Chapter 5: duties after injury occurs/conditions.
The Duties of the Insured
The policy lists seven duties that the insured is to undertake in the event of an injury occurring to an employee.
First and foremost is the duty to notify the insurer if an injury that may be covered by the policy occurs. The obvious reason for this is so that the insurer can process an injury claim promptly. Such promptness can aid the insured, the insurer, and the injured employee. With prompt notice, the insured gets the ball rolling so that the insurance coverage he has already paid for can be applied to the claim. The injured worker gets quick appropriate medical attention and care, knowing that such care is going to be paid for by the insurer. The insurer can set up its claim file and fulfill its contractual obligations to "pay promptly when due" the workers compensation benefits required by law; and, if a lawsuit results from the injury, prompt notice allows the insurer to have the facts and figures of the injury incident so that a defense can be planned or a subrogation lawsuit can be successfully made. It is true that some insureds may want to hide a worker's injury in order to protect its experience rating factor, but that would not only violate the insured's duties under the policy contract, but also set the stage for possible future problems in the insurer-insured-employee relationship.
The next listed duty of the insured is to provide for immediate medical and other services required by the workers compensation law. This may conflict with the duty noted in the last paragraph of this part of the policy. That last paragraph warns the insured not to voluntarily make payments, assume obligations, or incur expenses, except at the insured's own cost. If, in the process of providing immediate medical services, the insured incurs expenses, are such expenses reimbursable by the insurer? The policy is not clear on this point; however, in all probability, the insured will be reimbursed. Note that the insurer has already promised to pay reasonable expenses incurred by the insured at its request, and since the insurer has "requested" the insured to provide immediate medical services if an injury occurs, it can be said that the insurer has already agreed to the reimbursement. Besides, the duty of the insured is to not voluntarily make payments or incur expenses; but, if the immediate medical services are required by law, that is not exactly voluntary on the part of the insured.
If an injury occurs, the insured must give the insurer or the agent the names and addresses of the injured persons and of witnesses, and other information needed by the insurer. And, the insured is required to promptly give the insurer all notices, demands, and legal papers related to the injury, claim, or lawsuit. This helps the insurer to process the claim as soon as possible, and to plan for any future legal action on behalf of or against the insured.
The insured has the duty to cooperate with the insurer and to assist in the investigation, settlement, or defense of any claim, proceeding, or lawsuit. This is not to say that the insured has the final say in any settlement; the insurer has already reserved to itself that task. But, the insured has an affirmative duty to cooperate with the insurer in the claims process, and most courts would require the insured to fulfill this duty or be held in breach of contract.
The final listed duty of the insured deals with the insurer's right of subrogation. The insured must do nothing after an injury occurs that would interfere with the insurer's right to recover from others. The duty says nothing about an insured signing a waiver or some other type of hold harmless agreement prior to an injury that would restrict or even deny a right to recover from others, so such agreements would apply to the insurer as well as to the insured. Insureds should make such agreements known to the insurer before the policy takes effect.
Note again, if the insured violates these duties, there is the chance that the insurer will claim breach of contract, thus making the policy voidable. The insurer would have to prove such a breach, but if it can do so the insured could end up with no insurance coverage for a workers compensation claim.
There are five conditions listed on the workers compensation policy, dealing with inspections, long term policies, the transfer of the named insured's rights, cancellation of the policy, and just who acts as the sole representative on behalf of all the insureds.
The inspections clause gives the insurer the right to make an inspection of the workplace "at any time." This condition has given rise to a theory that would allow the injured employee to maintain an action for negligence against the workers compensation insurance carier itself. The reasoning behind this is that some insurance carriers take it upon themselves to inspect the workplace for safety engineering purposes, and if an accident then occurs, the injured worker can charge negligence on the part of the insurer for failure to perform its assumed duty to uncover and correct unsafe working conditions.
