Court Says “Exclusive Remedy Rule” May Not Apply to COVID Claims

by Tom Richard, RTGR Law LLP, Oakland, CA

California’s Second District Court of Appeal has rejected employer See’s Candies workers’ compensation “exclusive remedy rule” defense in a COVID wrongful death lawsuit.  The suit claims that the disease was contracted from a See’s employee who was negligently exposed to the virus in the workplace.

The appellate opinion in Matilde Ek et al. v. See’s Candies Inc. et al. undermines the “exclusive remedy rule” defense which has long precluded employees and others from pursuing separate civil court remedies against employers in addition to or in lieu of workers’ compensation benefits.

The facts & the “exclusive remedy rule”

Plaintiffs alleged that employee Mrs. Ek contracted COVID at work because of defendant See’s failure to implement adequate safety measures. While convalescing at home, Mrs. Ek is alleged to have passed COVID to her husband (who was not an employee of See’s) who died from the disease a month later.

Defendant See’s filed a motion to dismiss the lawsuit, asserting that plaintiffs’ claims were barred by the “derivative injury doctrine”. The derivative injury doctrine establishes workers’ compensation as the exclusive remedy for all claims that are derivative of an employee’s workplace injury. This means that if See’s were to prevail, the estate of Mr. Ek, as a third party, would not be allowed to proceed with a separate wrongful death suit. Instead, his remedy would be limited to the benefits awarded to Mrs. Ek in the workers’ comp system.

At issue was whether Mr. Ek’s third-party COVID lawsuit was derivative of his wife’s work injury

See’s argued that any third party-claim is derivative if it is “causally linked” to an employee injury. Specifically, they argued that because Mrs. Ek’s COVID workplace injury was the biological cause of her husband’s COVID injury, the derivative injury doctrine should apply.

The court, however, rejected this common understanding of what of qualifies as a derivative injury. The court’s analysis emphasized the Snyder case holding that “causation is not the sole requirement” for application of the derivative injury doctrine, finding that derivative injuries refer to something much more specific and limiting than what See’s argued.

The court noted: “Derivative injuries are the ‘economic’ and ‘intangible’ losses suffered by an employee’s loved ones as a result of the employee’s disability or death.” Derivative injuries are “based on losses arising simultaneously from the employee’s work injury—the directly injured party is disabled or killed, which in turn deprives close relatives of the injured party’s support and companionship.”

This definition adopted by the court does not extend to separate physical injuries suffered by non-employees, even when an employee’s injury was part of the causal chain leading to those injuries.

The Holding: COVID suffered by non-employee third parties as a result of contact with COVID-infected employees is a “separate physical injury” and therefore the “derivative injury doctrine” does not apply to bar a third-party’s tort claims against an employer

The court states that Mr. Ek’s lawsuit was therefore not derivative of, or based on, losses arising from his wife’s COVID injury and found that instead, he suffered his own separate COVID injury caused by conditions at the See’s facility, even though he did not set foot in the facility.

As the court noted, “Plaintiffs do not seek damages for losses arising from a disabling or lethal injury to Mrs. Ek, such as loss of her support or companionship, or emotional trauma caused by observing Mrs. Ek’s suffering. Nor do they sue for ‘injuries that arose during the treatment of [an employee’s] industrial injury’ or ‘in the course of the workers’ compensation claims process.’ Instead, they sue for damages arising from Mr. Ek’s death, an event allegedly causally related to Mrs. Ek’s alleged infection by the virus in the workplace, but under Snyder, not derivative of that infection.”

This holding changes the derivative injury doctrine by finding that it does not apply to separate physical injuries suffered by third parties. In other words, while an employee that has contracted COVID in the workplace will be limited to workers comp as their exclusive remedy, non-employees that later claim to have contracted the virus from that employee are not subject to this same exclusive remedy rule, and can sue for economic and punitive damages.

Implications for California Employers

The decision exposes California employers to an untold number of lawsuits from individuals and estates alleging that their COVID infections were contracted indirectly from workplaces that those people never once visited. Not only family members and housemates, but neighbors, acquaintances, or anyone who can claim to trace their COVID infection back to a California employer may be able to sue that employer for damages.

California employers may want to carefully review their workers’ compensation “Coverage B” policies as well as business liability insurance for coverage of such claims.  Absent insurance coverage, the businesses could be directly liable.

The court plainly opined that the “derivative injuries doctrine” does not extend to separate physical injuries suffered by third parties (e.g., COVID), even if these injuries were transmitted by an employee. In response to some of the public policy concerns raised that might favor an extension of the current doctrine to encompass such third-party injuries, the court expressly commented that this was an issue “more properly addressed to the Legislature than to this court. We cannot distort the derivative injury doctrine as articulated in Snyder to address these policy concerns.”

Also, note that this decision merely allows Mr. Ek’s negligence case to proceed. The court expressed no opinion on the question of whether employers owe a duty of care to non-employees infected with COVID because of an employee contracting the disease at work.