Workers Compensation Death Benefits and Wrongful Death Claim

Did you know that California has a maximum death benefit if someone dies from a work related injury?

California workers’ compensation death benefits include:

• Up to $10,000 for burial expenses; and
• $250,000 for one total dependent
• $290,000 for two total dependents, or
• $320,000 for three or more total dependents.

Death benefits are commonly paid by installments, similarly to the payment method of temporary total disability benefits.

Even after the maximum death benefit amount has been reached, installment payments will continue for totally dependent children of the deceased employee until the youngest child turns 18 or an incapacitated child dies.

If family members of the deceased believe the fatality was a wrongful death, meaning they believe there was negligence on the employer, they can sue the employer in the form of a, “wrongful death claim.” This type of claim would no longer be part of the workers compensation policy as family members of the former employee are third parties to the insurance contract, not first parties covered directly under the policy. 

In the event of a wrongful death claim, there can be coverage on the general liability insurance policy, however reviewing most cannabis insurance policy forms, we have found this to be excluded. The insurance terminology for this type of exclusion is called an, “action over exclusion.” Through this exclusion, insurance companies exclude claims brought by employees, as well as family members of a company’s employees or independent contractors from coverage under the policy. 

If there is NOT an action over exclusion on your general liability policy, another way to further protect your business from these lawsuits is by purchasing an excess liability policy over the workers compensation and general liability to increase the limits available to cover the claim. 

This discussion reinforces the importance of carefully reviewing your insurance policy with the help of professionals before you bind coverage. Not all insurance policies are created equal, particularly in the legal cannabis industry. Buying a policy that’s a little cheaper today can often be much more expensive tomorrow. If an action over provision bars coverage for a wrongful death claim, it could mean spending hundreds of thousands of dollars out of pocket for attorney’s fees alone, in addition to your potential liability for the claim itself. 

Even if you have strong coverage without any action over provision, however, companies should reach out to both their brokers and legal counsel as soon as they first receive notice that someone intends to bring a wrongful death action against them. In order to preserve the coverage you have, it is often critical to take certain steps upon learning of a claim or even the potential for a claim. Moreover, insurance carriers often take longer to investigate claims, make coverage determinations, and assign defense counsel than you will have to timely respond in court. 

Protecting your company against the risk of wrongful death liability is not always simple, but with diligence and the help of the right professionals, you can manage that risk far more effectively. 

Written by: Stephanie Bozzuto of Cannabis Connect Insurance and Jason Horst of Horst Legal Counsel, PC