ELRAC, Inc. v. Exum, 16 N.Y.3d 320 (2011)

An employee of a self-insured employer is entitled to uninsured motorist benefits from that employer, despite receiving workers’ compensation benefits, because the right to uninsured motorist coverage stems from a quasi-contractual obligation.

Summary

Birtis Exum, an employee of ELRAC, Inc. (Enterprise Rent-A-Car), was injured in a car accident while driving an ELRAC vehicle in the course of his employment. The other driver was uninsured. ELRAC, as a self-insured entity, sought to avoid arbitration for uninsured motorist benefits, arguing that workers’ compensation was Exum’s exclusive remedy. The Court of Appeals held that Exum could pursue uninsured motorist benefits from ELRAC, notwithstanding the exclusivity provision of the Workers’ Compensation Law, reasoning that the obligation to provide uninsured motorist coverage is essentially contractual, and thus not barred by workers’ compensation exclusivity. The court likened the situation to the employer writing an insurance policy to itself.

Facts

Birtis Exum was employed by ELRAC, Inc., a subsidiary of Enterprise Rent-A-Car Company.
While driving a car owned by ELRAC in the course of his employment, Exum was involved in an accident with an uninsured driver.
ELRAC was self-insured under Vehicle and Traffic Law § 370 (3) and did not have a separate insurance policy for the vehicle Exum was driving.
Exum sought uninsured motorist benefits from ELRAC and served a notice of intention to arbitrate.
Exum was also entitled to workers’ compensation benefits from ELRAC.

Procedural History

Exum served a notice of intention to arbitrate on Elrac, seeking uninsured motorist benefits.
ELRAC petitioned the Supreme Court to stay the arbitration, which was initially granted.
The Appellate Division reversed the Supreme Court’s decision, allowing the arbitration to proceed. (Matter of ELRAC, Inc. v Exum, 73 AD3d 431 [1st Dept 2010]).
The Appellate Division granted leave to appeal to the Court of Appeals.

Issue(s)

Whether a self-insured employer is liable to its employee for uninsured motorist benefits when the employee is injured in a work-related automobile accident, despite the exclusivity provision of the Workers’ Compensation Law.

Holding

Yes, because an action against a self-insurer to enforce the liability for uninsured motorist coverage is essentially contractual, and is therefore not barred by Workers’ Compensation Law § 11.

Court’s Reasoning

The Court relied on its prior holding in Matter of Allstate Ins. Co. v Shaw, 52 NY2d 818 (1980), which established that self-insurers have the same liability for uninsured motorist coverage as insurance companies.
The court found that there was no reason to diminish Exum’s uninsured motorist protection simply because he was driving a self-insured vehicle.
Addressing the workers’ compensation exclusivity argument, the court acknowledged Workers’ Compensation Law § 11, which states that an employer’s liability for workers’ compensation is exclusive and replaces any other liability.
However, the Court stated that the seemingly all-inclusive language of the statute cannot be taken literally, citing Billy v Consolidated Mach. Tool Corp., 51 NY2d 152 (1980).
The Court reasoned that the right to uninsured motorist benefits is akin to a contractual right, as if the employer had written an insurance policy to itself with the required uninsured motorist provision. The court stated, “The situation is as though the employer had written an insurance policy to itself, including the statutorily-required provision for uninsured motorist coverage.”
Therefore, the action to enforce this quasi-contractual right is not barred by the exclusivity provision of the Workers’ Compensation Law. The Court distinguished this situation from a tort action directly arising from the injury, which would be barred. The court also referenced Matter of Country-Wide Ins. Co. (Manning), 62 NY2d 748 (1984), which involved similar facts.