science experiment in the classroom went wrong. Put him in private school. If he sued the manufacturers of the equipment and supplies used in the experiment, and those entities in turn sued the private school, the EL limits on the school's WC policy would apply, because “people engaged in a teaching capacity in or for a nonprofit…educational institution” are not covered by the NY WC law while “performing teaching duties.” 

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On Top Of Spaghetti...: WC Benefits For Employee Getting Take-Out

Worker injured on break entitled to workers comp benefits: Court

January 9, 2012 - 12:22pm

ALBANY, N.Y.—A car salesperson injured while driving to retrieve spaghetti dinners on a break is entitled to workers compensation benefits, a New York appellate court ruled Thursday.

The claimant in Richard Potter Jr. vs. Paolozzi Imports Inc. suffered an injury while driving his personal car after receiving a supervisor's permission to leave work briefly.

Mr. Potter was returning to his worksite after retrieving two spaghetti dinners when the accident occurred, court records show. A finance manager where he worked had purchased the dinners as part of a fundraiser sponsored by a football team that Mr. Potter helped run on a voluntary basis.

No interruption of employment

A workers comp judge found that Mr. Potter's injuries arose from his employment and awarded him benefits. In October 2010, a workers comp board affirmed the judge’s finding, and Paolozzi Imports appealed.

But the 3rd Judicial Department of the New York Supreme Court’s Appellate Division agreed with the workers comp board.

The appellate court cited case law finding that short breaks are so closely related to job performance that they do not constitute an interruption of employment, and another finding that benefits are awarded on the theory of an employer’s control of the employee during off-premises activity.

In this case, the appellate court said it found substantial evidence supporting the board's determination that claimant's short break did not constitute an interruption of employment.

via www.businessinsurance.com

Come on, admit it -- you used to sing "On Top of Spaghetti" when you were a kid. It was funny. What isn't so funny is what happened to this New Yorker who was driving back to the office after spending his break time picking up a couple of dinners for a colleague.

It's an interesting illustration of how the question of whether an injury arises out someone's employment can be very unclear. Those of you who suffered through sat in riveted attention to the Workers' Compensation class I taught around the state last year know that this was a point of discussion in the course.

By coincidence, the appellate court that decided this case is the same one that will hear IIABNY's appeal of the Regulation 194 lawsuit tomorrow. We're all about the Third Department these days. The complete text of this decision is on the court's Web site.

I'm curious as to what you all think of this ruling. Fair and sensible, or unjustifiable and biased? Do you best in the comments.

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Ask Tim, Episode #28 -- The Fellow Servant Rule

In this episode of the Ask Tim podcast:

• Tim wishes J.B. a merry Christmas, leaving J.B. speechless
• Tim discusses the "fellow servant rule" and how it applied under common law before there was a Workers' Compensation system.
• New York workers who suffer injuries on the job can sue if they suffer "grave injuries," such as death, dismemberment, paralysis, amputation, etc.
• The Commercial General Liability policy covers the employer when one employee injures another, but it does not cover the employee who caused the injury.
• Businesses who want to protect certain employees against these types of lawsuits need a special endorsement on their CGL policies.

For more information, visit the Big "I" Virtual University page on Commercial General Liability.

Download Ask Tim Episode #28

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Order in the Court: Labor Law, Deadlines

Lots of interesting decisions have been coming out of the New York appellate courts recently.

• Last February, the New York Supreme Court Appellate Division, Second Department ruled that the federal Longshore and Harbor Workers Compensation Act does not prevent a legal action under New York Labor Law Sections 240 and 241 against a party who is neither a vessel owner nor the injured worker's employer. These sections of the Labor Law are, of course, New York's infamous "scaffolding law," which makes owners and general contractors of projects absolutely liable for injuries involving a height elevation when the injured worker was not given certain adequate safety devices.
• The First Department ruled in late October that a user's privacy-protected Facebook content is not necessarily safe from being discovered as evidence in a legal action. 
• An insurer's failure to promptly deny a liability claim based on late notice of loss prevented it from obtaining a default judgment against its insured.
• Another insurer that did promptly deny a liability claim for late notice lost anyway because there is a question as to whether its insured had a reasonable belief that it was not liable for the loss.
• An insurer's letter to a hospital denying a claim for no-fault benefits "pending adjuster's review" and "investigation" was not sufficient to meet the law's 30-day deadline for paying or denying a claim. 

The moral: Claim adjusters, deny your claims on time.

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Missouri Workers' Comp Insurer Gets It Right

Accident Fund reverses stance, gives workers comp benefits to Joplin, Mo., hero

October 24, 2011 - 1:54pm

JOPLIN, Mo.—Accident Fund Insurance Co. of America is reversing its denial of workers compensation benefits for a Joplin, Mo., man deemed a hero for saving three men with Down syndrome from the Joplin tornado.

