Pennsylvania’s Car Insurance Workers’ Compensation Exclusion Struck Down

In a case that is sure to have a ripple effect throughout Pennsylvania's public and private employment community, the Supreme Court of Pennsylvania recently ruled that it is against public policy for an employer's uninsured and underinsured motorist automobile insurance to deny payments to victims who are also receiving workers' compensation benefits.

On-the-job Car Accident

The case dates back to 2002, when a Sugarcreek Borough police officer was injured in a car accident in his patrol car while performing duties consistent with his position as a law enforcement official. He applied for and received workers' compensation benefits to cover his medical expenses and part of his lost wages, and the municipality paid the remainder of his salary during his recovery. In addition, he received the policy limit of $25,000 from the automobile insurance company of the person who caused the accident.

Since the police officer's medical expenses exceeded the $25,000 provided by the at-fault driver's insurance company, he sought additional compensation through Sugarcreek Borough's policy with the Pennsylvania Pooled Risk Insurance for Municipal Entities (PennPRIME). Under that policy, claimants may receive up to $100,000 in additional payments per person injured in an accident involving an agent of a municipality of the state.

PennPRIME denied the police officer's claim under the guise of a policy clause that prohibits payment to claimants who are also eligible for workers' compensation benefits. The officer challenged the denial of benefits, arguing that the exclusion was contrary to public policy and illusory, since nearly every claim brought under the policy would be by state or municipal workers also eligible for workers' compensation payments.

Court Rules to Give Car Insurance and Workers' Compensation Benefits

When the dispute between the officer and PennPRIME went to trial, the judge ruled that the workers' compensation exclusion indeed rendered PennPRIME's policy coverage illusory and against public policy. After PennPRIME appealed that ruling, the appellate court reversed it, reinstating the company's original denial of benefits. Ultimately, though, the Supreme Court of Pennsylvania reversed the appellate court's decision, finding that the exclusion made the insurance coverage illusory and that "the insurer receives a windfall by charging a premium for the coverage."

Claims for workers' compensation benefits are complex, particularly in conjunction with claims made through other insurance policies. If you have questions about a workers' compensation claim, contact a Pennsylvania workers' compensation attorney who can provide more information about your legal rights and options.