When one thinks of workers’ compensation matters, the issue of coverage of executive level employees is not something that ordinarily comes to mind. The WSIB considers executive officers to be the employees who control the direction of the entire organization rather than just a department or branch. The following positions are considered to be “executive” level in a corporation for WSIB purposes:
- members of the board of directors
- chair and vice-chair of the board of directors
- corporate president, chief executive officer (CEO), chief financial officer (CFO), chief operating officer (COO), vice president, corporate secretary, treasurer and general manager of the corporation
For WSIB purposes an executive must be named in the corporation’s minute book as an executive officer and perform the duties of the position at issue. Generally speaking, executive officers are exempt from WSIB coverage and must obtain optional insurance if they wish to be eligible for WSIB benefits. Coverage for executives is mandatory in the construction industry, but construction employers with multiple executives may exempt one officer if that person does not perform any construction work. Employees covered by WSIB are not able to bring a lawsuit against an employer for damages resulting from a workplace accident. However, individuals who are not covered by WSIB are able to sue an employer for personal injury.
Many employers simply choose not to cover executive officers on the assumption that the company’s general liability insurance policy would apply in the event of a lawsuit from an executive arising out of a work related accident. Unfortunately, many employers do not appreciate that many general liability policies exclude individuals who are not covered by WSIB. This reality creates an unfortunate insurance coverage gap for employers which opt out of WSIB coverage for executives.
One recent case, Sam’s Auto Wrecking Co. Ltd. (Wentworth Metal) v. Lombard General Insurance Company of Canada, provides an example of the potentially devastating financial consequences of such a gap. The case involved an executive who was badly injured in a workplace accident caused by one of the company’s employees. At the time, the executive was not covered by optional insurance from WSIB. The executive sued his employer for damages for his injuries. The employer wrongly assumed that the lawsuit would be covered by the company’s general liability policy. The insurance policy contained the following exclusion:
This insurance does not apply to: …
d. “Bodily injury” to an employee of the Insured arising out of and in the course of employment by the Insured.
This exclusion applies:
1) Whether the Insured may be liable as an employer or in any other capacity; and
2) To any obligation to share compensatory damages with or repay someone else who must pay compensatory damages because of the injury.
This exclusion does not apply:
1) To liability assumed by the Insured under an “Insured contract”; or
2) To employees on whose behalf contributions are made by or required to be made by the Insured under the provisions of any workers compensation law.
The language of the exclusion is counterintuitive in the sense that it operates to have the insurance apply for employees covered by WSIB and excludes employees who do not have WSIB coverage. Obviously, this is the exact opposite of what any insured would have wanted, as there is very little benefit to extending coverage to employees who are required to be covered by the WSIB.
The Court of Appeal agreed that the language of the exclusion produced an “odd result” which the Court attributed to the apparent fact that the language of the policy has American origins. The Court was not persuaded that the nature of the exclusion should result in the insurer being required to provide coverage. The unfortunate result for the employer was that it was responsible for the damages suffered by the executive and had to pay $20,000 in Court costs to the insurance company as a result of the appeal.
We strongly encourage employers without WSIB coverage for executives to carefully review the insurance coverage to ensure that their private insurance policies cover executive officers for work related accidents. Alternatively, such employers could consider obtaining optional insurance for executives from the WSIB itself, which is probably the safest course of action from the perspective of avoiding civil liability to executives for personal injury.