Exclusive Remedy Loopholes
The casualty market
could see increasing
aggregation risk as
more courts find a way
around the exclusive
By Autumn Heisler
During the first waves of the Industrial Revolution, workers endured grueling labor in life-threatening conditions. No safety regulations were in place, and employers had no legal obligation to pay workers a “fair” wage. Men, women and children toiled in factories that contained
primitive machinery prone to breaking down and causing fires. Workdays of 16
hours a day were not uncommon in temperatures that could reach 130 degrees
Workers injured on the job didn’t have access or the established right to
protections. They could sue their employer — if they could afford to — and start
the process of lengthy court battles and high-at-the-time payouts, but usually they
were left disabled and jobless.
Something had to be done to both protect workers and employers from the
cycle of injury and liability. Thus, workers’ compensation coverage was born. And
with it came the exclusive remedy.
The arrangement provided workers with compensation in the event of injury or
illness while protecting employers from being held liable by workers injured on
the job. Workers’ compensation became the sole remedy to address workplace
“It was the early 1900s when workers’ compensation laws were enacted,
allowing workers’ compensation coverage to be the exclusive remedy for how
injured workers would be compensated for their medical costs and lost wages,”
said Tony Tam, managing director, U.S. casualty placement leader, Marsh.
“Before that, the worker had to go through the legal process to prove the
employer was responsible and negligent. As a result of the enactment of workers’
compensation laws in the 50 states, injured workers for the most part can be made
whole through workers’ compensation and exclusive remedy, and on the rare
occasion, through employers’ liability, which requires the injured employee to
prove the employer’s negligence.”
And “employers would rather have workers’ compensation apply than have
an employee injury claim go to jury trial,” added Mark A. Lies, labor attorney,
Seyfarth Shaw LLP.
“An employer could spend a lot of money if their employee retains a lawyer
and files a lawsuit,” said John Denton, managing director, Marsh. “The exclusive
remedy doctrine avoids a lot of expensive litigation.”
In the event a civil suit is brought forward, added Lies, employers frequently
seek a motion to dismiss the claim. Typically, he said, the motion is granted,
because the claim in issue is deemed to be covered by workers’ compensation and
the exclusive remedy applies.
WHEN EXCLUSIVE REMEDY DOESN’ T APPLY
However, there are instances when exclusive remedy may not apply and
employers face lawsuits regarding personal injury or other liability claims.
Negligence on the side of the employer is the biggest culprit.
“If the employer’s conduct is
particularly egregious, if they are
proven to have been grossly negligent
or intentionally [exhibit] bad behavior,
and depending on the state, an
employee can sue their employer,” said
Likewise, third parties often aren’t
covered under workers’ compensation
and are exposed to suits by employees.
“Sometimes an employer agrees to
indemnify a third party and thus may be
responsible for the third party if an injured
worker sues them, which is referred to
• Exclusive remedy was established
to protect both worker and
employer in the event of an injury.
• There are marked exceptions to
exclusive remedy, like negligence
on the part of the employer.
• More workers are fighting the
exclusive remedy in court and are
“[Claims] could go either way —
through workers’ compensation
and exclusive remedy or through
employer liability, which is
[when an incident is proven as]
— Tony Tam, managing director, U.S. casualty placement leader, Marsh
New York’s Scaffold Law opens the door for workers to sue their employers in the event of an injury.