Texas: Sheldon A. Etie v. Walsh & Albert Company, Ltd. et al.
December 16, 2004
In the first quarter of 2003, we reviewed the Texas Supreme Court’s decision in Lee Lewis Construction, Inc. v. Harrison, regarding the liability of a general contractor for injury to a subcontractor’s employee. Job site safety is a continuing concern for owners, contractors and subcontractors. Workers’ compensation laws in Texas provide relief both for injured workers and for contractors and subcontractors who want to insure against unforeseen costs. Earlier this year, a Houston Court of Appeals considered the application of a single workers’ compensation insurance policy that covered all subcontractors on the job site. In Etie v. Walsh & Albert Company, Ltd. et al., the First District Court of Appeals in Houston held that where a general contractor provides workers’ compensation insurance that covers all subcontractors on the job, that insurance is the exclusive remedy for any subcontractor’s employee injured by the acts or omissions of any other subcontractor’s employee. Etie v. Walsh & Albert Company, Ltd. et al., 135 S.W.3d 764 (Tex. App. – Hous. [1st Dist] 2004, pet. denied).
Initially, Clark Construction Group, Inc. (Clark) contracted with Enron Corp. to act as the general contractor for the construction of Enron Building #2. Clark then subcontracted part of the work to Way Engineering Company, Inc. (Way). Per its contract with Way, Clark purchased a workers’ compensation insurance policy that covered all subcontractors and employees who worked at the site. Way subsequently entered into a lower tier subcontract with Walsh & Albert Company, Ltd. (Walsh & Albert) to perform sheet metal work. Walsh & Albert’s employees were also covered by the workers’ compensation insurance. Sheldon Etie, an employee of Way, was seriously injured when he was struck by a falling plenum that had been improperly attached to the ceiling by a Walsh & Albert employee. Etie received workers’ compensation benefits, but also filed a negligence lawsuit against Walsh & Albert Company, Ltd. and Walsh & Albert, Inc.
Workers’ compensation laws in Texas authorize a contractor to provide workers’ compensation insurance coverage for subcontractors and subcontractors’ employees. Tex. Lab. Code Ann. § 406.123 (Vernon Supp 2004). In deciding that Etie’s recovery was limited to the workers’ compensation insurance secured by Clark, the Court of Appeals found that by providing such insurance the general contractor is deemed the employer of the subcontractor and the subcontractor’s employees. Although the act does not specifically discuss lower tier subcontractors, under the facts of the case, the Court found that Way was both a subcontractor to Clark and a general contractor to Walsh & Albert. Way’s contract with Walsh & Albert incorporated by reference all of the provisions of the contract between Clark and Way, and as a result, Walsh & Albert and its employees were also covered by the workers’ compensation insurance policy obtained by Clark. The Court was quick to distinguish the facts of this case from the situation where a subcontractor expressly chooses not to participate in workers’ compensation coverage, or where a third party who is not a covered employee, such as a visitor to the site, causes injury to a covered employee.
This appears to be the first time that a Texas Court of Appeals has had the opportunity to consider the extension of employee status to lower tier subcontractors for workers’ compensation insurance purposes. On October 15, 2004, the Texas Supreme Court declined review of the issue on appeal. We will continue to monitor how the various courts of appeal apply this case and the practical effect it may have on the management and operation of the job site.
For more information, e-mail Steve Weber at steven.weber@hklaw.com or call toll free, 1-888-688-8500.
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