Co-employee Immunity Case With a No Liability Settlement Twist: Things That Make You Go Hmmm

Co-employee Immunity Case With a No Liability Settlement Twist: Things That Make You Go Hmmm

An employee files an injury claim against the employer and receives a $6,000 lump sum payment in exchange for a "no liability" settlement with the employer. The settlement is subsequently approved by the Industrial Commission. May the employee now proceed in tort against a co-employee who caused the injury?

In most jurisdictions, the vast majority of workers’ compensation claims are settled without formal hearing. The parties usually enter into some sort of settlement agreement that is often submitted for approval to the agency that administers the state’s Workers’ Compensation Act. Generally, if the settlement is approved, it takes on all the qualities of an award [see Larson’s Workers’ Compensation Law, § 132.06]. The principle of res judicata fully applies to these approved settlements; issues thus resolved may not be relitigated at a later point and ordinarily the parties will not be later heard to take positions in other proceedings that are inconsistent with those contained in the settlement documents.

All this sounds like straightforward, hornbook law. Real life cases, of course, have a way of throwing us unexpected curves. Unusual fact patterns test the applicability of long-set rules. For example, in a recent case from Georgia, Smith v. Ellis, 2012 Ga. LEXIS 701 (Sept. 10, 2012), the state high court was called upon to “break the tie” that existed at the Court of Appeals level related to what the judges thought was a basic issue of workers’ compensation law—whether an employee who files an injury claim against an employer, and receives compensation in exchange for a “no liability” settlement with the employer that is approved by the state Board may then “turn around and sue the co-employee who caused the injury in a tort action.” Six judges on the Court of Appeals said “yes”; six said “no.” The state Supreme Court answered with an eloquent, “It depends.” The injured employee would be barred from suing the co-employee for the same injury in tort only if the co-employee was not acting within the course and scope of his employment at the time of the injury, an injury that the trial court and the Court of Appeals had largely ignored, indicated the Supreme Court.

Background

Though undisputed, the facts were somewhat bizarre. Smith and Ellis were both employed by a construction company. Smith worked at a subdivision in one community and Ellis worked at a subdivision in another. Ellis called Smith to arrange a meeting so that he could borrow one of Smith’s tools for his personal use. Ellis also wanted to shoot some new guns he had purchased and hoped to do so in an undeveloped field in the subdivision where Smith worked. The two met and went through several houses for which Smith was responsible. They went to lunch and returned to Smith’s subdivision, where Smith continued to work. At one point, Ellis left that part of the property so that he would not be seen by one of the employer’s supervisors. He then began firing his new rifle while Smith organized Smith’s work tools next to Smith’s truck. The rifle jammed three times. Ellis successfully cleared the first two rounds, but he accidentally shot Smith in the right thigh as he attempted to clear the third round. The bullet went through Smith’s right leg and into his left leg, causing serious injury.

The employer fired both men after the shooting. Smith filed a workers’ compensation claim alleging that his injury was compensable under the Act. The employer ultimately agreed to pay Smith $6,000 in exchange for Smith’s stipulation that he had not sustained a compensable injury. Pursuant to OCGA § 34–9–15(b), the “no liability” settlement was submitted to and approved by the Workers’ Compensation Board, which issued an award denying the employer’s liability.

Nine months later, Smith sued Ellis for negligence and Smith’s wife sued as well for loss of consortium. Ellis moved for summary judgment on both claims, contending that the tort lawsuit was barred by the Act’s exclusive remedy provision, OCGA § 34–9–11(a). Relying on Ridley v. Monroe, 256 Ga. App. 686 (569 S.E.2d 561) (2002), the trial court granted summary judgment to Ellis. Smith appealed, arguing that his tort action was not barred by his workers’ compensation settlement with the employer because Ellis was acting as a “third-party tortfeasor” rather than as an “employee of the same employer” at the time of the injury. As noted above, the whole Court of Appeals heard the case and divided evenly on the issue.

Log Jam at the Court of Appeals

Presiding Judge Barnes, writing for the six judges in favor of reversing the trial court, reasoned that if an injury was not compensable under the Workers Compensation Act, then the exclusive remedy provision did not apply. Judge Brown continued that Smith’s injury was not compensable under the Act, that no reasonable person could see a causal connection between the conditions of the employment and the injury. Brown added that although Ridley held that a no-liability settlement triggered the Act’s exclusive remedy provision and barred the injured employee from later suing a co-worker in tort, Ridley’s holding was “illogical” and should be overruled.

Judge Andrews, writing for the six judges in favor of affirming the trial court, indicated that Ridley controlled and was correctly decided. Although Judge Andrews agreed that the exclusive remedy provision did not apply if an injury was not compensable under the Act, he noted that Smith had actually been compensated under the Act. Smith’s settlement agreement had been approved by the Board, and thus it represented an award of the Board.

Supreme Court Decision

The high court observed that it was well-established that a settlement under § 34–9–15(a) that required an employer to compensate its employee for an alleged injury barred a subsequent tort suit by the employee against anyone protected by the exclusive remedy provision, regardless of the actual circumstances of the employee’s injury and the amount of compensation to which the parties agreed.

