IN THE SUPREME COURT OF
TEXAS
════════════
No. 06-0418
HCBeck, Ltd.,
Petitioner,
v.
Charles Rice,
Respondent
════════════════════════════════════════════════════
On Petition for Review from the
Court of Appeals for the Second
District of Texas
Argued October 18, 2007
Justice Johnson, joined by
Justice Medina, dissenting.
The workers’ compensation system is bottomed on a voluntary trade.
Employers provide workers’ compensation insurance coverage in exchange for
statutory immunity from suit by employees injured on the job. Employees accept
workers’ compensation insurance coverage in exchange for releasing their common
law rights to sue the employer for injuries on the job. In Texas Workers’
Compensation Commission v. Garcia, we described the exchange when
considering a challenge to the constitutionality of the Texas Workers’
Compensation Act (TWCA):
[T]he
Act—carrying forward the general scheme of the former act—provides benefits to
injured workers without the necessity of proving negligence and without regard
to the employer’s potential defenses. In exchange, the benefits are more limited
than the actual damages recoverable at common law. We believe this quid pro quo,
which produces a more limited but more certain recovery, renders the Act an
adequate substitute for purposes of the open courts guarantee.
893 S.W.2d 504, 521 (Tex. 1995).
Today the Court says “[a] general workplace insurance plan that binds a
general contractor to provide workers’ compensation insurance for its subcontractors and its subcontractors’ employees achieves
the Legislature’s objective to ensure that subcontractors’ employees receive the
benefit of workers’ compensation insurance.” ___ S.W.3d ___,
___. It also says HCBeck qualifies as a
statutory employer because its subcontract with Haley Greer incorporated the
general workplace insurance plan. Id. at ___. The Court’s decision extends statutory immunity to
HCBeck without requiring a corresponding substantive
quid pro quo from it as was intended by the Legislature. The decision enlarges
the number of entities that can claim that which an employee ostensibly provides
by releasing his or her common law right to sue—immunity from suit—by merely
contracting for someone else such as the subcontractor or the owner of a
project to secure and maintain insurance for the subcontractor. All HCBeck did here was facilitate communications between FMR
and Haley Greer and agree that HCBeck might in the
future provide workers’ compensation insurance for Haley Greer. That goes beyond
what the Legislature intended. Accordingly, I dissent.
Pursuant to its contract with HCBeck, FMR
elected to provide insurance through its OCIP and arranged for an agency to
secure individual insurance policies for contractors and subcontractors,
including both HCBeck and Haley Greer. The insurance
covered only on-site construction activities at FMR’s
office campus in Westlake. The contractors and subcontractors
were contractually required to maintain and furnish proof of separate insurance
for their off-site activities. As to the OCIP insurance, FMR paid the premiums.
Each contractor and subcontractor adjusted its individual contract price to
reflect the premiums FMR paid for the coverage of the individual contractor or
subcontractor. Under HCBeck’s agreement with FMR, if
FMR elected not to provide insurance via an OCIP, then “upon thirty (30) days
written notice from the Owner,” HCBeck was required to
perform the actions FMR actually performed in this case: securing insurers to
write coverage for the contractors’ on-site Westlake construction activities,
paying for the coverage, and then adjusting contract prices of the contractors,
if necessary, to reflect the insurance premiums. But because FMR both secured Haley
Greer’s insurance and paid for it, HCBeck did neither
as to the workers’ compensation policy in effect when Rice was injured. Nor had
HCBeck undertaken any obligation or commitment that
assured the coverage was in place. HCBeck’s
substantive function as to the insurance was (1) contractually requiring the
subcontractor to obtain workers’ compensation insurance through FMR’s plan, and (2) agreeing that it might in the future
actually secure and pay for coverage if FMR did not.
Under HCBeck’s subcontract with Haley Greer,
HCBeck did not agree to procure the workers’
compensation insurance in force for Haley Greer, nor did it agree to pay or
somehow obligate itself to pay the premiums, or otherwise assure the workers’
compensation coverage Haley Greer had in effect when Rice was injured. Haley
Greer’s subcontract incorporated the contract between FMR and HCBeck. In that contract, HCBeck
only agreed to secure and pay for insurance if FMR notified HCBeck that FMR was unable or unwilling to furnish the
coverage under an OCIP. The latter contingency did not occur before Rice was
injured.
