Racketeering claims blocked by exclusive remedy

In Michigan, claims by workers alleging that they were fraudulently denied benefits lay within the exclusive remedy of the workers' compensation law.

Case name: Brown v. Cassens Transport Co., No. 04-CV-72316 (E.D. Mich. 09/27/10).

Ruling: The U.S. District Court, Eastern District of Michigan dismissed a suit brought by a group of workers alleging that their employer, its third-party administrator, and their workers' compensation physician perpetrated a scheme to deny them benefits in violation of the Racketeer Influenced and Corrupt Organizations Act.

Sub-subcontractor's employee not entitled to coverage from contractor (02/25/13)
NFL seeks to seal the deal against players filing in California (04/19/12)
Company's failure to pay premium results in liability for worker's injury (12/19/11)
Medicaid's payment, write-off erase employer's liability to worker (03/12/12)
Insurer's de facto denial of symptom doesn't trigger penalties, fees (02/06/12)

What it means: In Michigan, claims by workers alleging that they were fraudulently denied benefits lay within the exclusive remedy of the workers' compensation law.

Summary: A group of workers were injured while working for the same employer. The workers claimed that their employer and its claims adjuster, through various acts of mail and wire fraud and in violation of RICO, fraudulently denied them benefits. The workers also alleged that the employer deliberately selected unqualified doctors to give false medical opinions that would support the denials of their claims. The workers sought the benefits denied to them, attorney's fees, medical care expenses, and mileage to and from medical care. On remand from the U.S. Supreme Court and the 6th U.S. Circuit Court of Appeals, the U.S. District Court, Eastern District of Michigan dismissed the suit, holding that the workers' exclusive remedy for their claims that they were fraudulently denied benefits rested within the workers' compensation law. The court also held that the workers failed to allege an "injury to business or property" under RICO.

The court noted that the damages the workers sought are provided under the workers' compensation law. The court stated that the law also addresses the fraudulent denial of benefits and Michigan courts routinely dismiss claims based on the bad-faith denial of benefits. Some courts allow a departure from exclusive workers' compensation remedies where an employer's behavior is "particularly heinous" and where the workers seek damages for emotional and mental distress separate and apart from the underlying claim for benefits. In this case, the workers asked the court to decide whether they were entitled to benefits and whether the employer's denial of benefits was fraudulent.

The court also explained that personal injuries and pecuniary losses stemming from the injuries did not confer standing under the act. Additionally, the damages sought by the workers presumed an entitlement to workers' compensation benefits that was based on "pure speculation."

Read more at the WorkersComp Forum homepage.

November 29, 2010

Newsletter Sign-up