The fundamental principle of workers’ compensation across Canada is that workers who suffer an injury “in the course of employment” give up their right to sue their employer and others in tort, in exchange for access to the no fault workers’ compensation benefit system. However, there are exceptions to this principle, which may expose uninsured workplace parties to significant liability, including directors.
Take the example of a recent case decided by the Alberta Court of Appeal. In Hall v Stewart, a number of workers sued the director of a construction company for negligence after they were injured as a result of the collapse of a staircase on a construction project. It should be noted that the director at issue was personally involved in the work giving rise to the personal injury lawsuit.
Under Alberta law, the directors of a company are not covered by workers’ compensation and must personally purchase coverage if they wish to be immune from suit and to access benefits. Ontario has a similar scheme, although most officers and directors in the construction industry are subject to mandatory coverage.
The Court of Appeal held there was no question on the facts that the director was not entitled to personal immunity from a lawsuit even though he was actively working on the job.
However, the director successfully had the case dismissed at the trial level by using a clever legal maneuver by arguing that he could not be held personally liable for the acts of the corporation.
The director relied on a significant body of law that addresses whether an individual executive can be personally liable for a tort committed by a corporation. That issue typically becomes relevant when the corporate defendant (who usually has the most assets or insurance to satisfy a judgment) is insolvent or as in this case immune from suit. These cases often examine whether the individual has committed an overt or extraordinary act beyond the scope of employment that would justify imposing personal liability.
The director argued that he had done nothing outside the normal scope of his duties and thus a personal suit could not proceed. The Alberta Court of Appeal agreed with the director on this point. However, the Court noted that workers’ compensation legislation made it clear that directors must buy personal coverage to be immune from suit.
Further, the Court found that there are strong public policy reasons to ensure that physically injured persons are compensated for their loss. Principally for this reason, the Court held that the director could be held personally liable if he was proven negligent and responsible in law for the accident. The Court ordered the matter to be tried on the merits.
We believe that accepting the director’s argument would have given directors very little incentive to buy personal coverage, if they could rely on the corporation’s immunity.
This case is a wake-up call to officers and directors to ensure that they are properly covered by commercial errors and omissions insurance for workplace injuries (or opted-in for coverage in their jurisdiction’s regulatory scheme).
It should be noted that the lawsuit was actually brought by the Alberta Workers’ Compensation Board pursuant to the legal right of the Board to sue negligent individuals in the name of injured workers to recover benefits it has paid out (referred to as the right of “subrogation”). The director in this case may face significant personal liability if he does not have adequate private insurance.