Citing section 406.123(a) of the TWCA, the Court says that HCBeck “complied in all respects with the provision in the
Act that expressly allows it to enter into a written agreement to provide
workers’ compensation insurance to its subcontractors and their employees.”
___ S.W.3d at ___. The Court is wrong. Section 406.123
states that a general contractor and a subcontractor may enter into a written
agreement under which the general contractor provides workers’
compensation insurance for the subcontractor and its employees, not under which
it agrees to provide the insurance at
some point. Tex. Lab. Code § 406.123(a). The Act must
speak of insurance in effect at the time of an employee’s injury as opposed to
some possible future date; if not, there would be no argument about immunity
because there would be no injured employee suing the general contractor. The
statute is clear. If the general contractor and subcontractor enter into a
contract under which the general contractor provides the insurance, not just
promises to provide it at some future time, then the general contractor is
classified as the employer of the subcontractor and the subcontractor’s
employees for purposes of the TWCA:
§ 406.123.
Election to Provide Coverage; Administrative Violation
(a) A
general contractor and a subcontractor may enter into a written agreement under
which the general contractor provides workers’ compensation insurance
coverage to the subcontractor and the employees of the subcontractor.
. . . .
(d) If a
general contractor . . . elects to provide coverage under Subsection (a)
. . . the actual premiums, based on payroll,
that are paid or incurred by the general contractor or
motor carrier for the coverage may be deducted from the contract price or other
amount owed to the subcontractor . . . .
(e) An
agreement under this section makes the general contractor the employer of the
subcontractor and the subcontractor’s employees only for purposes of the
workers’ compensation laws of this state.
(f) A
general contractor shall file a copy of an agreement entered into under this
section with the general contractor’s workers’ compensation insurance carrier
not later than the 10th day after the date on which the contract is executed. If
the general contractor is a certified self-insurer, the copy must be filed with
the [Workers’ Compensation] division.
(g) A
general contractor who enters into an agreement with a subcontractor under this
section commits an administrative violation if the contractor fails to file a
copy of the agreement as required by Subsection (f).
Tex. Lab. Code
§ 406.123 (emphasis added).
In construing statutes, we ascertain and give effect to the Legislature’s
intent as expressed by the statutory language. City of
Rockwall v. Hughes, 246 S.W.3d 621, 625
(Tex.
2008). We use definitions prescribed by the Legislature and any technical
or particular meaning the words have acquired; otherwise, we construe the
statute’s words according to their plain and common meaning unless a contrary
intention is apparent from the context or such a construction leads to absurd
results. Id. at 625-26; see Tex. Gov’t Code § 311.011.
The Legislature did not define “provides” or “provide” as those words are
used in section 406.123. Looking to the common meaning of “provide,” we find the
definition includes to “supply,” “furnish,” or “make available.” Webster’s New Universal Unabridged Dictionary
1556 (1996); see Tex.
Gov’t Code §
311.011(a). The “make available” part of the definition is
of little applicability when the key to obtaining statutory employer status is a
quid pro quo. See Garcia, 893 S.W.2d at 521. To
“make available” the insurance, all a general contractor would have to do is
refer the subcontractor to an insurer or agent who would write the coverage or
require the subcontractor to apply for insurance with an owner such as FMR. The
general contractor does not trade anything of value in such a situation. Section
406.123 does not express Legislative intent to change the fundamental quid pro
quo concept underlying relationships between workers and those who could be
subject to common law liability for on-the-job injuries to workers. See
Tex. Lab. Code §
406.123. Therefore, the “supply” or “furnish” part of the
definition is applicable here. The two words essentially are the same: “supply”
means to “furnish or provide with what is lacking or requisite,” Webster’s New Universal Unabridged Dictionary
1912 (1996), while “furnish” means to “provide or supply” with something.
Id. at
777.
