Premises Owner Is General Contractor and Qualifies for Exclusive Remedy Defense

Premises Owner Is General Contractor and Qualifies for Exclusive Remedy Defense

The Texas Supreme Court in Entergy Gulf States Inc. v. Summers, 2007 Tex. LEXIS 799 (Tex. 2007) issued a long anticipated decision reversing the Court of Appeals in this important workers’ compensation case.

Essentially, the Texas Supreme Court held a premises owner can be considered a general contractor under the Texas Labor Code and qualifies for the exclusive remedy defense against claims by subcontractor employees.  Underwriters and business owners should closely review this.
 
Summers sustained a compensable injury in the course and scope of his employment while working for International Maintenance Corporation (IMC).  IMC contracted with Entergy to perform construction and maintenance on Entergy’s premises.  Summers sued Entergy for his injuries alleging negligence. 
 
The contract between Entergy and IMC recognized Entergy would be the statutory employer of IMC employees.  Further, Entergy provided workers’ compensation insurance to IMC’s employees in exchange for a lower contract price with IMC.  Entergy obtained the insurance policy and paid premiums.
 
Prior to 1993, the Texas Labor Code definition of general contractor precluded a premises owner.  However, the 1993 codification did not include this language.  The Supreme Court held the statutory change in language overruled legal precedent and held a premises owner could be a general contractor.
 
It is important to note Entergy did have a contract with IMC indicating it was the statutory employer and also purchased an insurance policy to cover IMC’s employees and paid the premiums.  Further, it was clear Entergy “undertook to procure the performance of work” and therefore met the definition of general contractor found in Texas Labor Code §406.123.  The court held, “The fact that Entergy also owns the premises where the accident occurred is immaterial.” 
 
The court further found Summer waived his argument Entergy failed to satisfy §406.123's requirement the general contractor and subcontractor execute a written agreement because Summer did not raise the argument at the trial court as a ground for denying summary judgment.
 
As a result of this decision, premises owners that hire contractors may consider executing a written agreement with its contractors to take advantage of this decision, purchase workers’ compensation insurance, provide and pay premiums, or consider an owner controlled insurance program (otherwise known as an owner provided insurance program).
 
Summers has requested reconsideration of the decision.  Numerous parties have filed amicus briefs, including one by four legislators arguing the Supreme Court did not accurately state legislative intent (proposed amendments arriving at the Court’s conclusion have been defeated numerous times).  Further, the House and Senate will consider the effects of this decision as an interim change.  Expect legislation if the Supreme Court does not reconsider its decision.