Sometimes, through ignorance or neglect, employers subject to the state statutory workers' compensation mandates fail to obtain or maintain the requisite insurance. Where employers subject to the system's mandates are found on the date of an employee's workplace accident (or other compensable event) to lack such insurance (either as a self-insurer or through a third-party insurer), such noncompliance with the workers' compensation insurance mandate has serious consequences for the employer.
First, a noncompliant employer loses a primary benefit of the workers' compensation system's exclusive remedy provision. This provision bars injured workers from suing their employers in tort in exchange for statutorily defined wage replacement and medical benefits, thereby significantly limiting the potential legal exposure of the employer regarding such accidents.
Lacking the required insurance strips from the employer the workers' compensation insulation from civil tort suits, allowing injured workers to sue in tort. Also, in many states, such noncompliance with the insurance mandate often (a) disallows the employer from asserting the standard rebuttable presumption that an employee's injury was caused by his or her own negligence, replacing it with (b) a rebuttable presumption that an uninsured employer was itself negligent. See, e.g., Cardiello v. Venus Group, Inc., No. 58925, 2013 WL 7158504 (Nev. Nov. 14, 2013); Jones v. Sorenson, 25 Cal. App. 5th 933, 236 Cal. Rptr. 3d 271 (2018).
Perhaps, most importantly, employer noncompliance with the workers' compensation insurance mandate bars the employer from asserting common tort defenses such as (a) employer freedom from negligence, (b) negligence of a fellow servant, (c) assumption of risk, and (d) contributory negligence. See, e.g., Brown v. Leighton, 385 Mass. 757, 434 N.E.2d 176 (1982); Riddell v. Cagle's Estate, 227 Miss. 305, 85 So. 2d 926 (1956).
In some states, employer noncompliance with insurance mandate also constitutes a criminal offense, potentially subjecting employers to fines and even jail time. Walrath v. Witzenmann USA LLC, 320 Mich. App. 125, 134-35, 904 N.W.2d 875, 881 (2017) (citing Mich. Comp. Laws § 418.641).Given the array of serious legal and financial consequences occasioned by an employer's failure to possess adequate workers' compensation cover at the time of a workplace accident, legal counsel for employers should be sure that their clients remain in compliance with the relevant statutory requirements.