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Wrap Up Policy Limits Workers’ Compensation Immunity to General Contractor and Employer of Injured Employees Only
By Barry Zalma, CFE, Attorney At Law - January 14, 2015

Defendant Messer Construction Co.’s motion for summary judgment, Defendants D.A.G. Construction Co., Inc.’s and Triversity Construction Co., LLC’s motion for summary judgment, Defendant J & B Steel Erectors, Inc.’s motion for summary judgment, and the parties’ responsive memoranda were before the District Court for the Southern District of Ohio in Stolz v. J & B Steel Erectors, Inc., Slip Copy, 2014 WL 7409917 (S.D.Ohio, 12/31/14).
 
BACKGROUND
Plaintiff was injured while working as a concrete finisher for Jostin Construction, Inc. (“Jostin”) at the Horseshoe Casino construction project in Cincinnati. Plaintiff brings this civil action against Defendants Messer Construction Co. (“Messer”), D.A.G. Construction Co., Inc. (“D.A.G.”), Triversity Construction Co., LLC (“Triversity”), J & B Steel Erectors, Inc. (“J & B Steel”), Terracon Consultants, Inc., and Pendleton Construction Group, LLC, each of whom allegedly had responsibilities related to the construction project.
 
Defendant Messer moves for summary judgment on the grounds that (1) it is entitled to immunity under Ohio’s workers’ compensation laws as a self-insuring employer and (2) the election of remedies doctrine bars Plaintiff from pursuing his claim against Defendant Messer. Defendants D.A.G., Triversity, and J & B Steel argue that they are entitled to immunity under Ohio’s workers’ compensation laws as enrolled subcontractors under Defendant Messer’s workers’ compensation program.
 
UNDISPUTED FACTS
  1. At the time of his alleged injuries, Plaintiff Daniel Stolz was working for Jostin as a concrete finisher at the construction project for the Horseshoe Casino in Cincinnati, Ohio (“Casino Project”).
  2. Defendant Messer was the general contractor for the Casino Project and Jostin was one of its subcontractors.
  3. Prior to Plaintiff’s accident, Messer had obtained authority from the Ohio Bureau of Workers’ Compensation (“BWC”) to self-administer the workers’ compensation program for all of the enrolled subcontractors on the Casino Project.
  4. Plaintiff’s employer, Jostin, was an enrolled subcontractor participating in Messer’s workers’ compensation program under the certificate of authority issued by the BWC to Messer.
  5. J & B Steel was an enrolled subcontractor participating in Messer’s workers’ compensation program for the Casino Project under the certificate of authority issued by the BWC to Messer.
 
ANALYSIS
Workers’ compensation represents a social bargain in which employers and employees exchange their respective common-law rights and duties for a more certain and uniform set of statutory benefits and obligations. In the event an employee is injured in a work-related incident, he is entitled to workers’ compensation benefits, even if the employer is not to blame for the employee’s injury. In exchange, the employer receives tort immunity for work-related injuries.
 
The “exclusivity rule” dictates that an employee who is injured in the course of his employment must accept workers’ compensation benefits as his exclusive remedy vis-à-vis his employer. On most projects, contractors and subcontractors provide their own liability and workers’ compensation coverage. However, under certain circumstances, contractors on large-scale construction projects may self-insure the project, whereby the employees of subcontractors enrolled in the self-insurer’s plan for that project are treated as employees of the self-insuring contractor for purposes of workers’ compensation.
 
The Ohio Bureau of Workers’ Compensation (“BWC”) issued a “Certificate of Employer’s Right to Pay Compensation Directly” for “Subs 2000 4170–2 Horseshoe Casino–Cincinnati Wrap Up” (“certificate of authority”) to Defendant Messer, effective March 1, 2011 to March 1, 2012. The list of “subs” identified under this “Wrap Up” included Plaintiff’s employer, Jostin.  It is undisputed that Plaintiff was Jostin’s employee and that Jostin was an enrolled subcontractor under Defendant Messer’s workers’ compensation plan. Accordingly statutes impart workers’ compensation immunity upon Defendant Messer for any injuries sustained by Plaintiff while working on the Casino Project, since he was an employee of enrolled subcontractor Jostin.
 
Defendant Messer became liable for providing workers’ compensation for injured employees of enrolled subcontractors at the Casino Project upon approval of the application, regardless of whether the rules and statutes had been strictly followed. Defendant Messer’s risk manager testified that Defendant Messer would not have paid Plaintiff’s claims if the certificate of self-insurance being challenged by Plaintiff had not been issued. Plaintiff seeks to retain the benefits he received under the workers’ compensation system, the assurance of recovery, while simultaneously seeking to avoid his own obligations by denying Defendant Messer immunity.
 