The Court views HCBeck as having provided, that
is, supplied or furnished, Haley Greer’s insurance by contractually requiring
Haley Greer to participate in FMR’s OCIP. For the same
reasons expressed above as to making the insurance “available,” even if HCBeck’s actions fall within an expansive construction of
supplying, furnishing, or providing the insurance, its actions do not warrant
statutory employer status because HCBeck still did not
contribute anything of value—a quid pro quo—to the trade Haley Greer’s employees
made for workers’ compensation coverage. Moreover, HCBeck’s actions simply do not equate to supplying or
furnishing the insurance. By contractually requiring Haley Greer to enroll in
the OCIP, HCBeck supplied or furnished Haley Greer
with the opportunity and obligation to apply for insurance; it did not provide
the insurance itself. FMR supplied or furnished the insurance when FMR secured
the agency to place the insurance and paid the premiums. Absent payment of, or
incurring liability for, premiums by FMR, the insurance that covered Rice when
he was injured would not have gone into effect and been in place.
The parties, the Court, and I agree this matter should be determined by
what actually happened, not what might have happened. As to what actually
happened, HCBeck substantively functioned only as a
conduit through which FMR’s insurance requirements
were communicated to and imposed on Haley Greer. Otherwise, HCBeck played no part in locating the agent who placed the
insurance or in securing and making certain the insurance remained in effect.
For a general contractor such as HCBeck to “provide”
workers’ compensation insurance to a subcontractor under section 406.123 and in
exchange receive the significant benefit of statutory employer status, the
Legislature surely intended that the general contractor must do more than
communicate insurance requirements or contractually require other parties to
maintain the insurance in effect, even if the contract requires a subcontractor
to enroll in a program in which the project owner contractually agrees to
purchase the subcontractor’s insurance.
The Court’s opinion could be interpreted as allowing a general contractor
to claim statutory employer status by agreeing in a subcontract to provide
workers’ compensation insurance, yet also requiring the subcontractor to provide
coverage if the contractor does not. Then, so long as the subcontractor
maintains coverage, the general contractor would have contributed nothing to the
trade by the subcontractor’s employees of their common law rights, yet may claim
statutory immunity because it contractually “provided” the insurance. The
Court’s holding might even be interpreted as giving a general contractor
statutory employer status if it contractually required a subcontractor to
provide workers’ compensation insurance on its own, so long as the subcontractor
maintained coverage. Again, the general contractor would have exchanged nothing
for the subcontractor’s employees’ release of their common law rights against
the general contractor. Section 406.123 of the TWCA does not reflect legislative
intent that general contractors should have statutory immunity when their
involvement in assuring workers’ compensation insurance coverage for the
subcontractor and its employees is so minimal. See Tex. Lab. Code §
406.123. I would hold that in order for a general
contractor to be afforded statutory employer status because it “provides”
workers’ compensation insurance to a subcontractor, the general contractor must
be more substantively involved in securing and maintaining the subcontractor’s
workers’ compensation insurance coverage than was HCBeck, and that contracting for another to place and
maintain insurance, whether to be done in the present or the future, is not
enough to qualify for the status.
I would hold that under section 406.123, a general
contractor “provides” workers’ compensation insurance if the general
contractor “puts something in the pot,” that is, if it contributes something of
value for statutory immunity. It could do that by taking actions to assure (1)
the subcontractor is insured, and (2) the insurance will not lapse without the
contractor allowing it to do so. Such actions would equate to substantive
involvement by the general contractor in obtaining and maintaining the
subcontractor’s insurance. But for the general contractor’s actions to reach a
level of substantive involvement warranting statutory employer status, coverage
would have to actually be assured by the general contractor and not be dependent
merely on the fulfillment of a contractual obligation or the payment of premiums
by another party, such as a subcontractor that might be under financial pressure
to save money by stopping payment of its insurance premiums or an owner that
might run short of funds and stop paying insurance premiums. In other words, the
general contractor would have to place itself in a position to have actual
control over the workers’ compensation insurance becoming effective and
remaining in force.
