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Employers with multiple comp insurers can't play favorites


Employers who have more than one workers compensation insurer cannot pick and choose which insurer is on the hook for covering an injured worker's comp claim, the Massachusetts Supreme Court has ruled.

Scott Marino, president of Haverhill, Massachusetts-based industrial equipment supplier Progression Inc. was severely injured in an auto accident during a business trip to Oman in January 2010, according to court records. Progression held two primary workers comp policies from the Insurance Co. of the State of Pennsylvania, which covered all Progression workers in the United States, and Great Northern Insurance Co., which covered workers traveling outside of the United States and Canada.

Mr. Marino filed a workers comp claim, and Progression only gave notice of the claim to New York-based ISOP, which paid the comp claim, according to court filings. ISOP later learned that Progression had workers comp coverage with Great Northern, and sought in October 2011 to have Great Northern contribute to the employee's comp claim.

Warren, New Jersey-based Great Northern declined to pay for Mr. Marino's claim, citing the fact that Progression had only notified ISOP of the claim and had not authorized ISOP to seek payment from Great Northern, records show.

In November 2013, ISOP filed a lawsuit against Great Northern in U.S. District Court in Boston. The insurer argued in filings that Great Northern should be responsible for paying half of the past and future defense costs and indemnity payments related to the Progression comp claim.

However, the court ruled in favor of Great Northern in August 2014, saying in its ruling that Great Northern was not responsible for the claim because “any obligation of a co-insurer for equitable contribution to the other insurer does not arise until a claim for defense or indemnity is tendered by the insured or one authorized to act on behalf of the insured.”

ISOP appealed in May 2015 to the 1st Circuit U.S. Court of Appeals in Boston, which asked the Massachusetts Supreme Court to rule on whether a policyholder can elect which of its insurers should defend and indemnify a claim.

The Massachusetts high court ruled on Monday that policyholders cannot choose one primary insurer to cover a claim by withholding notification of the claim to another primary insurer.

Case law in most states has held that “equitable contribution” doctrine applies for policyholders who have primary coverage with more than one insurer, the high court said in its ruling.

“Equitable contribution is designed to prevent the potential unfair result that the company that pays first is left to cover the entire loss,” the ruling reads.

The high court also said that Massachusetts workers comp law holds that insurers are directly liable to pay comp benefits to injured workers, and that the liability is triggered once the employee notifies his or her employer of an injury.

“In light of these statutory provisions, Great Northern's obligation to defend and indemnify the claim was triggered by the notice given to Progression by its injured employee, regardless of whether Progression gave notice of the injury to Great Northern,” the ruling reads.

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