An employee suffers the amputation of his hand at work. But before he can receive any compensation for his injury, courts have to untangle some details, particularly because this happened in the only U.S. state where employers are allowed to opt out of workers’ comp insurance.
Rafael Zuniga worked for San Diego Tortilla (SDT) in Texas. His hand was amputated in September 2012 while operating a tortilla machine.
Texas employers can opt out of carrying workers’ comp insurance. If they do, workers can sue their employers for negligence, and if they’re successful, the payout most likely will be much more than what would have been paid under workers’ comp.
SDT didn’t carry workers’ comp insurance, but it had a commercial general liability policy issued by Essex Insurance Co.
Zuniga sued SDT for his injuries. Essex investigated and determined that SDT’s policy didn’t cover Zuniga’s claims because he was a company employee. A provision of SDT’s policy excluded coverage for injured employees.
SDT and Zuniga claim he was working as an independent contractor, therefore the insurance policy should cover his claim.
Essex rejected Zuniga’s offer to settle his claims against SDT for the policy maximums. After that, Zuniga added a claim against Essex, seeking a court ruling that the insurance company must cover SDT for its liability to him.
The insurance company filed to have the portion of the lawsuit against it thrown out. A trial court and Texas appeals court refused the insurance company’s request.
But the Texas Supreme Court ruled in favor of the motion by Essex. “In Texas, the general rule is that an injured party cannot sue the [alleged wrongdoer]’s insuror directly until the [alleged wrongdoer’s] liability has been finally determined by agreement or judgment,” the Texas Supreme Court wrote in its decision.
Now a lower court will have to determine whether SDT is liable.
Why would both the employer and the employee argue that Zuniga was an independent contractor? Because if he was an employee, the insurance policy issued by Essex won’t cover the company. A resulting decision against the company could be enough to put it out of business, and Zuniga may never see the amount of compensation he would have received if his injury was covered under the insurance policy.
(In re Essex Insurance Co., Supreme Court of Texas, No. 13-1006, 11/21/14)
