In a declaratory judgment action filed in Passaic County, New Jersey, a jury determined that the owner of two construction companies had committed a fraud against a workers' compensation carrier by attempting to attribute employment of an injured worker to one of his companies rather than the other. The jury further determined that the defrauded insurance carrier is entitled to reimbursement from another workers' compensation carrier for the approximately $1,000,000 in benefits that it has paid to the worker to date as well as punitive damages against the owner.
Declaratory Judgment
The declaratory judgment action arises out of a construction site accident in which the worker sustained catastrophic injuries. At the time of the accident the worker was employed as a laborer by an individual who owned two construction companies. Payroll records and other evidence introduced during the course of the trial revealed that the worker was employed by Company "A" on the date of the accident and that the owner was notified that A's workers' compensation policy was canceled for non-payment of premiums prior to that date. It was alleged that, upon learning of the accident, the owner submitted a fraudulent claim to the workers' compensation carrier for his other company, Company "B", in which he represented that the injured worker was an employee of that company at the time of the accident. Thereafter, Company "B's" insurance carrier began to pay workers' compensation benefits to the worker until it discovered the fraud.
In an ironic pretrial ruling, a Superior Court judge granted a summary judgment motion ruling that Company "A's" policy was improperly canceled and, consequently, workers' compensation coverage for Company "A" was in effect on the date of the accident thus obviating the need for the alleged fraud by the owner.
Employer Fraud Verdict
In its verdict, the jury found that (i) the injured worker was an employee of Company "A", (ii) the owner had committed a fraud against the workers' compensation insurance carrier for Company "B", and (iii) the owner's conduct was "so wrongful" that Company "B's" insurance carrier is entitled to an award of punitive damages from the owner as well as reimbursement from Company "A's" insurance carrier for benefits paid to the worker.
Future Trial for Damages
The amount of compensatory and punitive damages owed to the injured worker will be determined in another jury trial to be scheduled. Not surprisingly, Company "A's" workers' compensation insurance carrier has appealed the jury verdict in the declaratory judgment action.