Defendant Messer is entitled to immunity from Plaintiff’s negligence claim pursuant to O.R.C. §§ 4123.35 and 4123.74.
 
Dual Capacity Doctrine
Plaintiff also argues that Defendant Messer is liable pursuant to the dual capacity doctrine.The dual capacity doctrine is a narrow exception to the general rule of employer statutory immunity in negligence suits brought by employees. In order for the dual-capacity doctrine to apply, there must be an allegation and showing that the employer occupied two independent and unrelated relationships with the employee, that at the time of these roles of the employer there were occasioned two different obligations to this employee, and that the employer had during such time assumed a role other than that of employer.
 
Here, Defendant Messer is not Plaintiff’s actual employer. Although the statute provides that Defendant Messer is treated as if it were Plaintiff’s employer for the purposes of determining immunity, it does not create an actual employment relationship. In fact, the statute specifically states that employees of covered subcontractors are not considered employees of the self-insuring employer for any purpose other than immunity and self-insuring employers have no authority under the statute to control the means, manner, or method of the subcontractor employee’s work.
 
Plaintiff has failed to raise a genuine issue of material fact related to the applicability of the dual capacity doctrine, and the Court finds that the dual capacity doctrine does not apply.
 
WORKERS’ COMPENSATION IMMUNITY
The Court’s paramount concern in construing a statute is legislative intent. To discern legislative intent, the Court first considers the statutory language, reading words and phrases in context and in accordance with rules of grammar and common usage. If the meaning of the statute is unambiguous and definite, it must be applied as written and no further interpretation is necessary.
 
To read section 4123.35(O) in a manner which grants tort immunity to Subcontractor Defendants for injuries sustained by another subcontractor’s employee is contrary to the plain language of the statute. Section 4123.35(O) states, “the contractors and subcontractors included under a certificate … are entitled to the protections provided under this chapter and Chapter 4121 of the Revised Code with respect to the contractor’s or subcontractor’s employees ….“ (emphasis added).
 
As the statute is written, each subcontractor is only protected from liability for injuries to one of the subcontractor’s employees-its own. Even though the subcontractor is not providing the workers’ compensation coverage on the job to their own employees, the Ohio General Assembly pronounced that the subcontractors are still entitled to tort immunity from their own employees. If the General Assembly intended for immunity to extend to all subcontractors for injuries sustained by the employees of all the subcontractors, it would have written the statute in a manner that indicated such.
 
To grant blanket immunity to Subcontractor Defendants, the Court would have to read protections into the statute that are not there.   It contravenes the workers’ compensation scheme to provide Subcontractor Defendants immunity when they have not earned it. To do so would not uphold the social bargain, rather, it would constitute a “free pass” on their alleged liability for their role in the injuries sustained by Plaintiff.
 
The fact that Ohio’s workers’ compensation statutes do not expressly state that one who receives workers’ compensation is entitled to bring a claim against a third party tortfeasor, does not mean that they do not have the right to do so. The relevant fact is not that the Ohio workers’ compensation act does not grant this right to plaintiffs; the relevant fact is that section 4123.35(O) does not take this right away from plaintiffs.  In light of the fact that the plain language of the statute does not grant the broad immunity the Subcontractor Defendants seek, the Plaintiff maintains the right to bring suit against them.
 
ZALMA OPINION
Wrap-up schemes allow a general contractor to provide insurance, including workers’ compensation insurance for all of the contractors and subcontractors who are employed on a particular construction project. It does not, however, make each contractor and subcontractor an employer of all the people working on the project. It only provides workers’ compensation benefits to the employees of the particular subcontractor. The statute allows the actual employer and the general contractor who obtained the wrap up privilege to be protected by the exclusivity provision of the workers’ compensation law.
 
Barry Zalma is an insurance coverage attorney, consultant, and expert witness. As a California attorney, Mr. Zalma limits his practice to transactional, rather than litigation, counsel concerning insurance coverage matters, mainly representing insurers and those in the business of insurance. Mr. Zalma was licensed to practice law in 1972 and has operated his own firm since 1979. He is admitted to practice before all California courts, California U.S. District Courts and the Ninth Circuit Court of Appeals. He has qualified as an expert in various state and federal courts across the U.S. and the British Cayman Islands.
 
Barry Zalma practices law as the Law Offices of Barry Zalma, Inc., 4441 Sepulveda Boulevard, Culver City CA 90230; phone 310-390-4455, fax: 310-391-5614, email: zalma@zalma.com.  If you need an insurance claims handling, insurance coverage or insurance bad faith consultant and expert, contact Barry Zalma at Zalma Insurance Consultants using the aforementioned contact information.   
 
Published by adjustercom with permission.  
 
 
 
 
 

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