Carve-Out Exception To Workers Comp and UIM

Baker v. St. Paul Travelers Ins. Co., 2010 WL 537880 [C.A.1 (R.I.)], arose out of a car accident where Heidi Baker, the plaintiff-appellant and a resident of Rhode Island, was injured while on the job and driving a vehicle owned by her employer, Safety Source Northeast . Baker filed a third-party claim against the other driver, who was at fault for the accident and whose insurance coverage was insufficient to cover Baker's damages. Baker also filed for and received workers comp benefits through the Rhode Island workers comp system. Baker also sought to recover under the UIM provision of her employer's auto insurance policy provided by St. Paul Travelers Insurance Company, the defendant-appellee. In this case, St. Paul denied Baker's attempt to recover under the UIM provision, citing Massachusetts law for the proposition that an employee cannot recover for work-related injuries under both workers comp and her employer's UIM coverage.

 

Baker filed a complaint in Rhode Island state court in response to the denial. She sought a declaratory judgment regarding her eligibility for coverage under St. Paul's UIM coverage. St. Paul removed the case to Rhode Island district court and Baker and St. Paul both moved for summary judgment. A magistrate judge recommended granting St. Paul's motion and denying Baker's on the grounds that Massachusetts law governed the matter and Massachusetts case law prohibited recovery by an injured employee under both workers comp and her employer's UIM coverage. Baker filed a written objection to the report and recommendation, arguing that Rhode Island law should apply, but that even under Massachusetts law the bar on recovery under both workers comp and the employer's UIM coverage did not apply where the UIM coverage was a bargained-for provision. The district court adopted the magistrate's report and recommendation in full.

 

The United States Court of Appeals, First Circuit, stated that it disagreed with the district court's conclusion that two decisions relied on from the Massachusetts Supreme Judicial Court (SJC), Berger v. H.P. Hood, Inc., 416 Mass. 652 (1993), and Nat'l Union Fire Ins. Co. v. Figaratto, 423 Mass. 346 (1996), foreclosed Baker's claim. According to the appeals court, Berger and National Union only addressed whether the exclusivity provision of the Massachusetts workers comp statute permitted an injured employee to recover under both workers comp and her employer's UIM coverage. In Baker's case, however, she had recovered workers comp benefits under the Rhode Island workers comp statute rather than the Massachusetts statute. Therefore, Berger and National Union were not dispositive.

 

Thus, because the SJC had not addressed the precise question before it, the appeals court predicted how that court likely would decide the issue. The court determined that Berger and National Union were largely governed by the court's policy concerns regarding providing Massachusetts companies with a predictable and reliable scheme concerning the interplay of workers comp and underinsured motorist coverage, and holding down insurance costs for Massachusetts companies. Because this case concerns a Massachusetts company doing business in Massachusetts, and carrying an auto insurance policy executed and delivered in Massachusetts, the court explained that it expected these policy concerns would lead the SJC to apply the conclusions of Berger and National Union to this case, even though those cases concerned collection of workers comp payments under the Massachusetts workers comp scheme.

 

However, the appeals court explained that that conclusion did not end its analysis because in National Union the SJC carved out an exception to the general bar on an employee's recovery under both WC and her employer's UIM coverage. The National Union court stated that it “would not extend the bar imposed by the exclusivity provision of the Workers' Compensation Act to make ineffective [UIM] coverage (or any other coverage) that an employer explicitly purchased for the purpose of providing [UIM] coverage (or any other coverage) to employees injured in the course of their employment.” The district court, however, had granted summary judgment to St. Paul without addressing this carve-out language and therefore had not reached the factual question of whether the underinsurance coverage purchased by Safety was indeed a bargained-for provision intended to provide Safety's employees with additional protection from damages caused by underinsured motorists.

 

Thus, because the limited facts available suggested that Safety indeed bargained for the UIM coverage contained in its policy with the intention of protecting its workers from damage caused by uninsured motorists, the court held that remand was warranted for discovery as to application of carve-out exception to the general bar on recovery under both workers comp and the UIM policy.

 

Editor's Note: The court remanded for discovery specifically on the question of whether Safety “explicitly purchased” its UIM coverage “for the purpose of providing [UIM] coverage … to employees injured in the course of their employment.” If the court concludes as much, the terms of the contract will require that any recovery by Baker under the UIM provision be reduced by “[t]he amount paid under a workers' compensation law.” In other words, an offset would be required.