Historically, a worker’s compensation claim has been the only remedy for an employee injured in a work or construction accident. The compensation payable under Alabama’s Worker’s Compensation Act is not intended to fully compensate a worker for a serious personal injury. Worker’s compensation payments, whether made periodically or in a lump-sum, are not intended to compensate the worker for damages such as mental anguish, loss of future earnings, pain and suffering, permanent injury or disfigurement, etc. Moreover, the injured worker has no right to a jury trial. Ala. Code §25-5-88 (1975).
Code of Alabama §25-5-11 statutorily approves of an injured worker’s right to proceed against any third-parties who may be jointly liable with the employer for injury or death. The section provides:
If the injury or death for which compensation is payable…under circumstances also creating a legal liability for damages on the part of any party other than the employer,…the employee, or his or her dependents in case of death, may proceed against the employer…and at the same time, may bring an action against the other party to recover damages for the injury or death. [Emphasis Added]
Presumably, an action against the “other party” would be allowed under common law tort principles, without reference to this section. However, §25-5-11 serves to (a) codify the right to proceed against the “other party” and (b) allows the employer to subrogate on any monies recovered by the employee. See generally, Baggett v. Webb, 248 So.2d 275 (1971).
Contents
I. Procedural Considerations
A worker’s suit against a third-party is brought much like any other case. In a third-party case, the worker’s compensation carrier simply takes the role of a private insurance company as the subrogor. More often than not, the worker’s compensation insurance carrier will file a complaint in intervention seeking to recover the benefits they paid to the injured worker. This includes medical bills and compensation payments. Accordingly, the attorney must decide whether a third-party suit will be worth the effort. If the employer’s subrogation interest is substantial, the client may receive little, if anything, from the suit.
The time of the filing of a third-party lawsuit can sometimes make a big difference in the recovery in the worker’s compensation case. Full and complete disclosure to the client is critical for the practitioner. The client needs to completely and fully understand that if the third-party case is adjudicated or settled prior to the determination of the worker’s compensation claim, then the benefits due under the Worker’s Compensation Act can be extinguished. §25-5-11 provides that monies recovered by an injured worker from a third-party are to be credited upon the liability of the employer for compensation. Accordingly, it is conceivable (and not uncommon) for a practitioner to settle his client’s third-party case for an amount in excess of what the worker/client would be entitled to under Alabama’s Worker’s Compensation Act. The preferred approach is to settle the worker’s compensation case first, obtain the client’s benefits and lump-sum settlement, and then proceed with the third-party case. This allows the client a degree of financial security during the pendency of the third-party action. Of course, the employer will still have the right to recover their money, minus attorney’s fees, when the third-party case is settled or results in a favorable verdict. See Fitch v. INA, 408 So.2d 1017.
Another consideration that warrants discussion is the duty, if any, on the part of the employer to assist the employee in his third-party lawsuit. The statutory scheme of Alabama’s Worker’s Compensation Act would seem to indicate that the employer, who will directly benefit from any recovery via their subrogation interest, should assist the employee in his suit, i.e., making witnesses available, protecting the instrumentality of the worker’s injury, etc. Although there is no case law directly on point, it has always been this author’s opinion that an employer who refuses to cooperate and assist the employee in his third-party action does not have a right to recover their subrogation interest.
At a minimum, the attorney should always charge the employer a pro rata share of the attorney’s fee charged to his client. For example, if an attorney handles a product liability suit for a worker injured by a defective product while on a construction site, and obtains a favorable settlement under a 50% contingency fee, then the employer must reduce their subrogation interest in an equal amount, i.e., by 50%. By way of example, if a practitioner settles a lawsuit for $500,000.00 and his attorney’s fee is $250,000.00 (i.e., 50%) then the employee will get $250,000.00 minus an amount equal to 50% of the employer’s subrogation interest. Thus, if the employer’s subrogation interest in this same example is $50,000.00, they will only be able to recover $25,000.00.
II. Potential Third-Party Defendants
Whenever an attorney is handling a worker’s compensation case for a client, he/she has a duty and responsibility to look to see if there are third-parties who may be responsible, in part or in whole, for the client’s injury. Below is a laundry list of the potential third-party defendants in a work injury case:
- Supervisory co-employees;
- Manufacturers and distributors of the instrumentality causing harm to the worker;
- Entities who inspected or maintained the instrumentality that caused harm to the worker;
- Subcontractors on construction sites;
- General contractors who retained or exercised the right to control the manner and method in which the worker performed his task;
- Owner of the premises where the injury occurred;
- Any entity or person who was contractually bound to provide a safe work place, via compliance with OSHA or other regulatory agencies.
- Employer who acted willfully in causing injury to the Plaintiff.
