Company May be Held Liable for Budget Cuts' Safety Effects

February 20, 2007 ( - The Illinois Supreme Court has ruled that a parent company may be held liable for worker injuries at a subsidiary company when it directed budget cuts that created unsafe conditions.

Business Insurance reports that t he high court said in its opinion “direct participant liability” is a valid theory of recovery when “a parent company mandated an overall business and budgetary strategy and carried that strategy out by its own specific direction or authorization, surpassing the control exercised as a normal incident of ownership in disregard for the interests of the subsidiary.” The court also found that workers’ compensation’s exclusive remedy does not apply in the situation.

The widows of two mechanics in a fire at a refinery owned by Clark Refining & Marketing sued the company claiming Clark operated its refinery under a low-cost strategy that it knew would adversely affect safety by forcing training and maintenance reductions, according to Business Insurance. A trial court granted summary judgment to Clark, but a state appeals court reversed the trial court decision.

Clark petitioned the Illinois Supreme Court arguing that a holding company parent cannot be held liable for a subsidiary’s negligence based on its set financial goals. Rejecting Clark’s argument, the state supreme court remanded the case back to the trial court.

The opinion in Forsythe, et. al. v. Clark USA Inc. is  here .