RLI Must Cover $2.4M Company Settlement to Injured Trucker

The Sixth Circuit ruled that an RLI Corp. unit must pay $2.4 million toward an Ohio trucking company's settlement with an injured driver after the company failed to obtain workers' compensation insurance for him.

Source: Bloomberg/Business Insurance | Published on July 8, 2022

According to the US Court of Appeals for the Sixth Circuit, the case hinges on RLI Insurance Co.'s obligation to cover a tort claim arising from the policyholder's failure to purchase workers' compensation insurance for its employees, rather than its duty to reimburse the policyholder for a workers' compensation payment.

According to the decision of the 6th U.S. Circuit Court of Appeals in Cincinnati in P.I. & I. Motor Express, Inc. v. RLI Insurance Co., Ryan Marshall was seriously injured in June 2014 while working as a truck driver at a plant in Duquesne, Pennsylvania, when the accident occurred.

According to the ruling, "Mr. Marshall had stepped out of his flatbed truck while others were loading large metal pipes onto it." "Unintentionally, a worker drove a forklift into the pipes, causing one of them to dislodge and roll off the truck." As it fell, the pipe collided with Marshall."

According to the ruling, doctors were forced to amputate both of Mr. Marshall's legs, rendering him completely disabled.

According to the ruling, a state agency determined that Masury, Ohio-based P.I. & I. Motor Express was the driver's "statutory" employer in terms of workers compensation, but because the company had not obtained workers comp coverage for him, Mr. Marshall could sue it under tort law.

The suit was settled for $2.4 million after RLI, Motor Express' commercial general liability insurer, agreed to defend the company under a reservation of rights.

After RLI refused to reimburse it for the settlement, Motor Express sued the insurer in U.S. District Court in Youngstown, Ohio, seeking indemnification for the settlement up to the $2 million limit of the CGL insurance policy.

The district court ruled in favor of Motor Express. RLI argued on appeal that a workers compensation exclusion applied in part, but a three-judge appeals court panel upheld the lower court's decision.

The case "turns on whether this settlement 'obligation' was incurred 'under' Pennsylvania 'workers compensation' law." "It was not," the decision stated.

"The $2.4 million settlement resulted from a suit filed by Marshall against Motor Express under Pennsylvania tort law." So it was the commonwealth's judge-made tort law, not its statutory workers' compensation law, that gave Marshall the ability to seek the money (and Motor Express the duty to pay it)," the ruling stated.

In a statement, Motor Express attorney Amanda Leffler, a partner with Brouse McDowell LPA in Akron, Ohio, said the decision was "a significant win for policyholders."

"Prior to this case, other courts across the country had broadly construed the Workers' Compensation exclusion for a variety of reasons that did not apply in our case," she explained.

"However, the Sixth Circuit correctly rejected the insurer's attempts to stretch the exclusion beyond its plain and commonly understood meaning in this case."

The attorneys for the insurer did not respond to a request for comment.