In Port Elevator-Brownsville, L.L.C. v. Casados, the Texas Supreme Court reaffirmed this State’s prohibition on split workforces (i.e., Texas employers are not permitted to cover some but not all employees with worker’s compensation insurance if the employer is a subscriber), and confirmed that a temporary employee is covered by the employer’s comp policy (and subject to the comp bar) even if the employer took steps to intentionally exclude the temporary employee from coverage (such as not paying premiums for such employees or not including a classification for temporary employees under the policy).
Practitioners on both sides of the bar that deal with personal injury and wrongful death claims should take note of this opinion because it confirms what many in the defense bar have been arguing for a number of years. But coverage attorneys should also take note because one key point in the Court’s analysis was its acceptance of a rule set out by the Amarillo Court of Appeals in 1940 — that "premiums are an issue between the employer and the insurer; they do not affect the employee’s coverage." (Slip op. at 9) (citing Tex. Employers’ Ins. Ass’n v. Stanton, 140 S.W.2d 337, 339-40 (Tex. Civ. App.–Amarillo 1940, writ ref’d).
In Casados, Rafael Casados worked for a temporary staffing agency that provided Casados to Port Elevator to perform general labor. Mr. Casados died in a work-related injury while working at the Port Elevator facility. The temporary staffing agency and Port Elevator were both considered Mr. Casados’ employers at the time of his death, and both carried workers’ compensation insurance. However, Port Elevator’s policy did not include a classification for temporary workers like Mr. Casados, and Port Elevator did not pay premiums for such workers. Port Elevator’s carrier denied coverage related to Mr. Casados’ death.
Mr. Casados’ parents sued Port Elevator directly for negligence, negligence per se, and gross negligence. Port Elevator moved for summary judgment based on the comp bar, arguing that the plaintiffs’ exclusive remedy was workers’ compensation. The trial court rejected that argument, and granted summary judgment for Plaintiffs, determining that the Port Elevator policy did not cover Casados. The case was tried to a jury, and Plaintiffs obtained a favorable judgment on their negligence claim. The court of appeals affirmed.
But the Supreme Court reversed and rendered judgment for Port Elevator. Port Elevator’s failure to pay premiums for temporary workers, the failure to include a classification for temporary workers in the comp policy, and the carrier’s denial of coverage were all inconsequential to Port Elevator’s exclusive remedy defense. Indeed, the Supreme Court rejected the Casados’ argument that the rule against splitting workforces should be subject to an intent-based exception whereby courts would look to the employer’s intent to determine whether the comp bar applies. Simply put, if an employer has worker’s compensation coverage, then all employees are covered (and subject to the comp bar) regardless of whether the employer tried to exclude the employee from coverage and regardless of whether the carrier denies coverage.
So, the main take away from this opinion is that subscriber employers of temporary employees may rely on the exclusive remedy defense. However, workers’ comp carriers should also take note of this opinion when making coverage determinations.