Workers’ Compensation is considered a quid pro quo between employer and employee. The worker enjoys compensation benefits for work related injuries (regardless of who is at fault for such injuries) in exchange for surrendering the right to sue the employer for damages (with certain exceptions). This limitation is known as the “exclusive remedy” rule.
Traditionally the rule pertained to employees and their direct employers and/or to “principal employers” that paid workers compensation benefits when the direct employer failed to pay. However, courts in a number of jurisdictions expanded the exclusive remedy rule to apply to upstream parties (construction project owners and/or general contractors) that procure workers compensation insurance for the employees of downstream parties (such as subcontractors) as part of a consolidated insurance program, a/k/a “wrap-up” insurance. Other jurisdictions have rejected this expansion.
The Supreme Court of Utah in Nichols v. Jacobsen Constr. Co., 2016 UT 19 (Utah 2016) recently joined those jurisdictions which extended the exclusive remedy protection, finding that a project general contractor acquiring workers’ compensation coverage under a wrap-up was immune from a negligence claim brought by a subcontractor’s injured employee.
“We conclude that Jacobsen qualifies as an eligible employer and has met the specific requirements of the statute. First, Jacobsen procured the work of Mr. Nichols’ subcontractor Safway by entering into an agreement to erect and dismantle scaffolding for the City Creek project. Second, Jacobsen satisfied the statutory requirements for securing the payment of workers’ compensation benefits by enrolling Safway in the CCIP [wrap-up policy].”