Avoid Comp Premiums…and Pay the Price

March 4th, 2005 by

We have been following the aftermath of the tragic Station night club fire that took place just over a year ago in Rhode Island. The Providence Journal (registration required) has done a terrific job of tracking the many legal cases emerging from the fire. One hundred people died, including a number of nightclub employees. There are many unresolved liability issues stemming from the fire: is the town liable for negligent fire inspection? who sold the fire-prone tiles to the club? who installed the tiles? how much liability rests with the band, Great White, who started the fire with their pyrotechnics? While these issues are still unresolved, the workers comp situation is starkly clear: Judge Bruce Q. Morin has determined that the nightclub’s owners, brothers Michael and Jeffrey Derderian, and their company, Derco LLC, are “jointly and individually” liable for the workers’ compensation benefits of at least four employees who died in the fire.
At this point, the employees’s families are owed death and dependency benefits totaling over $200,000. The Derderians, lacking insurance, are liable for the benefits themselves. Of course, they plan to appeal, just as they have appealed the $1 million dollar fine slapped on them by a comp judge last year.
In the world of business, insurance is often viewed as an “expense.” And when your profit margins are tight, the temptation to cut expenses can be great. But in the nearly 100 years of coverage in America (beginning in 1910 in New York), workers comp has become a fundamental benefit of employment. You can argue whether the system is working as well as it should and we can all point to abuses on both sides (employer and employee), but few would argue that the program itself is not needed. Indeed, the Derderian brothers have become an object lesson in bad management: while catastrophe may be highly unlikely, that does not mean it cannot happen. And unless you have the nearly infinite resources to absorb the risk, you’d best secure the modestly priced insurance that provides a safety net for your employees.