New York's Highest Court Holds That Workers' Compensation Bar Does Not Prevent Employee Claim For Uninsured Motorist Benefits
January, 2012
In Elrac, Inc. v. Exum, 2011 WL 6153101, New York's Highest Court, the Court of Appeals, held that a self-insured employer whose employee was involved in a motor vehicle accident can be liable to the employee for uninsured motorist benefits, notwithstanding the prohibition on employee versus employer claims under the Workers' Compensation Law.
Birtis Exum was employed by Elrac, Inc., a subsidiary of Enterprise Rent-A-Car Company. While in the course of his employment, Mr. Exum was injured in an automobile accident. Because the driver of the other vehicle was uninsured, Exum filed a notice to arbitrate upon Elrac by which he intended to seek uninsured motorist benefits from his employer's motor vehicle insurance. The employer moved for a permanent stay of the arbitration. The trial Court granted the employer's motion, and the employee appealed. The Appellate Court reversed the lower court's ruling, and this appeal followed.
In New York, Insurance Law Section 3420(f)(1) requires all motor vehicle liability policies to include uninsured motorist protection with minimum limits of $25,000 for injury and $50,000 for death caused by the owner or driver of an uninsured vehicle. Additionally, self-insurers are held to this same requirement with regard to uninsured motorist coverage. Thus, Elrac, a self-insurer, was required to provide the same protection to operators of its vehicles.
The Court of Appeals found that Exum was entitled to workers' compensation benefits as he was injured while in the course of his employment. Elrac claimed that, in light of this entitlement, its employee was barred from recovery of uninsured motorist benefits. The Court disagreed, reasoning that Workers' Compensation Law Section 11's language asserting that employer liability for workers' compensation benefits provides an employee's "exclusive" recourse "cannot be taken literally." 2011 WL 6153101. Section 11, as quoted in the opinion, provides:
The liability of an employer [for workers' compensation benefits]... shall be exclusive and in place of any other liability whatsoever, to such employee, his or her personal representatives, spouse, parents dependents, distributes, or any person otherwise entitled to recover damages, contribution or indemnity, at common law or otherwise, on account of such injury or death or liability arising therefrom.
(Italics added.) The Court pointed out that Section 11 "cannot be read to bar all suits to enforce contractual liabilities" such as where an employer agrees to provide an employee with life or medical insurance. If the employer breached such an agreement, a suit by the employee would not-the Court reasoned-be barred even though the lawsuit might in fact literally arise "on account of... injury or death," as provided in Section 11. Accordingly, the Court affirmed the Appellate Court's Order in favor of employee Exum.
Learning Point
While the Court of Appeals acknowledged the well-established Workers' Compensation Law bar against employee-versus-employer claims as provided under New York Workers' Compensation Law Section 11, it crafted an exception to that rule. Employee suits premised upon breach of contract, will not be affected by the Workers' Compensation prohibition. The Court utilizes this concept to shape the provision of uninsured motorist benefits as being essentially a contractual obligation owed by the employer to its employee. It remains to be seen whether this case will open the door to other types of claims by employees in spite of the Workers' Compensation Law's language.
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