Massachusetts Court Rules on ‘Equitable Contribution’ Case

Massachusetts’ top court ruled in March that a workers’ compensation insurer that has paid benefits has a right to pursue “equitable contribution” from a second insurer that also provided coverage to the same policyholder.

The Massachusetts Supreme Judicial Court said the doctrine of equitable contribution is applicable even though the injured worker’s employer did not give notice of injury to the second insurer.

The case involves Progression Inc., a Massachusetts-based industrial supplies company. In 2010, a Progression employee was severely injured in an auto accident while on a business trip abroad.

Progression had purchased two policies from two different insurers – one providing compulsory workers’ comp coverage from the Insurance Co. of the State of Pennsylvania (ISOP), and a second providing workers’ comp coverage for employees traveling overseas from Great Northern Insurance. Both policies provided primary coverage.

Following the accident, the employee gave timely notice of his injury to his employer who gave notice of the claim only to ISOP.

ISOP paid the claim but later learned that Progression also had coverage under a Great Northern policy. In 2011, ISOP sent a letter to Great Northern and requested contribution. But Great Northern declined to contribute and told ISOP that it had learned from Progression that Progression intended to tender the claim only to ISOP.

In 2013, ISOP sued Great Northern in U.S. District Court, arguing that the doctrine of equitable contribution required Great Northern to pay half of the claim. But the judge ruled that Great Northern is not obligated to contribute since the policyholder did not tender a claim. ISOP appealed, and the U.S. Court of Appeals asked the Supreme Judicial Court to examine the question of whether an insured can choose which of its workers’ comp insurers is to indemnify the claim.

In its March 7 ruling, the Supreme Judicial Court answered “no” to that question, concluding that ISOP has a right to pursue equitable contribution.

The high court said Great Northern was seeking the “selective tender” exception, which provides that “where an insured has not tendered a claim to an insurer, that insurer is excused from its duty to contribute.” But the court said this would not align with the Massachusetts comp law.

In Massachusetts, an insurer is directly liable to an injured employee, and the employee only needs to give notice to the employer. The employer is then required to notify the insurer within seven days, but the failure to do so does not bar the employee from obtaining benefits. “Great Northern’s obligation was triggered by the notice given to Progression by its injured employee, regardless of whether Progression gave notice to Great Northern,” the court ruled.

Topics Carriers Legislation Workers' Compensation Massachusetts