Your $1m risk: are your executives covered for workplace injuries?

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If an executive in your company is injured, would workers compensation or general liability cover them? In some industries a gap between the two means they’re left exposed.

Gowlings employment lawyer David Law noted that it is typical for executive officers of non-construction companies to be exempt from workers’ compensation coverage, and can also be exempt from general liability insurance coverage, due to the “employee injury exclusion” sometimes found in those policies. 

In a recent Court of Appeal decision, Sam's Auto Wrecking Co. Ltd. (Wentworth Metal) v. Lombard General Insurance Company of Canada, 2013 ONCA 186, the court found  on whether an employer could look to its general liability insurer to indemnify injury claim costs.

In May 1998, Wentworth Metal’s executive officer John Ferber was badly injured in a workplace accident. Ferber sued the company and a coworker over alleged negligence, and the dispute settled for just under one million dollars in damages – all from the company’s purse. The company’s coverage under the Ontario workers’ compensation law – the Workplace Safety and Insurance Act (“WSIA”) meant it did not pay premiums for its executives. The employer – Wentworth – then pursued its insurer, Lombard, seeking indemnification.

The company failed in its bid due to a specific provision in its insurance policy stating it did not apply to “’Bodily injury’ to an employee of the Insured arising out of and in the course of employment by the Insured”.

This clause is essentially to prevent a company claiming insurance payouts when workers compensation will cover costs, however, it also means Wentworth’s general coverage did not include executive injuries.

“At trial, a Wentworth owner ‘testified he did not appreciate the relationship between Workers’ Compensation and the coverage purchased from Lombard’,” Law said. “Ultimately this proved a very costly mistake.”

Law suggested companies examine their policies for similar loopholes to avoid the costly situation Wentworth faced.

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