Entergy Gulf States, Inc. v. Summers, No. 05-0272 (Tex. April 3, 2009) see Entergy Majority Opinion
Somebody needs to explain to me why this case has provoked such a firestorm. In a unamimous 2007 decision, the Texas Supreme Court held that the Texas' workers' compensation (WC) statute (Labor Code sec. 406.121) permitted a premises-owner to act as its own "general contractor" (the term used in the statute) and achieve the benefits of immunity from common law lawsuits by contracting with subcontractors to purchase WC insurance for all employees on the work site. (See my discussion at Entergy 1) This arrangement, called an Owner Controlled Insurance Program (OCIP), may be used on large construction projects to lower insurance costs. One big WC policy instead of 100 smaller ones.
Then all hell broke loose. Outcries of judicial activism seemed to arise from all sides. Even some lawmakers commented in the press that this was never the intent of the 1989 language changes that the Court construed. One reporter was so desperate for a comment, she called me. So the Court agreed to rehear the case. Now, in 87 anguished pages, a four-judge majority, joined by three concurrences (two of which wrote 51 of those pages, see Hecht Concurrence and Willett Concurrence) and opposed by a three-judge dissent (see Dissent), reached the same result.
The statute itself provides:
A general contractor and a subcontractor may enter into a written agreement under which the general contractor provides [WC] insurance coverage to the subcontractor and the employees of the subcontractor.
The controversy lurks in the definition of "general contractor":
"General contractor" means a person who understakes to procure the performance of work or a service, either separately or through the use of subcontractors. The term includes a "principal contractor," "original contractor," "prime contractor," or other analogous term. the term does not include a motor carrier that provides a transportation service through the use of an owner operator.
The majority and those concurring say a premises owner may "undertake to procure the work or service of another." The dissenters assert that common usage, as well as earlier versions of the statute, as well as court opinions, defined "general contractor" to mean one contracting directly with an owner; "subcontractors" being those who contract with the general contractor.
The majority says it is just giving the statutory language its plain meaning. But even Justice Hecht, writing one of the concurring opinions, admits the statute is ambiguous. He finds sound policy reasons for spreading the blessings of WC coverage as broadly as possible. Apparently, a number of amici ("friends of the court who submit briefs because the outcome affects their interests) argued against allowing owners to escape common law liability to injured employees because WC benefits are too meager.
Admittedly, it's hard to tell which interpretation is what the Legislature intended. There are currently at least three bills pending on the current legislative docket, H.B. 520, H.B. 1657, and S.B. 2063, that would bar owners from becoming statutory employers. But I ask again, why all the fuss?
One of the amici seeking to overturn the 2007 result admits that very few owners are large and rich enough to afford an OCIP arrangement. Insurance companies typically won't agree to them unless the project is huge. Opening the statutory protection to owners will not make much difference in the number and frequency of construction lawsuits.
I stand by what I told the reporter in 2007. I think this case is no big deal.
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