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In The News:

Partner Matt Fogg pens article for DTLA magazine: The Advocate

In the May 2012 edition of The Advocate, partner Matt Fogg wrote an article on workers’ compensation. He discussed the current law on the liability of contractors to secure workers’ compensation benefits for injured workers on a jobsite. He also spoke about a case pending in the DE Supreme Court. The Advocate is delivered to over 500 lawyers statement in Delaware who represent consumers injured in auto and work related accidents.

The Challenge of 19 Del. C. §2311: is a Certificate of Workers’ Comp Insurance a Useless Piece of Paper? by Matthew Fogg, Esq.

In 2007, the Delaware Legislature enacted 19 Del. C. §2311 to address the problem of uninsured sub-contractors and uninsured independent contractors on construction sites in the State of Delaware. The statute was enacted to protect these workers, who were susceptible to catastrophic injury given the nature of the work. All too commonly, these subcontractors and independent contractors did not have workers’ compensation insurance. Prior to the enactment of §2311, an injured worker employed by an uninsured sub-contractor was left with virtually no remedy[1] as Delaware does not have an uninsured employer’s fund.[2]

On its face, §2311 makes perfect sense and is consistent with the purpose of the worker’s compensation statute: to protect Delaware’s injured workers. The crux of §2311 is found in sub-section 5, which states:
Any contracting entity shall obtain from an independent contractor or subcontractor and shall retain for 3 years from the date of the contract the following: a notice of exemption of executive officers or limited liability company members and/or a certification of insurance in force under this chapter. If the contracting entity shall fail to do so, the contracting entity shall not be deemed the employer of any independent contractor or subcontractor or their employees but shall be deemed to insure any workers’ compensation claim arising under this chapter.[3]

So, what does §2311(5) really mean? The statute has been subject to multiple interpretations and legal challenges. While case law is sparse, Dunham v. Outlaw Enterprises seems to indicate that coverage extends to the next level beyond the injured worker’s employer (i.e. where there is a general contractor who contracts a subcontractor and the subcontractor subcontracts to another sub-subcontractor who is uninsured, the subcontractor above the uninsured sub-subcontractor is responsible for providing worker’s compensation insurance).[4]

While this interpretation is relatively straightforward, the case of Reuben Cordero has provided a new wrinkle in the life of §2311.

In July of 2008, Reuben Cordero was working for a roofing subcontractor, Grieven Rodriguez. Grieven Rodriguez had a history of canceling insurance policies soon after acquiring a policy. Grieven Rodriguez was sub-subcontracted by Delaware Siding to provide roofing services at a construction site where Gulfstream Development Corporation was the general contractor. While on the job, Mr. Cordero sustained serious personal injuries while in the course and scope of employment. At the time of the incident, Grieven Rodriguez’s workers’ compensation insurance policy had been cancelled for non-payment. Under 2311, it would seem that Delaware Siding would obviously accepted responsibility under §2311, but that’s not what happened in this case.

Delaware Siding argued that §2311 had been satisfied because it had obtained a certificate of insurance from Grieven Rodriguez. Thus, according to Delaware Siding, there was no further onus upon it. The parties proceeded to an evidentiary hearing before the Industrial Accident Board, which ruled in favor of Delaware Siding.[5]

The claimant then appealed the Industrial Accident Board’s decision to the Superior Court.
While the Superior Court ultimately affirmed the Industrial Accident Board’s decision, it appeared that the Superior Court had some reservations:
In other words, a general contractor cannot turn a blind eye to its subcontractor’s lack of insurance and expect the Court to protect it from its malfeasance. A similar liability could be imposed if the general contractor continues to use a subcontractor that it knows from past practices and experience consistently cancels its policy a few months after executing a project. Under such circumstances, the Court could potentially find the lack of monitoring as a basis to hold the general contractor liable. In other words, implicit in 19 Del. C. §2311(a)(e) is a good faith obligation to verify insurance coverage, and the lack of due diligence by the general contractor under the right facts may require liability to be imposed.[6]

So, where does this leave us? Does §2311 allow a contractor to obtain and retain a useless piece of paper (i.e. a certificate of insurance for an insurance policy subsequently cancelled)? Such an interpretation seems to leave the injured worker in the identical position he was in prior to the enactment of §2311. Is this a matter requiring action by the Legislature or is the statute, as written, subject to reasonable interpretation from the Courts? These questions will be answered when oral argument is heard en banc before the Delaware Supreme Court on July 5, 2012.

[1] The claimant could file a direct action in Superior Court or could file before the Industrial Accident Board against the employer directly and request a bond be posted by the employer. Frequently, however, the uninsured subcontractor or independent contractor has no real assets and provides no avenue for recovery.
[2] Maryland, for instance, has a fund for uninsured employers.
[3] 19 Del. C. §2311(5)
[4] Durham v. Outlaw Enterprises, IAB Hearing No.: 1327499 (May 9, 2010).
[5] Cordero v. Gulfstream Development Corp., et. al., IAB Hearing Nos.: 1359959, 1357671 (February 10, 2011)
[6] Cordero v. Gulfstream Development Corp., et. al., Del. Super., C.A. No.: 11A-03-003 WCC (November 30, 2011) at p. 12


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