Uninsured NY Employer May Not Use “Grave Injury” Statute to Defend 3rd-Party Indemnity Claim

In relevant part, N.Y. Workers’ Comp. Law § 11 prohibits third-party claims for indemnification and contribution against an employer unless the injured employee has sustained a “grave injury” as defined in that statute. A New York appellate court recently held that an employer could not utilize the § 11 exclusive remedy defense in an indemnity or contribution claim filed against it where it had failed secure workers’ compensation insurance coverage [Naula v. Utokilen, LLC, 2020 N.Y. App. Div. LEXIS 1356 (2d Dept., Feb. 26, 2020)]. Thus, where it appeared the employer’s insurance coverage had lapsed at the time of the work-related accident, the employer was fully susceptible to the third-party claim.

Background

Utokilen, LLC (“the property owner”), leased premises it owned to Nancy Marin-Rojas D.D.S., P.C. (“the dentist”). Plaintiff, an employee of Specialized Dental Construction, Inc. (“Specialized Dental”), sustained injuries when he fell at the premises while performing construction work. Specialized Dental was a subcontractor, having contracted with the construction project’s general contractor, Adapt Construction, LLC (“Adapt”). After a hearing, Plaintiff was awarded workers’ compensation benefits related to his injuries.

Plaintiff filed the instant civil action against the property owner and the dentist, alleging that they were liable for his personal injuries. In turn, the property owner and the dentist commenced a third-party action against Plaintiff’s employer, Specialized Dental, sounding in common-law indemnification and contribution. Specialized Dental moved for summary judgment, contending that it could not be liable because Plaintiff had not sustained a “grave injury” within the meaning of N.Y. Workers’ Comp. Law § 11. The trial court denied Specialized Dental’s motion for summary judgment and granted the cross-motion filed by the property owner and the dentist that sought to strike Specialized Dental’s defense.

Appellate Court Decision

The appellate court affirmed. The court stressed that an employer cannot benefit from the protections of § 11 against third-party liability when it fails to secure workers’ compensation insurance. In as much as there had been a prima facie showing that Specialized Dental’s coverage had lapsed at the time of the accidental injury and it had failed to raise a triable issue of fact as to that important point, the trial court’s grant of summary judgment was entirely appropriate.