New York Court of Appeals Rules on the Interplay Between Worker’s Compensation Law §29(6) and Vehicle and Traffic Law §338


This matter was referred to the New York State Court of Appeals by the United States Court of Appeals for the Second Circuit for a decision concerning the relationship between the Workers’ Compensation Law and the Vehicle and Traffic Law, when a plaintiff is injured in an automobile accident and one of the tortfeasors is a co-worker otherwise protected from liability under the Workers’ Compensation Law.  Ultimately, the Court determined when recovery against a co-worker is prohibited by the Workers’ Compensation Law, other parties cannot avoid this result by filing a third-party action against the co-worker, who typically would be vicariously liable to those other parties.

This is a case involving a collision between two motor vehicles. Plaintiff Matthew Isabella was a passenger in a vehicle driven by his co-worker, Roberta Oldenborg, and owned by Michael Koubek. The plaintiff and Ms. Oldenborg were co-workers traveling from a business meeting when the accident occurred.  The second vehicle was owned by Peter Hallock and operated by his wife, Doris Hallock.

Mr. Isabella brought suit for personal injuries in federal court against the Hallocks based on diversity of citizenship.  He did not sue his co-worker as his claims are barred by the Workers’ Compensation Law. The Hallocks filed a third party action against Mr. Koubek as the owner of the plaintiff’s host vehicle. Following a jury’s finding that defendants Hallocks were 10% liable, and third party defendant Koubek was 90% liable, Koubek appealed to the United States Court of Appeals for the Second Circuit.  On appeal, Koubek raised the novel issue of whether a defendant may pursue a third-party contribution claim under Vehicle and Traffic Law §388 against the owner of a vehicle where that vehicle’s driver is protected from suit by the exclusive remedy provisions of New York Workers’ Compensation Law §29(6).

In brief, §29(6) of the Workers’ Compensation Law, and the sections incorporated therein, prohibit an injured employee from recovering against a negligent co-employee or employer. They also preclude third parties from seeking contribution or indemnification from a co-employee or employer, unless the injured employee sustains a grave injury as defined by statute.

Separately, §388(1) of the Vehicle and Traffic Law establishes that a vehicle’s owner is vicariously liable for injuries to person or property resulting from negligence in the permitted use of such vehicle. Under typical circumstances, vehicle owners are named as defendants under this theory of vicarious liability either directly or by a third party plaintiff seeking indemnification or contribution.  Under this provision, injured persons are ensured a financially responsible party against whom they can recover.

The Hallocks sought indemnification from the owner of the host vehicle under §338(1) as vicariously liable for the negligence of the plaintiff’s co-worker. The vehicle owner’s liability is purely vicarious under VTL §388, as the owner himself was not a culpable wrongdoer.  However, that co-worker cannot be held liable because of the Workers’ Compensation Law §29(6).  Because the actual wrongdoer (Oldenborg) was statutorily immune from suit under the Workers’ Compensation Law, there is no liability to be imputed to the owner.

The Hallocks appealed to the Court on fairness grounds, arguing that they were only found to be 10% liable for the accident and that fairness would dictate they not be forced to pay the entirety of plaintiff’s damages. The Court of Appeals held that it would be no more equitable to require owner Koubek, who had no personal fault, to pay in full when he likewise cannot recover from Oldenburg because of the Workers’ Compensation Law.  The Court also noted that the Hallocks were taking exception to the consequences of joint and several liability, which has been a longstanding part of New York law.

Isabella v. Koubek holds that the exclusivity provision of the Workers’ Compensation Law trumps the statutory cause of action created against the owner of a vehicle by VTL §338, and bars defendants from asserting third party claims against vehicle owners under VTL §388 to circumvent the Workers’ Compensation Law.  In application, this means that any claims, third party or otherwise, brought against a vehicle owner when the culpable driver was a co-employee or employer of the injured party, will not stand.  Though this originated as a United States District Court matter, the federal court referred the question to the New York State Court of Appeals, and this decision now reflects the current State of New York law.

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