There are lots of employers in Ontario who have decided to
exclude their executives from WSIB coverage in order to reduce
those expensive premiums. The cost-savings can be significant but
it is vital to ensure that you have the correct insurance coverage
in place to pick up the slack. A recent decision of the Superior
Court of Justice underlines the potential costs of making a mistake
in this area.1
Sam's Auto Wrecking ("Sam's") operated a scrap
metal business. In May, 1998 a tragic accident occurred in which a
crane operator ran over the Operations Manager, John Ferber,
severing the right leg below the knee and cutting the left foot
quite badly. While Sam's kept Mr. Ferber on the payroll for a
few years, ultimately he left the company and commenced a legal
action for damages arising from the accident. It turned out that
some years earlier, Sam's had discontinued WSIB coverage for
the senior employees of the company, including Mr. Ferber.
Sam's believed that it had adequate coverage through its
disability insurance policy provided through AFLAC.
Subsequent to discontinuing WSIB coverage but prior to the
accident, Sam's arranged for a comprehensive business policy
through its insurance broker and, while the decision does not
explicitly say so, presumably discontinued the AFLAC policy. That
comprehensive business policy, provided through Lombard General
Insurance ("Lombard"), included exclusion language which
stated, in part:
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.
Unfortunately for Sam's, by the date of the accident it had
given up its WSIB coverage for Mr. Ferber and Lombard relied on the
exclusion language in denying the claim made under the
comprehensive business policy.
As a result of Mr. Ferber's action, Sam's commenced its
own action against Lombard and the insurance broker which had
handled Sam's insurance needs during the relevant period.
Ultimately, Sam's and the insurance broker settled Mr.
Ferber's action with a joint payment to him totalling
$950,000.00. Sam's and the insurance broker then proceeded
against Lombard, arguing that Mr. Ferber was covered by that
policy as an executive officer of the company.
In finding against Sam's and the broker, the Court noted
that an executive officer could also be an employee and it was in
that capacity that Mr. Ferber was injured. As such, the exclusion
clause meant that Lombard had no liability. It is also worth noting
that the Court observed that Sam's had never clearly advised
the insurance broker that it had removed its senior employees from
The clear lesson for employers who have removed senior employees
from WSIB coverage, or are considering doing so, is that is
essential to have insurance coverage in place which will provide
protection in the event of a work-related illness or injury to such
employees. If your organization uses an insurance broker make sure
that you have clearly advised the broker in writing of this
situation and that you have received confirmation that it has been
Removing senior employees from WSIB coverage may create real
cost-savings but, as Sam's found to its dismay, there can be
significant costs as well for employers who don't ensure that
the resulting gap is filled.
Unfortunately, reasonable accommodation for employees in the workplace continues to be the source of significant litigation and even today we continue to see outrageous examples of employers behaving badly.
We are now beginning to see reported cases involving charges and subsequent fines laid against employers for failing to provide information, instruction and supervision to protect a worker from workplace violence.
On October 13, 2016, the Supreme Court of Canada denied leave to appeal an Ontario Court of Appeal decision which ordered an employer to pay a former employee 37 months of salary and benefits following termination.
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