Texas: Injured Employee of Non-Subscribing Employer May Not Proceed Directly Against Employer’s Liability Insurer

In a per curiam order, the Supreme Court of Texas held that a worker could not proceed directly against a non-subscribing employer’s general liability insurance carrier until it had been established, by judgment or agreement, that the employer had a legal obligation to pay damages to the injured worker. Accordingly, the high court reversed a decision of an intermediate appellate court (and the trial court) and conditionally granted the carrier’s petition for writ of mandamus to stop the action filed against that carrier. The worker, who lost his hand while operating a tortilla machine at the employer’s facility, had initially filed suit against the “employer.” The carrier had issued a general liability policy to the employer, but denied coverage since it said the injured party was an employee. The purported employer contended that the worker was an independent contractor. The carrier conditionally agreed to defend, but continued to argue that it had no ultimate liability under the policy. The carrier refused a settlement offer from the injured worker. The high court concluded that under the Texas “no direct action” rule, the worker must first establish liability on the part of the defendant/employer. Only then could the issue turn to the carrier’s liability, if any, under the policy. The rule applied to plaintiff’s declaratory relief action in the same way that it applied to any suit to recover money damages.

Thomas A. Robinson, J.D., the Feature National Columnist for the LexisNexis Workers’ Compensation eNewsletter, is a leading commentator and expert on the law of workers’ compensation.

LexisNexis Online Subscribers: Citations below link to Lexis Advance. Bracketed citations link to lexis.com.

See In re Essex Ins. Co., 2014 Tex. LEXIS 1164 (Tex. Nov. 21, 2014) [2014 Tex. LEXIS 1164 (Tex. Nov. 21, 2014)]

See generally Larson’s Workers’ Compensation Law, § 102.01 [102.01]

Source: Larson’s Workers’ Compensation Law, the nation’s leading authority on workers’ compensation law.

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