WORKERS COMPENSATION EXCLUSIVE REMEDY PROVISION ALSO APPLIES TO CONTRACT BASED CLAIMS

Last Monday, the Amarillo Court of Appeals, as a matter of first impression for Texas courts, considered whether the exclusive remedy provision of Texas Workers Compensation statute also served to preclude contract based claims against the employer arising under uninsured and underinsured motorist coverage, and concluded that it does.  In Smith v. City of Lubbock and St. Paul Fire and Marine Insurance Company, 2011 WL 4478067 (Tex. App. – Amarillo, September 26, 2011), a city employee was injured when occupying a city owned vehicle that  was struck by another vehicle owned and operated by a underinsured drunk driver.  The city subscribed to workers compensation and also purchased uninsured / underinsured motorist (UM/UIM) coverage. But the city had a $500,000 self-insured retention or deductible under the UM/UIM coverage.  The employee received workers’ compensation benefits and then made a claim under the UM/UIM policy with St. Paul.  The claim was denied and this lawsuit followed.  Summary judgment was rendered in favor of the City and St. Paul, and this appeal followed.

On appeal, St. Paul conceded that it had coverage under the UM/UIM policy to the extent that required reversal.  The court thus reversed and remanded that issue to the trial court.  The court then turned its attention to the exclusive remedy provision as applied to the city and the UM/UIM claim.  Plaintiff argued that the workers’ compensation exclusive remedy provision applied only to tort claims and not those arising under contract with a third party insurer.  After reviewing case law from other states applying the exclusive remedy provision, the court concluded:

Simply put, if an employee suffers work related injuries and seeks their redress from an employer that subscribes to a workers compensation program, there is only one way to obtain them.  It is through that compensation program.  It does not matter if the employer provides those benefits from its own pocket or via a contract with a third party insurer;…” To rule otherwise would provide the employee a backdoor way of recovering more from his employer than the exclusive workers’ compensation remedy ….” Especially when a portion of that recovery “would come out of that employer’s pocket.”

The court limited its decision to the facts presented and offered several fact patterns to which its finding could be distinguished, but then affirmed summary judgment denying further recovery against the City. Editor’s Note:  We will continue to monitor this decision and report on further significant developments as they arise.