As in any personal injury action, the first hurdle that must be overcome by the practitioner is proof of legal duty owed by the third-party. The other issues, breach, proximate cause and damages all take a backseat to this first hurdle. The existence of a duty comes from three (and only three) sources:
- Contractual;
- Imposed by law; and
- Voluntary undertaking/Retained control.
These will be addressed separately.
CONTRACTUAL DUTY
Many times, especially in the construction industry context, one or more contractors who are not the employer of the worker, will agree with another party to comply with any and all applicable laws, including but not limited to, OSHA. For example, it is not unusual for a general contractor to sign such a contract with the owner of the premises on a construction site. Accordingly, if an employee of a subcontractor is injured, he is an incidental and/or intended beneficiary and can sue the general contractor pursuant to the contractual provision requiring compliance with OSHA. See generally, Rose v. Blount Bros. Construction Co., 149 So.2d 821 (Ala. 1962). The suit by the worker can be in tort or in contract. The benefit of proceeding under a breach of contract theory means the Defendant will not be able to raise the affirmative defenses of assumption of the risk or contributory negligence. Finally, fault does not have to be proven under a breach of contract count; mere proof of the breach itself without necessarily showing any fault is sufficient.
DUTY IMPOSED BY LAW
The best example of a duty imposed by law is found in product liability. Under Alabama law, manufacturers must insure that their products are reasonably safe for their intended uses by foreseeable consumers. Therefore, if a worker is injured when operating a defective drill press while on the job, he can proceed directly against the manufacturer of the press for his injuries and damages in addition to his worker’s compensation claim.
Perhaps the rarest and most difficult third-party case involves the supervisory co-employee or employer. By law, these parties can be held responsible if their conduct is “willful”. The only realistic avenue of recovery is found under §25-5-11(c)2. It provides that a co-employee can be sued for the removal of a safety device from a machine. Id. “Removal” has been construed as including bypassing or failing to maintain a safety device. Moore v. Reeves, 589 So.2d (Ala. 1991); see also Harris v. Gill, 585 So.2d 83 (Ala. 1991). Moreover, the device removed must be from a “machine”. Mallisham v. Kiker, 630 So.2d 420 (Ala. 1993). Additionally, the device must have come from the manufacturer. It cannot be a homemade device fabricated by the employer.
VOLUNTARY UNDERTAKING AND/OR RETAINED CONTROL.
Whenever an independent contractor, general contractor, or any other entity voluntarily undertakes to control or direct the manner and method in which work progresses or retains the control of the progress of the work, a legal duty attaches. Construction accidents are usually a fertile ground for these type claims. See Alabama Power Co. v. Beam, 472 So.2d 619 (Ala. 1975); See also Alabama Power Co. v. Henderson, 342 So.2d 323 (Ala. 1976) The party that undertakes the duty then must act reasonably in their undertaking. The rationale behind this law is as follows: if a party retains the right to control how a worker performs his/her work, then that worker’s employer is essentially an agent for the third-party and they are responsible for either their own independent negligence in controlling the worker/employer or for the negligence of the agent/employer. Several recent cases illustrate these legal principles.
In Whisenant v. Gulf States Steel, 703 So.2d 899 (Ala. 1997), a worker suffered a partial amputation of his right hand while working on the premises of Gulf States Steel. Whisenant was actually employed with Alabama Structural Beams (ASBI). ASBI was a lessee of Gulf States. Whisenant was working on a slitter machine that had been purchased and set up by Gulf States Steel. Despite the fact that Whisenant was not employed with Gulf States Steel, he successfully argued that Gulf States Steel voluntarily undertook to control and direct the manner and method in which he worked and further, that Gulf States had retained the right to control the work being done. Whisenant was able to establish that Gulf States Steel had purchased the slitter, had installed the slitter and that employees of Gulf States Steel had consulted others about the slitter line prior to Whisenant’s injury. Whisenant was also able to present substantial evidence that Gulf States Steel’s Safety Director had walked through the ASBI facility on several occasions and had inspected for and given advice on safety. The Court held that “this and other evidence tended to show active involvement by Gulf States had control of ASBI and, specifically, in setting up and maintaining the slitter and deciding whether to install safety devices on it, is substantial evidence in support of Whisenant’s claim that Gulf States reserved a right of control over ASBI and voluntarily undertook to provide for safe operation of the slitter”. Id. at 906.
