Wednesday, April 15, 2015

It's An Exclusive Relationship

The timing can't be better.

Tomorrow I will be in Biloxi, MS for a presentation on exclusive remedy, or more precisely whether the concept of exclusive remedy has eroded, at the Mississippi Workers' Compensation Educational Association conference.

Exclusive remedy is the linch pin concept to workers' compensation. Without exclusive remedy workers' compensation makes no sense. I dare to say it is the single most important element to the viability of work comp.

In recent years we have seen challenges to exclusive remedy come about in various permutations. In Texas that state's Supreme Court recently extended the concept to the employer's insurance company, essentially removing "bad faith" from work comp. We have legislative attempts that would allow employers to opt out of work comp in Oklahoma and Tennessee, with various alterations of the concept. Immigrant labor, without legal residency status, are still bound by work comp's exclusive remedy, but can't get subsequent employment after a work injury. In Florida a trial court found the system could no longer be exclusive because of inadequate benefits.

There are many examples of challenges to exclusive remedy.

The Oklahoma Supreme Court last week, in a narrowly divided opinion, refused to extend exclusive remedy to Wilson Paving & Excavating because Steven Broom wasn't its "employee."

Wilson contracted with temporary staffing company Labor Ready to get workers for a renovation project at Sand Springs Memorial Stadium at Charles Page High School.

Wilson's job was digging trenches and laying pipe for a storm drainage system being installed under the school's athletic field. Labor Ready sent Broom to work on this project.

Broom began laying pipe inside a trench that was approximately 5- to 6-feet deep, 4- to 5-feet wide and 50 feet long. After he had been on the job about four hours, the trench collapsed.

Broom was covered with dirt up to his waist, and then the trench collapsed a second time, burying him up to his neck.

Emergency personnel removed Broom from the trench after it was safely reinforced. He was transported to the hospital where he was treated for serious injuries, including rib fractures, collapsed lungs, pulmonary contusions, blood within the chest, fluid around the spleen and kidney, and a left kidney laceration.

Broom received workers' compensation benefits from Labor Ready for his injuries, and he filed a third-party action against Wilson in the District Court of Tulsa County.

Wilson had workers' compensation coverage through American Interstate Insurance Co. in effect at the time of Broom's accident. AIIC had obtained a declaratory judgment in 2009 establishing AIIC owed no coverage to Broom.

Thus, Wilson never paid any benefits to Broom, and it didn't participate in the comp proceedings for Broom's claim against Labor Ready.

Wilson's commercial general liability carrier, Mid-Continent Casualty Co., also sought a declaratory judgment as to whether it had a duty to defend Wilson from Broom's lawsuit.

The GCL policy that Mid-Continent provided Wilson provided that a "temporary worker" – defined as "a person who is furnished to you to substitute for a permanent 'employee' on leave or to meet seasonal or short-term workload conditions" – was not an "employee."

Broom was found to be a "temporary worker" at every stage of the litigation, so under the plain language of the policy, the exclusion for injuries to Wilson's "employees" was inapplicable.

The Supreme Court noted that Broom was a direct employee of Labor Ready and that he had recovered workers' compensation benefits through Labor Ready.

While Oklahoma law makes the workers' compensation system the exclusive remedy for an employee to recover from his direct employer for an on-the-job injury, the state Supreme Court has said civil immunity will not extend to a party standing in the position of a special master of a loaned servant if that party is not liable to the worker in comp.

Wilson had a workers' compensation insurance policy with the American Interstate Insurance Co. in effect at the time of Broom's accident, but AIIC obtained a declaratory judgment in 2009 establishing AIIC owed no coverage to Broom.

Thus, Wilson never paid any benefits to Broom, and it didn't participate in the comp proceedings for Broom's claim against Labor Ready.

In addition, as part of its contract with Labor Ready, Wilson expressly agreed to waive any immunity provided by the workers' compensation laws as a condition of using Labor Ready's services.

Mid-Continent won at the trial level and the first level of appeal, both victories based on different language and interpretations of the policy.

But the Supreme Court concluded that the policy did provide coverage because Broom met the policy definition of a "temporary worker."

Dissenting justices focused on a provision about earth movement in the policy.

"The policy's plain language excludes coverage for any movement of land, earth, or mud," they argued. As the cause of those events is not limited by the policy, they insisted the court "cannot in turn choose to limit those causes."

The case is complex because it involves insurance contract interpretation and some arcane legal concepts, and arguably is limited to the specific facts of the case, particularly the insurance contract language.

But I think the ruling supports my impression that exclusive remedy isn't dead despite all the challenges.

Exclusive remedy is based on a relationship, legally defined, between the employer and employee. Any extension of that concept is dependent on controlling law, contractual language and intent of the parties.

So long as workers' compensation exists, exclusive remedy will continue to be the single defining concept that underlies the theory of work injury protections.

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