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Massachusetts Appeals Court Ruling Prohibits Workers’ Compensation Insurers from Bypassing Department of Industrial Accidents in Coverage Disputes

In a newly published opinion, Merchants Insurance Group v. Spicer, the Appeals Court of Massachusetts decided the issue of whether a workers’ compensation insurer may file an action in Superior Court to retroactively void an employer’s policy while an injured employee’s benefits claim under the policy is pending with the Department of Industrial Accidents. The court answered no, holding that an insurer must exhaust its administrative remedies with the Department of Industrial Accidents before bringing an action in court.brand-new-mower-1530813-639x613

The employee in this case was seriously injured while working for his employer, a landscaping business. The employee subsequently filed for workers’ compensation benefits. The employer’s insurer contested the employee’s claim, and the matter remained pending for a formal evidentiary hearing. While the claim was pending before the Department of Industrial Accidents, the insurer filed a complaint in Superior Court against the employer and employee, claiming that the employer fraudulently obtained its workers’ compensation policy by making material misrepresentations in its application. The employer did not file any answer to the complaint. The employee did file an answer but did not oppose the insurer’s motion for summary judgment against him. Thus, the insurer secured a declaratory judgment in its favor, without ever litigating the issue of fraud.

The insurer then attempted to use this judgment in the pending proceeding with the Department of Industrial Accidents to dismiss the employee’s claim. The administrative judge denied the insurer’s motion, and the insurer filed a second claim with the Superior Court to enjoin the Department of Industrial Accidents from going forth with any proceedings, pursuant to the declaratory judgment. The Workers’ Compensation Trust Fund (Fund) was permitted to intervene in that action and submitted a motion to dismiss on behalf of the employee, arguing that the court lacked subject matter jurisdiction because the insurer failed to exhaust its administrative remedies. The Superior Court agreed, dismissing the insurer’s claim, and the insurer appealed.

There are four steps in pursuing a workers’ compensation claim. First, there is an informal conciliation proceeding. If the parties cannot resolve their dispute, they will then have the opportunity for an informal conference with the administrative judge, a formal hearing, and an appeal to the review board. A judicial review of the board’s decision is made by the Court of Appeals, not the Superior Court. Before any court has jurisdiction over the matter, therefore, all administrative remedies must be exhausted.

In a contested workers’ compensation claim, the Department of Industrial Accidents has the authority to decide any issues relating to the employer’s insurance coverage, including fraudulent procurement, and the parties have no right to litigate the matter in a separate court proceeding. In Merchants, the insurer bypassed the administrative proceedings and filed a court action to dispute coverage for the employee retroactively, while failing to exhaust its administrative remedies. Accordingly, the Court of Appeals affirmed the decision of the lower court dismissing the case for lack of jurisdiction, and it held that the insurer must litigate coverage issues through the administrative proceedings.

If you have been hurt in a workplace accident, there’s a good chance you are entitled to compensation for your injuries, including payment for medical bills and lost wages. At Pulgini & Norton, our skilled attorneys provide legal advice and competent representation to clients pursuing workers’ compensation benefits in Massachusetts. To discuss your claim with one of our experienced attorneys, contact our office by phone at (781) 843-2200 or through our website.

More Blog Posts:

Massachusetts Court Finds No Newly Discovered Evidence in Workers’ Compensation Case, Massachusetts Workers’ Compensation Lawyer Blog, published July 15, 2015

Alleged Workers’ Compensation Fraud in Massachusetts Asbestos Abatement Company, Massachusetts Workers’ Compensation Lawyer Blog, published June 19, 2015

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