To date, most judicial decisions in this area have come down on the side of the insurer. A federal district court in Michigan stated in Kotarski v. Aetna Casualty & Surety Company, 244 F.Supp. 547 (E.D. Mich. 1965) that nothing in Michigan's workers compensation act reveals the intention to allow the insurer that is performing safety inspections as an integral part of its business function to be sued as a negligent third party on the theory that its liability arises from negligent performance of a voluntary undertaking. In Barrette v. Travelers Insurance Company, 246 A.2d 102 (Conn. Super. Ct. 1968), the Connecticut Supreme Court decided that an employer's compensation carrier is not subject to suit by an injured employee for alleged negligence in the failure to inspect machinery, failure to warn the employee of the danger, or neglecting to provide devices to negate the danger. Also, in Reid v. Employers Mutual Liability Insurance Company, 319 N.E.2d 769 (Ill. 1974), the Illinois Supreme Court held that the workers compensation insurer engaged in making safety inspections incident to its compensation coverage was not amenable to a lawsuit by an employee for injuries caused by the carrier's negligence in performing safety inspections.
There are, of course, some cases on the other side of the issue. In a New Hampshire case, Corson v. Liberty Mutual Insurance Company, 265 A.2d 315 (N.H. 1970), a workers compensation insurer that undertook the task of assisting accident prevention by inspections and advice rendered to the insured employer was liable to an injured employee for a negligent inspection. And, in Rothfuss v. Bakers Mutual Insurance Company, 733 A.2d 315 (N.J. Super. Ct. App. Div. 1969), the New Jersey Supreme Court declared that a workers compensation carrier is a third person liable to an employee in a common law action if its acts negligently cause harm to the employee.
Regardless of which side of the argument prevails in any given state, it should be pointed out that the current workers compensation and employers liability insurance policy contains a rather specific disclaimer about the inspection of the workplace and the duty such an inspection places on the insurer. In the inspection condition of the policy, the insurance company declares that inspections it may carry out are not safety inspections; they relate only to the insurability of the workplaces and the premiums to be charged. Furthermore, the insurer states that it does not undertake to perform the duty of any person to provide for the health or safety of the employees, and does not warrant that the workplaces are safe or healthful, or that they comply with laws, codes, or standards. Thus, the insurer strives to intentionally limit its duty under the workers compensation policy to both the insured and the employee.
The long term policy clause notes that, if a policy is written for longer than one year and sixteen days--say, for example, two or three years--then all the provisions in the existing policy apply as if under a brand new policy. In other words, the annual renewal is treated as an automatic rewrite of the existing policy, though both the insured and the insurer should reexamine the exposures in order to get proper premium for proper coverage.
The transfer of rights clause acts to prevent the insured from transferring his or her rights or duties to another party without the written consent of the insurer. This is meant to protect the insurer from getting an insured that it neither contracted for nor would want to insure in any instance. An exception is made, of course, for the legal representative of the insured in case the insured dies; notice must be given to the insurer within thirty days after the insured's death.
The cancellation clause details how the insured or the insurer can cancel the policy. The clause allows the insured to cancel the policy at any time, even with only one day notice, as long as written notice is mailed to the insurance company in advance of the cancellation date. It should be noted that the clause states that notice need only be mailed in advance and not received by the company in advance. If the insurer cancels the policy, it must mail or deliver to the insured not less than ten days advance written notice stating when the cancellation is to take effect. For the insurer also, mailing the notice will prove sufficient to prove notice. Presumably, should any dispute arise over the cancellation date, a court will decide if the terms of the clause were heeded, but regardless of which party is mailing the cancellation notice, it would be prudent to mail it by certified mail, return receipt requested. This clause also states the obvious--if the cancellation provisions conflict with state law, the state law prevails and this policy and the insurer recognize that fact.
The final condition on the policy makes the first named insured the sole representative to the insurer, so that important items such as changing the policy provisions or cancelling the policy can be dealt with without having the insurer sort through possibly conflicting statements or wishes from the various insureds. This is simply a good and sensible business practice.