According to a widely reported Associated Press story, Mark Lindquist suffered broken ribs, a shoulder injury, the loss of most of his teeth and spent about two months in a coma after 200 mph winds tossed him nearly a block.

A Missouri Senate resolution hailed him as a “true hero” for helping protect the three middle-aged men living in a group home that had no basement.

On May 22, Mr. Lindquist and a co-worker placed mattresses over the three men and then laid atop the mattresses to help

via www.businessinsurance.com

This is a very heartening development in a story of bravery and tragedy. A Missouri social worker almost died trying to protect three developmentally-disabled men during the horrific Joplin tornado last May. His employer's Workers' Compensation insurer initially determined that he was ineligible for benefits under state law. The carrier has now reversed that decision and will pay his millions of dollars in medical expenses.

Did the insurer change its mind because the Associated Press ran a story in newspapers across the country about the man's predicament? Perhaps. Whatever its motivations, the important thing is that the carrier is providing the necessary benefits. In America, we don't let heroes go bankrupt simply because they did the honorable thing. Three cheers to the carrier for seeing it that way.

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Ask Tim, Episode #25 -- Employers' Liability

In the long list of commercial insurance coverages, Employers' Liability doesn't get a whole lot of attention. Part One of the Workers' Compensation and Employers' Liability Insurance Policy gets the spotlight because most of the losses the policy covers are payments due under the relevant Workers' Compensation law. However, most employers have at least some exposure to employee injury and disease losses that Workers' Compensation doesn't address. This episode of Ask Tim takes a look at this neglected coverage and the New York-specific wrinkles that producers need to be aware of.

The highlights:

• Employers' Liability covers the insured's legal liability for bodily injury to employees, other than injuries or diseases that are compensable under the Workers' Compensation law
• Coverage applies only if:
  • The injury arises out of and in the course of the injured worker's employment
  • The employment is necessary or incidental to the insured's work
  • The bodily injury by accident occurs during the policy term
  • The bodily injury by disease must be caused by or aggravated by conditions of employment
  • The employee's last day of last exposure to the conditions causing or aggravating the disease occurs during the policy term
  • The worker brings the lawsuit in the U.S.A., its territories or possessions, or Canada
• E.L. Coverage is unlimited for losses resulting from employments covered by the New York Workers' Compensation Law.
• The limits shown in the policy declarations apply to losses resulting from employments not covered by the New York Workers' Compensation Law.

 

Download Ask Tim Episode #25

 

 

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Does a Premium Finance Company Have to Send Cancellation Notices By Certified Mail?

Question from an IIABNY member: What do you know about finance company cancellation notices? If the cancellation is on a Workers Compensation policy is the finance company required to send the notices to the insured Certified Mail/Return Receipt like the insurance companies do?

Answer: New York Banking Law Sect. 576 applies here. It states:

"1. When a premium finance agreement contains a power of attorney or other authority enabling the premium finance agency to cancel any insurance contract or contracts listed in the agreement, the insurance contract or contracts shall not be cancelled unless such cancellation is effectuated in accordance with the following provisions:

(a) Not less than ten days written notice shall be mailed to the insured at his last known address as shown on the records of the premium finance agency, of the intent of the premium finance agency to cancel the insurance contract unless the default is cured within such ten day period and that at least three days for mailing such notice is added to the ten day notice. A copy of the notice of intent to cancel shall also be mailed to the insurance agent or broker.

(b) Service of the notice of intent to cancel or notice of cancellation by mail shall be effective provided that the notices are mailed to the insured's last known address as shown on the records of the premium finance agency. The records of the premium finance agency shall be presumptive evidence as to the correctness of such address.

(c) If the insurance contract or contracts provide motor vehicle liability insurance, every such notice of cancellation shall include in type or print, of which the face shall not be smaller than twelve point, a statement that proof of financial security is required to be maintained continuously throughout the registration period and a notice prescribed by the commissioner of motor vehicles indicating the punitive effects of failure to maintain continuous proof of financial security and actions which may be taken by the insured to avoid punitive effects.

(d) After the notice in paragraph (a) above has expired, the premium finance agency may thereafter, in the name of the insured, cancel such insurance contract by mailing to the insurer a notice of cancellation stating when thereafter the policy shall be cancelled, and the insurance contract shall be cancelled as if such notice of cancellation had been submitted by the insured himself, but without requiring the return of the insurance contract. A copy of the notice of cancellation shall also be mailed to the insured..."

Nothing in this language requires the finance company to send the notice by certified mail, return receipt. In addition, New York Workers' Compensation Law Sect. 54, which requires notice by certified mail, return receipt, appears to refer only to insurers ("No contract of insurance issued by an insurance carrier against liability arising under this chapter shall be cancelled within the time limited in such contract for its expiration unless notice is given as required by this section...Such notice shall be served on the employer by delivering it to him, her or it or by sending it by mail, by certified or registered letter, return receipt requested, addressed to the employer at his, her or its last known place of business..."). I think if the legislature had intended for premium finance companies to follow the same rules as insurers, it would have included the same language in Banking Law Sect. 576. (As a side note, Sect. 576 does contain some provisions that apply specifically to auto policies; the legislature could have done likewise for Workers' Comp.)

