Does your insurance cover you for employee injuries that fall outside workers’ comp? — Business Management Daily: Free Reports on Human Resources, Employment Law, Office Management, Office Communication, Office Technology and Small Business Tax Business Management Daily

Does your insurance cover you for employee injuries that fall outside workers’ comp?

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Nothing can sink an organization faster than having to pay a huge damage award without insurance coverage to pick up at least part of the tab. And if you don’t have the right policy, that can happen under an exception to Michigan’s workers’ compensation law.

Recent case: Rachel Rodriguez worked for American Axle until she got her hair caught in a conveyor system and suffered serious head injuries. In fact, they were so serious, she got a judgment for $8.5 million.

Workers’ compensation usually is the only compensation for work-related injuries, but Rodriguez’s claim was possible under an exception to that rule. That exception says that employers are liable for injuries if they have actual knowledge that an injury is certain to occur and willfully disregarded that knowledge. Apparently, the risk of scalping by conveyor belt was obviously an accident waiting to happen.

American Axle thought it had insurance coverage, but its carrier refused to cover intentional wrongdoing.

American Axle sued the carrier and, after an appeal, now will get the chance to have a court determine whether the specific language in the insurance contract (which was ambiguous) covers the accident. If not, American Axle is on the hook for the entire judgment. (American Axle, et al., v. National Union Fire Insurance Company, et al., No. 270043, Court of Appeals of Michigan, 2007)

Final note: Check with both your insurance agent or broker and your attorneys to make sure your employer’s legal liability policy covers this type of situation.

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