Another example of liability imposed for a voluntary undertaking is Haddock v. Multivac, Inc., 703 So.2d 969 (1996). In that case, the Plaintiff, Dwayne Haddock, was severely injured while working on a sausage & biscuit machine. Haddock’s employer was Rudy’s Farm. Haddock’s lawyer sued Multivac, a company who had inspected the machine a year or more before his accident. Evidently, one of the guards on the machine had not been working prior to Haddock’s injury. The Court held substantial evidence was presented that Multivac, Inc. voluntarily undertook to inspect the machine and was liable for any inoperable safety guards. Of course, Multivac was a completely separate entity from Rudy’s Farm. Discovery had revealed that Multivac made one isolated inspection check on the safety guard some eighteen months prior to the date of Haddock’s injury. Id. at 972.
Haddock stands for the proposition, as does Whisenant, that meticulous discovery and investigation is necessary in order to prove the control exercised or retained by the third-party. Also, pre-filing investigation into these kinds of cases is absolutely essential in withstanding a motion for summary judgment. Rule 27 of the Alabama Rules of Civil Procedures provides an excellent vehicle for pre-filing investigation. Through this Rule, the worker’s attorney can obtain contracts, specifications and other documents that identify potential tortfeasors.
The best example of a voluntary undertaking creating a duty on the part of a third-party is Sara Smith v. International Paper Co., 656 So.2d 355 (Ala. 1995). The decedent, an employee of B E & K Construction, Inc., was caused to be fatally injured when a brick wall collapsed on top of him. The accident occurred on the premises of International Paper Co., Inc. International Paper Co. voluntarily undertook to give the decedent’s employer advice about whether or not the brick wall should be braced. The Court held that the advice provided to the decedent’s employer rose to the level of a voluntary undertaking. The Court apparently reasoned that the decedent’s employer, B E & K, had relied on the advice from International Paper’s engineer and liability was appropriate under the circumstances. Id. At 358.
It is important to note that proving actual control and the exercise thereof is key in these cases. Theoretically, no control whatsoever needs to be proved as long as the control is retained by the third-party. Accordingly, all efforts should be made by the worker’s attorney to discover any and all contractual documents or agreements that may be relevant to show retained control.
Finally, a mere right to inspect the work or premises for safety hazards does not rise to the level of an undertaking for which liability may attach. The mere fact that a general contractor or premises owner routinely monitors the work of an independent contractor or makes general safety “walk-throughs” does not constitute a voluntary undertaking or retained control. There must be direct involvement with controlling the instrumentality or condition that causes the injury. See generally, Hurst v. Wallace Construction Co., Inc., 603 So.2d 985 (Ala. 1992).
III. Subrogation
As indicated earlier in the paper, the employer has a right to subrogate on any recoveries made by the employee. Their subrogation right is statutory and cannot be disavowed by use of Powell v. Blue Cross Blue Shield, 581 So.2d 772 (Ala. 1990). Because their subrogation right is statutory, the attorney cannot make the argument that his client has not been “made whole”. As mentioned previously, the attorney can charge an appropriate attorney’s fee that is commensurate with the contingency fee arrangement being charged to his client, the injured worker. In particularly difficult cases the worker’s compensation carrier will often agree to take even less than what is allowed under the law by virtue of the fact that they may get nothing if the lawsuit is tried and a defense verdict is returned. In addition to charging attorney’s fees, the worker’s attorney can also charge a pro rata share of the reasonable expenses incurred in prosecuting the suit. Lewis Trucking Co. v. Skinner, 671 So.2d 696 (1995). It is critical for the attorney to fully and completely disclose the total subrogation interest to the client before settlement!
IV. Practical Tips And Overview
Whenever an attorney is handling a worker’s compensation case for a client, he/she should meticulously scour the factual circumstances to determine if there is any possibility that a third-party may be, in part or in whole, responsible for the client’s injury. As seen above this can include independent contractors, co-employees, manufacturers, maintenance supervisors, general contractors, etc.
You should also make sure that you thoroughly review the worker’s compensation settlement release before your client signs it; otherwise, he may be releasing the third-party claim as well. Frequently, the carrier’s attorney will draft a document that releases “any and all persons, firms or corporations” who may be responsible or liable for the worker’s injury. This kind of language needs to be taken out of the release. If possible, the release should specifically exclude the names of any and all parties who the attorney feels may be responsible for the worker’s injury.
Detailed investigation is necessary for any third-party case prior to suit being filed. It is incumbent upon the attorney to take written or oral statements of any and all workers who were either witnesses to the accident or had supervisory responsibilities for the injured worker. This can eliminate the affirmative defenses of contributory negligence, assumption of the risk, etc.
The only “real” recovery a worker in Alabama can have for a serious personal injury is against a third-party. Worker’s compensation benefits do not fully compensate the worker nor are they intended to. Once a worker’s compensation lump sum dries up and he is still unable to go back to work he is relegated to either being on welfare or a ward of the State. A successful third-party claim, properly prepared with adequate investigation and discovery, can sometimes be the only hope a worker has of maintaining a dignified lifestyle.