There could be flexibility in how such substantive involvement
requirements are met. For example, as to the first requirement referenced above,
the statute specifically contemplates a situation in which the subcontractor’s
insurance is “provided” if a general contractor adds the subcontractor and its
employees as insureds under the general contractor’s
workers’ compensation policy. See id. § 406.123(f) (requiring a
general contractor to file a copy of an agreement under section 406.123 with its
workers’ compensation carrier or, if self-insured, the Workers’ Compensation
Division); id. § 406.123(g) (making the failure to file
a copy of the contract in accordance with subsection (f) an administrative
violation). But the requirement might also be fulfilled by the general
contractor requiring the subcontractor or its insurer to furnish a certificate
of insured status from the insurance company, or a copy of a policy showing
coverage for the job activities in question. As to the second referenced
requirement, the essential element to keeping insurance in force is payment of
premiums. That requirement is most clearly fulfilled when the general contractor
is directly liable for the policy premiums so the insurer either receives
premiums from the general contractor or the insurer has an unqualified guaranty
from the general contractor that the premiums will be paid. See, e.g., id. § 406.123(d) (stating
that a general contractor that provides coverage to a subcontractor under a
written agreement to do so may deduct the actual premiums, based on payroll,
that the general contractor pays or incurs for the coverage from amounts owed to
the subcontractor). There are methods by which the general contractor could
become directly liable for premiums and assure the insurance does not lapse
other than by directly paying premiums—for example, by letter of credit that the
insurer could draw against if premiums were not paid otherwise. It is worth
noting here that section 406.123 does not specify who must finally absorb the
subcontractor’s premium cost. The statute authorizes premiums paid or incurred
for a subcontractor’s insurance to be deducted from amounts owed to the
subcontractor. Id. But the statute does not preclude
the owner from bearing the premium cost, as FMR did in this case. And clearly,
the general contractor could absorb the cost without looking to any other party
for reimbursement.
The Court says “the reality is that HCBeck was
actually paying for the workers’ compensation insurance” because HCBeck contracted to pay the “Subcontract Amount” that did
not include premiums FMR paid for Haley Greer’s insurance as opposed to
contractually deducting the premiums from Haley Greer’s subcontract. ___ S.W.3d at ___. It concludes there is no real distinction
between the two methods of paying the insurance premiums because it is “simply
accounting.” Id. at
___. In this case, though, the distinction matters. Insofar as the
workers’ compensation insurance that covered Rice, HCBeck was a bystander. It was an interested bystander to be
sure; but it was a bystander. FMR bought and paid for Haley Greer’s insurance.
It received and checked Haley Greer’s wage reports on which the compensation
insurance premiums were calculated. It determined the amount by which Haley
Greer’s subcontract was adjusted for the premiums. And the money to pay Haley
Greer’s subcontract came from FMR. HCBeck did not
actually pay Haley Greer’s premiums, FMR did. HCBeck
had no more involvement in “providing” the workers’ compensation insurance
covering Rice for his injury on FMR’s Westlake job than it had
in “providing” Haley Greer’s workers’ compensation insurance for off-site
operations. In both instances HCBeck contractually
required Haley Greer to have the insurance in place, but HCBeck neither secured placement of the insurance nor
assured its being in force at the time of Rice’s injury.
The question before us is not whether OCIPs are
the best or most efficient and economical way to secure insurance—including
workers’ compensation insurance—for all workers on job sites. Nor is it how
OCIPs interface with workers’ compensation law. Those
matters are significant, but they are more in the nature of policy issues better
left to the Legislature to balance and address. The question before us is
limited to whether under these particular circumstances the Legislature extended
statutory immunity from suit by an injured worker—the major incentive for an
employer to carry workers’ compensation insurance—to an entity that is not the
injured worker’s direct employer. Under the Court’s decision, that important
inducement for carrying workers’ compensation insurance is extended to HCBeck even though it did not substantively participate in
the transaction that resulted in Rice being covered by workers’ compensation
insurance.
I would hold that HCBeck was not Rice’s
statutory employer. I would affirm the judgment of the court of appeals.
________________________________________
Phil Johnson
Justice
OPINION DELIVERED: April
3, 2009