Massachusetts Supreme Judicial Court Reviews Workplace Injury Covered by Two Policies

In a recent decision, Insurance Company of the State of Pennsylvania vs. Great Northern Ins. Co. (SJC-11897), the Massachusetts Supreme Judicial Court clarified what happens if there is more than one workers’ compensation insurance policy that covers a workplace injury. In this case, a Massachusetts employee was catastrophically injured in an automobile accident while working abroad on a business trip. The employer had purchased different workers’ compensation insurance plans from two different insurers. However, the employer chose to give notice of the accident to only one of the insurers, and it initially told the other insurer nothing of the accident. The first insurer eventually learned that there was a second insurer and sent a letter to the second insurer, giving notice about the claim and requesting contribution. The second insurer declined, pointing to the employer that advised them that only the first insurer was going to be used.

This case went through the federal court system for a time, which ultimately sent the question to the commonwealth’s appellate system, asking whether or not the employer can choose the insurer it wishes to use. The Supreme Judicial Court answered “no,” stating that the insurer paying for the loss has a right to equitable contribution from the co-insurer to make sure that they cover their share of the loss. The court felt that the employer cannot prevent the insurer covering the costs from seeking equitable contribution.

In its analysis, the court looked at case law that shapes the doctrine of equitable contribution. Over time, courts have determined that when multiple insurers provide coverage for the loss of an insured, any insurer that pays more than its fair share of the costs of the defense and indemnity can seek a proportionate contribution from the other co-insurers. This doctrine applies to insurers that share the same type of obligations on the same risk. Case law also states that the insurance companies do not have to have agreements with each other for this obligation to exist. The right to equitable contribution exists solely with the insurer, and it does not rely upon the insured.

The court did not feel the insurer should be subjected to any arbitrary decision-making on the part of its insured. The law recognizes that an employer/insured may not have any incentive to approach co-insurers if it feels like payment in full can be obtained by one company. The doctrine seeks to ensure fairness and encourage the basic risk-spreading purpose of insurance by distributing costs among all insurers with coverage obligations.

In its appellate brief, the second insurer argued it fell under the “selective tender” exception to the doctrine of equitable contribution. The second insurer felt it was excused from contributing to the settlement of the claim because the employer did not tender the claim to it. While some jurisdictions have adopted this exception, the Massachusetts Supreme Judicial Court declined to do so. The court felt that would not align with Massachusetts’ workers’ compensation statutes and regulations that create a direct liability from the insurer to the injured employee. No barriers, other than a nominal fee for failing to notify, exist under Massachusetts law. The court felt the notice given by the first insurer to the second insurer triggered the second insurer’s obligation to assist and indemnify the claim of the injured person.

The Massachusetts workers’ compensation attorneys at the Law Office of James K. Meehan have the experience you need to assist you with your claim. For a consultation, call our office today at 508.822.6600.

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