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Cases involving temporary staffing agencies and professional employer organizations often lead to unusual and complex legal issues in workers’ compensation. The recent case of Detres v. Workforce Logistics Corp., A-4963-15T1 (App. Div. August 25, 2017) illustrates this point quite well by delving deeply into coverage and conflicts of law issues in a very high exposure claim.
On October 18, 2013, Carlos Ariel Detres was injured seriously when struck by a truck while working for Buy Wise, which specialized in automotive parts distribution. He was a temporary worker provided by Workforce Logistics Corporation to Buy Wise. Detres was a New Jersey resident and was injured at the Buy Wise location in Jersey City. Detres filed a workers’ compensation claim against both Buy Wise and Workforce Logistics Corporation. Workforce, which was insured in New York by Public Service Mutual Insurance Company, denied that the injury occurred in the course of employment. Its carrier, Public Service Mutual Insurance Company, asserted that its policy only applied to New York State locations. Buy Wise, which was insured by Hanover Insurance in New Jersey, denied that its policy applied to this accident, and pointed at Public Service.
How this tangled mess occurred went back to April 23, 2013 when Workforce applied for workers’ compensation coverage to Public Service. The application only listed two locations in New York and never mentioned locations in New Jersey. The application also said that no employees “travel out of state” or “perform work for other businesses or subsidiaries,” and that Workforce did not “lease employees to or from other employers.” Relying on these representations, Public Service issued the workers’ compensation policy from May 1, 2013 to May 1, 2014. Under the policy conditions, only the workplaces and locations listed in the policy were covered, and there was language that there was no “duty to defend a claim, proceeding, or suit that was not covered.” It also said that New York law should apply.
The Judge of Compensation heard a great deal of complex testimony regarding the applicable policies. One key fact was that an agent for Workforce – after the accident with Detres – -sent an email to an Office Manager with Workforce, informing him that there was no coverage for any New Jersey locations. Workforce’s agent was concerned about other potential claims in New Jersey and suggested that the New Jersey location should be added to the policy. Eventually there was a request to add two New Jersey locations to Workforce’s workers’ compensation coverage effective December 16, 2013, which was several months after the accident to Detres. The premium more than doubled, and the policy was supposed to start December 16, 2013. However, the amended policy actually listed the same period as the original policy, namely May 1, 2013 to May 1, 2014 (during which time petitioner had his accident). There was no language limiting the effective date of the New Jersey locations to December 16, 2013.
In December 2015, Hanover Insurance and Buy Wise moved for a judgment that coverage must be provided either by Public Service or by the New Jersey Uninsured Employers’ Fund. The Judge of Compensation eventually ruled that Public Service had to provide coverage for Detres’s injury as well as providing legal representation for Workforce. The Judge focused on the fact that the New Jersey locations had been added and that they became part of the original policy dating back to May 1, 2013.
Public Service appealed and argued in part that New York law should be applied, and that the amendment to the policy in January 2014 should not be given retroactive effect. Public Service also argued that Workforce made several material misrepresentations to obtain coverage and therefore should not be given coverage.
The Appellate Division affirmed the decision of the Judge of Compensation on all points. The Court focused on the fact that the amendment to the policy adding two New Jersey locations was included in the original policy beginning on May 1, 2013. While Public Service produced emails showing that the amendment was only supposed to take effect in December 2013 (after the work accident), the Court said that the policy was clear and unambiguous in stating that it began on May 1, 2013. The Court also rejected the argument that Hanover Insurance, which insured Buy Wise at the New Jersey locations, should pay the claim.
The Court reviewed a little known provision on the New Jersey Workers’ Compensation Act, N.J.S.A. 34:15-87, which states that if an insurer wants to restrict liability of the insurer to a specific location, it must ensure that there is concurrent separate insurance for other locations. The Court read this provision as meaning that Public Service was required to provide coverage to New Jersey’s locations. The Court relied on Lohmeyer v. Frontier Ins. Co., 294 N.J. Super. 547 (App. Div. 1996), certif. denied, 148 N.J. 461 (1997). That case held that a trainer thrown from a horse was entitled to coverage even though the stable where he worked was not specified in the stable’s workers’ compensation policy.
Public Service next raised potential fraud by its insured, Workforce, as a defense. It argued that Workforce misrepresented that it only did business in New York. The Court accepted that there were misrepresentations but said that there is no defense to coverage simply because the insured made untrue statements to the carrier.
Lastly, the Court rejected the argument that New York law should apply, not New Jersey law. The Court began by noting that ordinarily the choice of law made by the parties in a contract is followed, unless some other state has a more significant relationship. The Court also observed that New York law allows a workers’ compensation carrier to exclude specific locations from a policy, but New Jersey law does not. In the end, the Court felt that New Jersey had a greater interest in resolving the dispute than New York because petitioner resides in New Jersey and was injured in New Jersey. “While we acknowledge that two New York corporations entered into a contract for workers’ compensation insurance coverage, and the original policy applied only to the New York locations, we are satisfied that application of New York law would be contrary to the fundamental policies and protections of New Jersey’s Workers’ Compensation Law.” The Court said that New Jersey had a strong interest in ensuring that an employer and its carrier cannot exclude certain locations from coverage.
The Court added, “Although both Workforce and Public Service are New York corporations, they purposefully availed themselves of New Jersey law by doing business in New Jersey and contracting for workers’ compensation coverage of a New Jersey location.”
One question left unanswered is what would have happened if the Public Service policy amendment had correctly stated that its policy covering the two New Jersey locations had been changed to reflect the commencement date of December 2013. That may have made a significant difference to the Appellate Division. It is likely that it was an oversight to issue the amended policy using the same original policy dates, but in the end the Court held the carrier to the language of its policy.
The case is also helpful in realizing that misrepresentations by an insured to its carrier will not exculpate the carrier when a worker is injured. There may be civil remedies against the insured, but an employee is entitled to workers’ compensation benefits because the employee had nothing to do with the misrepresentations.
John H. Geaney, Esq., is an Executive Committee Member and a Shareholder in Capehart Scatchard's Workers’ Compensation Group. Mr. Geaney concentrates his practice in the representation of employers, self-insured companies, third-party administrators, and insurance carriers in workers’ compensation, the Americans with Disabilities Act and Family and Medical Leave Act. Should you have any questions or would like more information, please contact Mr. Geaney at 856.914.2063 or by e‑mail at firstname.lastname@example.org.