To summarize, in my opinion premium finance companies do not have to send cancellation notices for Workers' Comp policies by certified mail. 

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The NYS Insurance Fund and 30 Days' Notice of Cancellation

Question from an IIABNY member: We continually have major issues with the New York State Insurance Fund. One of the most confusing issues is cancellation of policies with them and their "30 days after notice is given" policy. When we send them a Lost Policy Release, it is noted in their system, but they will not cancel a policy for 30 days, leaving insureds with large bills and over-lapping coverages. Given this day and age of people changing insurance companies at the drop of a dime, it is very hard to explain to them that NYSIF will not cancel their policy for an additional 30 days despite a legal document authorizing them too.
 
I guess I am looking for a little guidance on whom to contact at NYSIF or how to go about raising this issue (I am positive it is not the first time it has come up) with them. 

Answer: In this case, I have to let the State Insurance Fund off the hook and blame the New York State Legislature. The legislature writes the laws, and this is what they wrote in New York Workers’ Compensation Law Section 94:

Any employer may, upon (obtaining insurance coverage from a private carrier or providing proof of its ability to self-insure), withdraw from the fund by turning in his insurance contract for cancellation, provided he has given written notice to the fund of his intention to withdraw not less than thirty days before the effective date of such cancellation. Upon receipt of such notice the fund shall, at least ten days prior to the effective date file in the office of the chairman a notice of such cancellation date. (emphasis added)

In no event shall the insurance contract be deemed cancelled until at least ten days after the date of such filing, any earlier date mentioned in the notice to the contrary notwithstanding. (emphasis added again)

If an employer withdraws from the fund upon (obtaining coverage from a private carrier), the new insurance contract with the stock corporation, mutual corporation or reciprocal insurer shall be deemed not to take effect until the cancellation of such employer's contract with the state insurance fund has become effective.

Therefore, by law an employer cannot withdraw from the NYSIF without providing at least 30 days’ notice. Plus, the NYSIF must give at least 10 days’ notice to the Workers Compensation Board, and the policy is not cancelled until those 10 days are up. You don’t add these together – the Fund could receive a notice today advising of cancellation on Aug. 5, send the notice to the WCB tomorrow, and the cancellation will take effect on Aug. 5. Nothing in the law requires the Fund to wait. But the fact remains that the law requires the employer to give the 30 days’ notice.
 
Because this is a legal requirement, I don’t think the Fund is in a position to do anything about your insureds’ problem. By law, the replacing policy cannot take effect until the end of the 30-day notice period, so there really should not be dual coverage and premiums for the same time period.

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Is There Liability Coverage For After-School Zumba?

Question from an IIABNY member: Our insured, a school, is thinking of offering a Zumba (fitness class) for all staff at the school after work hours.  The instructor operates independently; the insured would be paying her directly. How would this fall as far as liability insurance on the school?  I hope it does not fall under Workers Compensation.

Answer: If one of the teachers were to suffer an injury during a fitness class, I don’t think the school's Commercial General Liability policy will provide coverage because of the Workers’ Compensation and Employer’s Liability exclusions. I also think it's questionable as to whether Workers’ Comp would apply since it’s unclear as to whether the injury would arise out of the claimant’s employment (a Workers' Comp law judge might have to rule on that one.) The most likely source of coverage might be the Employers Liability section of the WC policy. If the injured person is considered to be an employee at the time of the injury, then this is the coverage that should apply. Otherwise, the CGL should apply (the person is either an “employee” at the time of injury or not; if not, then the CGL applies.)

The CGL should apply to the fitness instructor’s injury or property damage she may suffer while on your insured’s premises.

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Cancellation and Nonrenewal Notice Requirements for Workers' Comp

Question from an IIABNY member: With regard to Workers Compensation:
1)     What is the requirement for carriers for issuing either non-renewal or conditional renewal notices?  Are they required to give 60 days notice as with other lines of business or is it less?
2)     We have a carrier that is issuing a ‘cancellation’ notice, with only 30 days notice, in order to change the writing company on the renewal policy.  Should they be issuing a conditional renewal notice instead?

Answer: New York Insurance Law Section 3426, which provides the requirements for cancellation, nonrenewal and conditional renewal notices for most commercial lines policies, specifically states that it does not apply to Workers' Compensation policies. Rather, New York Workers Compensation Law Section 54 applies; it requires a carrier to provide no less than 30 days' advance notice of non-renewal. It does not require carriers to provide conditional renewal notices. 

Regarding cancellation, that same section of the law requires the carrier to give 10 days' notice for non-payment of premium or 30 days' notice for any other reason.

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