Immunity Doesn't Bar Third-Party Liability

Somebody has to pay when an employee suffers serious injuries because a coworker crashed driving home from a work-related function. And in a recent case, that somebody was the insurer.

By Rebecca E. Lawrence and Matthew Brodsky

An injured employee deserved just compensation from a work-related accident despite the exclusive provision of the state workers' compensation law, a U.S. District Court in Pennsylvania found.

After considering summary judgments in July in the case of Nationwide Ins. Co. v. Chiao, the federal court ordered the injured passenger's automobile-policy insurer to open its wallet. The bench based its decision in Pennsylvania insurance law, but also in the general opinion that a carrier should meet its end of the insurance bargain.

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"It was an attempt by the court to provide the policyholder with fulfillment of reasonable policyholder expectations," says Neal R. Brendel, a partner at the Pittsburgh office of Kirkpatrick & Lockhart Nicholson Graham LLP. "They did pay an additional premium to have coverage for uninsured losses, and they suffered, clearly, a significant loss that was uninsured."

The case stems from a traffic accident that occurred en route from an employer-sponsored meeting. On Dec. 8, 1998, Chiao carpooled in a co-worker's minivan, but on the way home the driver crashed into a vehicle in front of her, which was stopped for a school bus. Chiao suffered "significant and life-altering personal injuries," according to court records.

In the aftermath, Chiao brought a claim against the driver, whose insurer, Progressive Insurance Co., paid Chiao the entire value of its coverage ($15,000). Under the Pennsylvania Workers' Compensation Act, Chiao also received workers' comp benefits from her employer.

Chiao sought damages for her injuries, as well, but she couldn't claim them from either her co-worker or her employer. Both were immunized by the exclusivity provision of the Pennsylvania Workers' Compensation Act. So Chiao asserted a claim against her own underinsured motorist insurance policy, underwritten by Nationwide Insurance Co.

In court, Nationwide argued that Chiao's policy required Chiao to be "legally due" payment from the other party involved in the car accident--her co-worker. But the co-worker was immune, Nationwide said, therefore Chiao was not entitled to recover under her policy.

The court however, said the immunity was irrelevant. What mattered was that the co-worker had motor vehicle insurance, which was enough to trigger Nationwide's obligation, regardless of the WCA exclusivity provision. The WCA, the court continued, does not protect unrelated third parties?in this case, Nationwide. The court also found nothing in the WCA or the motor vehicle statute that prohibits recovery by an insured injured by a co-worker.

The court concluded that the intent behind underinsured motorist insurance required insurers to compensate their customers when injured by an underinsured co-worker. It did so by applying the Keystone State's Motor Vehicle Financial Responsibility Act. The court said that absent a clear exclusion within its policy, Nationwide had to pay on the claim. Other insurers in similar situations could find themselves paying, too, unless their underinsured motorist policies contain an exclusion limiting the insured's ability to recover under both the policy and workers' comp.

Nationwide would not discuss the details of this case.

October 15, 2005

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