Texas Court Rules WC Is the Exclusive Remedy in CCIP Claim

Background

In January 2011, Jose Alonso, Miguel Betancourt, Jose Rodriguez, Luis Guajardo, Alejandro Salinas, and Ricardo Salinas Jr. (the employees and appellees) were on a scaffold working at a refinery on a project that involved work that other contractors and subcontractors were performing when a crane collapsed. At the time of the collapse, A&L Industrial and Empire Scaffold were subcontractors on Motiva's project. Both were subcontractors to Performance Contractors, Inc., and Performance was working on the project under a contract with Motiva.

The Motiva/Performance contract obligated Performance to provide labor and equipment on the project and required Performance to take directions on the project from the Bechtel–Jacobs Joint Venture. The various contracts in evidence reflect that the Bechtel–Jacobs Joint Venture was the contractor placed in charge of managing the overall project.

The various contracts on the project also included clauses requiring the various contractors and subcontractors to have various types of insurance for the project, including a workers compensation policy that covered their respective employees while they worked on the project.

The parties didn't dispute that, when the collapse occurred, Becon Construction and Bechtel Equipment (the subcontractors) were providing either construction equipment or services for the project under their respective subcontracts. Under their respective subcontracts, the subcontractors were indirectly required to take direction from the Bechtel–Jacobs Joint Venture, as Performance's contract with Motiva required that Performance take direction on its work from the Bechtel–Jacobs Joint Venture.

There was also no dispute that Becon Construction and Bechtel Equipment were named as insureds on the workers compensation policy obtained for the project by the Bechtel–Jacobs Joint Venture.

Arguing that the Act's exclusive remedy provision limited the employees to their compensation benefits and precluded them from bringing their common law damage claims, Becon Construction and Bechtel Equipment moved for summary judgment on all of the claims of the employees who sued them.

Analysis

The exclusive remedies provision of the workers compensation Act states, "Recovery of workers' compensation benefits is the exclusive remedy of an employee covered by workers' compensation insurance coverage.…" The court held that, in Texas, a general workplace insurance plan that binds a general contractor to provide workers compensation insurance for its subcontractors and its subcontractors' employees achieves the legislature's objective with respect to work sites where multitiered relationships exist. Interpreting the workers compensation Act in a way that favors blanket coverage to all workers on a site aligns more closely with the legislature's "decided bias" for coverage.

With respect to the various contractual insurance provisions at issue, the court ruled the contracts not ambiguous. It said that, collectively, the contracts contained an unambiguous expression that made it clear that Motiva, the Bechtel–Jacobs Joint Venture, Becon Construction, Bechtel Equipment, Performance, Empire Scaffold, and A&L Industrial intended to create a general workplace insurance plan providing a single workers compensation insurance policy covering all of their respective employees.

The prime contract between the Bechtel–Jacobs Joint Venture and Motiva required Bechtel–Jacobs to establish a contractor controlled insurance program (CCIP), creating a general workplace insurance plan for the project. Motiva's contract with Performance required that Performance and its subcontractors enroll in the general workplace insurance plan created by the Bechtel–Jacobs Joint Venture. In this case, it was undisputed that Empire Scaffold's and A&L Industrial's employees were enrolled in the general workplace plan created for the project.

While the respective master service agreements required that Empire Scaffold and A&L Industrial purchase workers compensation coverage covering their work, the summary judgment evidence conclusively established that Empire Scaffold and A&L Industrial adjusted their contract prices for the Motiva project to account for the fact that the insurance on Motiva's project was to be provided through a general workplace insurance plan. By adjusting the prices they charged for their work they were being hired to perform, Empire Scaffold and A&L Industrial effectively purchased the coverage for their work on Motiva's project under the terms of the master service agreements they had with Performance.

With respect to the work the employees were doing at the time the crane collapsed, the court of appeal concluded that the summary judgment evidence conclusively established that A&L Industrial and Empire Scaffold were enrolled in the general workplace insurance plan established on the Motiva project and that the summary judgment evidence conclusively established that the employees collected workers compensation benefits through the general workplace insurance plan.

In a case that involved a work site arrangement similar but not identical to this one, Etie v. Walsh & Albert Co., Ltd., 135 S.W.3d 764 (Tex. App.—Houston 1st Dist. 2004, pet. denied), the court explained that, where general workplace insurance plans exist, "the purposes of the Act are best served by deeming immune from suit all subcontractors and lower tier subcontractors who are collectively covered by workers' compensation insurance." In Etie, the court concluded that the deemed employment relationship extends throughout all tiers of subcontractors. Similarly, the San Antonio Court of Appeals has stated that, for sites governed by general workplace insurance plans, all of the employees covered by the compensation plan for the site are treated as "'fellow employees'" for the purposes of the Act. See Garza v. Zachry Constr. Corp., 373 S.W.3d 715 (Tex. App.—San Antonio 2012, pet. denied).

The court held that the various contracts effectively made Becon Construction and Bechtel Equipment agents of the Bechtel–Jacobs Joint Venture for purposes of compensation coverage; consequently, both Becon Construction and Bechtel Equipment were entitled to rely on the exclusive remedy defense against the claims of the employees who sued them because they were participating subcontractors on a site utilizing a general workplace insurance plan authorized by the Act.

The court went on to say that, given the legislature's decided bias in favor of employers electing to provide coverage through a policy that encourages the provision of workers compensation coverage to all workers on a given work site, the Act should not be interpreted in the manner the employees argued. The employees' interpretation would discourage contractors from becoming involved in work sites governed by general workplace insurance plans and might prevent some employees who would otherwise be covered by insurance from being covered under these types of policies due to the violation of regulations, as it did not appear that the legislature intended for these types of violations to strip employers of defenses or to cause employees to lose the benefits of their coverage.

Regardless of what might or might not happen in the future, the court said, evaluating whether a general workplace insurance plan provides a defendant with an exclusive remedy defense requires that courts look at what did happen, not what might happen. In this case, conclusive summary judgment evidence shows that the employees collected compensation benefits under coverage put in place based on the general workplace insurance plan established by the Bechtel–Jacobs Joint Venture for Motiva's project.

Conclusion

The summary judgment evidence conclusively established that the exclusive remedy defense of the workers compensation Act applied to all of the claims made by the employees who sued. The court held that the trial court erred by granting the employees' no-evidence motion for summary judgment and by denying Becon Construction's and Bechtel Equipment's joint motion for summary judgment. Exercising its power, the appellate court reversed the trial court and entered summary judgment in favor of the employers and found that workers compensation is the exclusive remedy available to the injured workers.

Employees strike a bargain with the state. When their employer maintains workers compensation insurance, the employees will receive benefits governed by the state's workers compensation statutes in exchange for agreeing that the law is the exclusive remedy available to the employee injured on the work site without a need to prove liability, negligence, or any other tort. In this case, it is also clear that, when many contractors and subcontractors enter into a joint agreement to all use the same insurance, all become, by reason of their contracts, joint employers of each and every employee for the purposes of workers compensation insurance.

© 2014 Barry Zalma, Esq., CFE