Is an Employer’s Lapse in Insurance Proof of Negligence?
An accident victim appealed from a grant of summary judgment to an insurance agent and his agency (“the defendants”) in a suit for negligence, breach of contract, and vicarious liability arising from his loss of a lower arm in a workplace accident.
On appeal, the plaintiff argued that the trial court erred in excluding testimony from the company owner and an expert witness and that a genuine issue remains concerning defendants’ negligence in allowing a lapse in the company’s comprehensive general liability (CGL) coverage.
Background
The plaintiff worked for a tree removal company as the fourth man on its work crew in January 2015. He drove the chipper truck and helped with feeding brush into the chipper. The plaintiff earned a flat rate per day, with checks issued at the end of each week. The company also had two office workers, including the company owner’s wife. The company’s insurance agent provided the owner with an application for workers compensation insurance and advised him that he needed the coverage, but he failed to return the application.
The agent had previously helped the owner obtain a CGL policy, which went into effect on January 24, 2014, for a period of one year and provided $1 million per occurrence for bodily injury. The CGL policy contains an employer’s liability exclusion and endorsement, however:
This insurance does not apply to: … bodily injury’ to any ‘employee’ of any insured arising out of or in the course of:
- employment by any insured; or
- performing duties related to the conduct of any insured’s business.
The main portion of the policy defined “employee” as including a “leased worker” but not a “temporary worker,” which was also defined as “a person who is furnished to [the insured] to substitute for a permanent ‘employee’ on leave or to meet seasonal or short-term workload conditions.” The relevant endorsement, however, substitutes its own definition of “employee” as “including, but … not limited to any person or persons hired, loaned, leased, contracted, or volunteering for the purpose of providing services to or on behalf of any insured, whether or not paid for such services and whether or not an independent contractor.”
After the insurance company sent a renewal application to the wrong email address, the CGL policy lapsed on January 24, 2015. A renewal policy containing identical relevant terms was eventually issued on March 27, 2015. In the meantime, however, on March 24, 2015, the plaintiff drove the crew to a work site and, while oiling the chipper, placed his hand in an air intake valve rather than on a handle, resulting in the severing of his left arm just below the elbow.
The plaintiff filed a workers’ compensation claim naming the company as his employer. After learning that the company didn’t have workers’ compensation insurance at the time of the accident, he filed a negligence action against the company. They didn’t file an answer, and an $8 million default judgment against it was entered. In late 2018, the owner and the company assigned any cause of action they might have against defendants to the plaintiff in exchange for $25,000 and a reduction in the default judgment to $3 million. In December 2018, the plaintiff filed the instant action against defendants for negligence, breach of contract, and vicarious liability arising from the company’s lack of workers’ compensation coverage and the lapse in its CGL coverage.
In his deposition, the owner testified that “the reason that I didn’t have workers’ compensation insurance before is because I couldn’t afford it; and after going through everything I just went through, I still can’t afford it. Okay. It’s not possible.”
After the defendants moved for summary judgment, the plaintiff filed an affidavit in which the owner stated for the first time that he “would have bought [workers’ compensation insurance]” if the insurance agent had “explained to [him] that the company was not covered by the [CGL] policy against lawsuits from employees injured on the job” and that he had needed workers’ compensation insurance “to protect the company from liability claims from injured employees.” The plaintiff also filed an affidavit from a former Insurance Commissioner who said that the insurance agent was negligent in allowing the CGL policy, which in his judgment would have covered the plaintiff’s injuries because he was a “temporary worker,” to lapse, and in failing to obtain workers’ compensation coverage for the company.
The trial court struck the owner’s affidavit because it “directly contradicted” his deposition testimony as to why the company didn’t get workers’ compensation insurance. The trial court also struck the insurance commissioner’s affidavit on the ground that its conclusions were either legal or speculative. The trial court granted the defendants’ motion for summary judgment on the grounds that the plaintiff wasn’t a “temporary worker” covered by the policy; that the failure to obtain workers compensation coverage was the fault of the owner, not the defendants; and that workers’ compensation “was the exclusive remedy for the plaintiff’s injury.”
Court of Appeals
The crux of this appeal was the plaintiff’s assertion that the grant of summary judgment was erroneous because issues of material fact remained as to the defendants’ negligence in allowing the CGL policy to lapse and in failing to convince the owner to obtain a workers’ compensation policy.
O.C.G.A. § 34-9-11(a) establishes workers’ compensation as the exclusive remedy, barring exceptions not applicable here, for on-the-job injuries:
The rights and the remedies granted to an employee by this chapter shall exclude and be in place of all other rights and remedies of such employee, his or her personal representative, parents, dependents, or next of kin, and all other civil liabilities whatsoever at common law or otherwise, on account of such injury, loss of service, or death.
This “‘statutory immunity from suit includes the statutory employer regardless whether that statutory employer had actually paid the workers’ compensation benefits, Judge Benjamin A. Land wrote, quoting a 2016 decision.
Given the CGL policy endorsement’s expansive definition of “employee,” Judge Land and the Court of Appeals found it unnecessary to determine whether the plaintiff was properly considered a “temporary worker.” All versions of the CGL policy explicitly excluded coverage for injuries falling under the purview of the workers’ compensation law. And summary judgment is properly granted to an insurer when an insured’s policy contains an applicable exclusion that’s not against public policy.
Here, it was undisputed that the company regularly operated four-man crews in the weeks preceding the plaintiff’s injury as well as on the day in question and that the plaintiff suffered that injury in the course of his employment. The Workers’ Compensation Act thus applied to the plaintiff’s claim, and the exclusion in the CGL policy would apply had that policy not lapsed. Thus, even if the Court was to accept as true the allegation that the defendants were negligent in allowing the CGL policy to lapse, that assumed negligence didn’t cause this claim to go uncovered. Where the Act applies, it provides the employee’s exclusive remedy against the employer, the judge said.
Further, as an employer subject to the Act, Judge Land opined that the company had the right to a dismissal of plaintiff’s action against it as a matter of law. Instead of asserting this right to a dismissal, the company failed to answer the lawsuit and allowed it to go into default, leading to the entry of the default judgment that was at the heart of the plaintiff’s claims against the defendants. Under those circumstances, the plaintiff’s attempt to recover the damages resulting from the default judgment from the insurance agent and his agency failed for the simple reason that the defaulting defendant had a defense that would’ve terminated the underlying action in its favor but failed to assert it.
Because the plaintiff, as the assignee of the company’s claims, took the claims subject to all defenses that would have been good against the company had it pursued an action against the insurance agent and his agency, the proximate cause defense that would’ve barred the company’s claims also bars the plaintiff’s claims.
Therefore, the trial court did not err when it granted summary judgment to defendants. The judgment was affirmed. Diaz Arriola v. Coleman, 2025 Ga. App. LEXIS 161 (Ga. App. April 24, 2025).
Contact Us
Having a knowledgeable Atlanta personal injury lawyer Atlanta residents trust who has extensive experience in handling auto accident cases every day really does make a difference. Whomever you hire as your personal injury car accident lawyer must understand Georgia law and how to apply the state’s personal injury laws effectively.
Our experienced Atlanta based personal injury law firm is happy to answer your questions. We offer free consultations to all prospective clients. Contact an Atlanta personal injury attorney at Tobin Injury Law 24 hours a day, seven days a week by calling 404-JUSTICE (404-587-8423).