The court noted that before 2000, there was apparently some uncertainty as to whether the Board could approve so-called “no liability” settlements, although the Board had already been doing so. In July of that year, the General Assembly added subsection (b) to § 34–9–15, which expressly authorized the Board to approve settlement agreements which stipulated that there was no liability under the Act. Two years later in Ridley, the Court of Appeals held that a settlement under § 34–9–15(b) that compensated the employee for his injury had the same effect as a settlement that provided for payment under § 34–9–15(a). Smith and Presiding Judge Barnes’s opinion argued that Smith’s negligence action against Ellis should not be barred because it did not, in their view, arise out of and in the course of Smith’s employment and, therefore, was not an “injury” within the scope of the exclusive remedy provision. The Supreme Court indicated, however, that redetermination of that issue was “precisely what is precluded by § 34–9–11, § 34–9–15, and the precedent correctly interpreting those provisions.” The court continued:

… An employee may not file a workers’ compensation claim against his employer alleging that he has suffered a compensable injury; reach a settlement with the employer to obtain compensation; avail himself of the right and remedy granted by the Act to seek and obtain the Board’s approval of the settlement, thereby resolving the case; and then turn around and sue the employer (or “an employee of the same employer”) now alleging that the injury was not compensable, hoping that the court will disregard the prior resolution of the case, deem the injury not compensable under the Act, and allow a second recovery.

Moreover, the barring of such inconsistent, follow-on litigation did not depend on whether the employer admitted liability in the settlement. Instead, preclusion resulted from the employee’s having exercised a right and received a remedy under the Act on account of an injury that he or she contended was compensable because it arose out of and in the course of his employment.

Was Ellis a "Third-Party Tortfeasor Other Than an Employee of the Same Employer?

The high court reasoned that because Smith settled his workers’ compensation injury claim against his employer under OCGA § 34–9–15(b), he was, therefore, barred from bringing an action on account of the same injury against anyone except a “third-party tortfeasor, other than an employee of the same employer” [OCGA § 34–9–11(a)]. That holding did not, however, resolve the appeal since Smith had also argued that, even under Ridley, Ellis was not acting in his capacity as a fellow employee of the employer when he injured Smith.

Res Judicata Not an Issue

The court continued that Smith’s contention that Ellis was not acting as a co-employee when the injury occurred did not contradict the position Smith took before the Workers’ Compensation Board and did not raise the res judicata and estoppel concerns, that while the settlement agreement barred Smith from now claiming that his injury did not arise out of and in the course of his employment, the record gave no indication that Smith had even taken a position about whether Ellis was acting in the course of Ellis’s employment with the employer when he shot Smith. Indeed, Ellis was not a party to the workers’ compensation claim and settlement, and in the absence of any allegation that Ellis shot Smith willfully for personal reasons, Ellis’s employment status was immaterial to Smith’s workers’ compensation claim. Smith therefore was not precluded from arguing now that Ellis was acting as a third-party tortfeasor, rather than as a co-employee, when the injury occurred.

The court noted an example suggested by Smith at oral argument, that if a UPS driver delivering packages in Atlanta was struck and injured by a car driven negligently by a UPS office clerk from Savannah, who was driving her kids to a soccer tournament on a Saturday afternoon and thus undeniably off-duty and far removed from any employment responsibilities, the on-duty driver would be entitled to seek workers’ compensation benefits from UPS. However, “only by ripping the words of § 34–9–11(a) from their workers’ compensation context” could it be said that the off-duty co-employee was functioning as an “employee of the same employer” rather than as a “third-party tortfeasor” when she caused the injury.

The high court concluded that the facts in Ridley did not require the Court of Appeals to address the meaning of the phrase “employee of the same employer,” and thus the court did not discuss that language. The court added:

… The current edition of the leading treatise on workers’ compensation law … now states flatly that “immunity attaches to the co-employee only when the co-employee is acting in the course of employment.” 6 Lex K. Larson, Larson’s Workers’ Compensation Law § 111.03[3] (rev. ed. 2012) (citing cases from more than 30 states, with only a Wyoming court reaching a contrary result).

The Supreme Court added that unlike Smith, who was injured while in the subdivision where he was assigned, had been doing his job, and was still engaged in organizing his work tools next to his truck, Ellis had come that day to a different subdivision in a different city to borrow a tool for personal use and to shoot his new guns. Ellis had worked little if at all that morning, and after lunch he did no work and actually hid his presence from a supervisor. Moreover, Ellis injured Smith during an activity their employer did not condone, much less direct.

The trial court had not addressed the evidence regarding whether Ellis was acting in the course of his employment when he injured Smith. Accordingly, the trial court’s judgment granting summary judgment to Ellis was reversed, and the case was remanded to the Court of Appeals with direction that it be remanded to the trial court for further proceedings consistent with the Supreme Court’s opinion.

Smith v. Ellis Is Instructive for Comp Professionals in Other States

Georgia is among the 46 state jurisdictions (all but Arkansas, Missouri, Maryland and Vermont) that extend immunity to common-law suit not only to the employer, but to a co-employee who may have injured the employee, ordinarily as long as the former was acting within the course and scope of his or her employment. The discussion of issues in Smith v. Ellis is, therefore, instructive for professionals elsewhere. As indicated by the Georgia Supreme Court, within the ordinary claims process it is necessary to examine whether the employee’s injuries were sustained in the course and scope of the employment. If they were, then the injured employee’s only recourse is within the workers’ compensation claims system. When it comes to determining co-employee immunity, the issue doesn’t stop there. A separate examination into whether the co-employee’s actions were sufficiently connected to the workplace is required. Co-employee immunity is not automatic.

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