What Do You Think: Could Worker Sue Dairy After Fire in Home?

Frank Ferreri

Fresno, CA (WorkersCompensation.com) – When a married couple owns a business, do both spouses have to hold separate workers’ compensation insurance for the “owners” of the business to be covered?

That question faced a California court when a dairy worker experienced burns on the owners’ property.

The worker experienced injuries during a fire at the home he was staying in, which was owned by the dairy’s owners, who were a married couple. The worker sued the owners, claiming that the home was “negligently owned, maintained, managed, and operated,” leading to severe burn injuries and loss of personal property.

The worker also filed a workers’ compensation claim against the diary, alleging that his injuries occurred in the course and scope of his employment. The dairy’s workers’ compensation policy compensated the worker for his injury, although it was unclear whether the policy named both the husband and wife as insureds.

At trial, the court found that the worker’s lawsuit against the owner was barred by the exclusive remedy provision under California law, even though the company didn’t own the home.

The worker appealed to the next level in court.

Similar to other states, in California, workers’ compensation law is an exclusive remedy for a work-related injury when:

  1. At the time of the injury both the employer and employee are subject to the compensation provisions of state law.
  2. At the time of the injury, the employee is performing services “growing out of and incidental to” his employment and acting within the scope of his employment.
  3. The injury is caused by the employment.

An exception provides that the exclusive remedy provision does not apply when the employer fails to secure the payment of compensation, such as when an injury policy is ineffective.

Did the exclusive remedy prevent the worker from suing?

  1. Yes. The dairy was a family busines, and it was reasonable to expect that the policy at issue covered both the husband and wife as owners.
  2. No. It must be clear that each owner carries worker’s compensation insurance, and because it wasn’t clear whether both the husband and wife in this case did, the dairy could be held liable for the worker’s injuries.

If you picked A, you agreed with the court in Gonzalez v. Soares, No. F077672 (Cal. Ct. App. 02/10/21, unpublished), which upheld the lower court’s ruling. According to the court, the policy at issue “served the purposes of the workers’ compensation statutes: providing prompt compensation for [the worker’s] injuries, regardless of fault, and passing the cost on as part of the cost of production of the dairy’s products.”

The court explained that construing the insurance policy “to protect objectively reasonable expectations of the insured” meant interpreting the policy to cover the couple even if the policy language was ambiguous.

“A reasonable insured would not expect the policy to single out one spouse for coverage, leaving the other civilly liable for the employees’ injuries and for any penalties imposed for failure to maintain insurance as required by the workers’ compensation law,” the court reasoned.

In reaching its decision, the court rejected the worker’s argument that each employer – in this case, both the husband and wife – had to maintain separate workers’ compensation insurance. According to the court, the dairy was at all times owned by the couple, and the insurer knew that at the time it issued the policy.

This feature does not provide legal advice.

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