Dig a Little Deeper

By Dawn Jackson, AU, AINS

LUNCHTIME SLIP AND FALL

Is employee on scheduled break covered by workers comp?

The Court Decisions column is one of the most popular features of Rough Notes magazine. One reason is that the courtroom is often where the promises made in an insurance contract become real. All insurance professionals can develop “what if” scenarios, but until those scenarios are tested with an actual loss and a court decision, they remain mere mental exercises. This column comes from the industry expert editors of Policy Forms & Manual Analysis (PF&M), a knowledge base that consists of more than 15,000 pages of coverage explanations from The Rough Notes Company’s digital solutions. The editors will dig a little deeper into one of those court decisions to identify a coverage problem, provide possible solutions, and offer broader perspectives.

Rochelle Frett was on a scheduled lunch break   when she slipped on water and fell while leaving her employer’s break room. She was on her way out of the building to eat the lunch she had just prepared. An administrative law judge awarded her workers compensation benefits for her injury.

Not long after she was awarded benefits, the state board of workers compensation denied coverage because her injury occurred during an unpaid lunch break. The lunch break was considered a personal matter. The board did not deny that the injury occurred in the course of employment but held that it did not arise out of employment.

For situations when an employee’s injury is not compensable under workers compensation laws, employers liability coverage responds to allegations of negligence on the employer’s part.

Such a decision is not uncommon. There are times when employee injuries are not compensable under a state’s workers compensation act. Defined benefits apply to employees for injuries sustained in the course of and arising out of employment. Both conditions must be met independently for compensation to apply.

“In the course of employment” means that an employee is actively engaged in performing work duties. “Arising out of employment” means that there is a causal connection between an employee’s work duties and the injury. If an employee is on a scheduled break, then technically an injury would not arise out of his or her employment because he or she was not actively engaging in work duties during the break.

Frett’s benefits were denied by the state board, the superior court, and the court of appeals. The state supreme court, however, issued a writ of certiorari, which meant that a review of the lower court’s decision for irregularities was requested to decide whether the court case cited was properly applied to this case.

The cited case in question was Ocean Acc. & Guar. Corp. v. Farr, 180 Ga. 266 (178 SE 728) (1935) (aka Farr). It’s a case that has been used in the appeals court for 85 years, in which an employee was injured on his lunch break but was denied benefits. The court stated that, while Farr was in the course of employment, his injury did not arise out of employment because there was no connection between his work duties and the break.

Over the years, however, the appellate court developed new rules that expanded the use of Farr. In 1950,

it developed the ingress/egress rule, which means that if an employee is injured on an employer’s premises while coming or going to and from work, then coverage is extended. This includes unscheduled lunch breaks. Further, the supreme court discovered that Farr and the ingress/egress rule were not used consistently by the court of appeals.

The supreme court found that when using Farr and the expanded rules, it meant that if an employee was injured in the same manner and place as Frett but was returning to work from an un-scheduled break, she would have been covered by the workers compensation act. Because Frett was leaving on a scheduled lunch break, however, coverage did not apply. This created a conflict, so the supreme court declared that the scheduled break rule used in Farr was ineffective and without merit, and that it violated the reasonable expectation of a typical work environment. The court overruled Farr and reversed the lower court’s decision.

A point to ponder: What would have happened if the state supreme court had not reversed the lower court’s decision? How would the employee be compensated for her injuries? The employer more than likely had employers liability cover-age under its workers compensation policy and would have needed to look to this coverage. Employers liability is typically included in all non-monopolistic state workers comp policies. It covers an employer’s common law or tort liability for employee injuries that fall outside the scope of state laws or acts. For situations when an employee’s injury is not compensable under workers compensation laws, employers liability coverage responds to allegations of negligence on the employer’s part.

It may seem illogical to deny coverage for an injured employee just because he or she is on a scheduled lunch break, but insurance was not designed to cover every potential loss. Insurance would not be affordable if that were the case, so there must be limitations. For workers compensation, the use of “in the course of” and “arising out of” employment requirements are the limitations.

The author

Dawn Jackson, AU, AINS, is senior editor, Technical & Educational Products Division, at The Rough Notes Company, Inc. She has more than 20 years of experience in the property and casualty insurance industry with a primary focus on commercial lines. She worked for 15 years as a commercial underwriter with both national and regional carriers. Dawn is also an experienced business analyst with a primary emphasis on commercial underwriting systems. She also has experience as a P-C claims trainer. Dawn is a licensed Indiana resident P-C producer. She obtained her bachelor’s degree from the University of Indianapolis.