State News : Oklahoma

OKLAHOMA TRENDS AUGUST 2024

 CO-WORKER LIABILITY

 The Oklahoma Supreme Court has said a co-worker can be sued by an injured worker in a third-party district court action. The case is Bayouth v. Dewberry, 2024 OK 42.

 A fundamental premise of workers' compensation/tort law is that exclusive remedy prevents an injured worker from maintaining a third-party action for the negligence of a co-worker. BUT THIS CASE IS DIFFERENT.

 On his day off, Employee A had an argument with Employee B and shot and injured him. The incident occurred at the place of their employment. Employee B filed a third-party action in district court against Employee A. An Oklahoma County district judge granted summary judgment for the estate of Employee A, citing the exclusivity of workers' compensation and a co-worker's immunity from third party suit.

 In a 7-2 decision, the Supreme Court said "an employee, who injures another employee, must be acting within the course and scope of their employment when the incident occurs in order to receive the protection of the exclusive remedy provision" of the Administrative Workers' Compensation Act.

The district judge did not make a ruling on whether Employee A was acting within the course and scope of his employment. There is a dispute about that issue, so the case has been remanded to the district court judge to opine on that issue.

 INDEMINITY PROVISIONS SUBCONTRACTORS OVERRULLED

The Oklahoma Supreme Court may have dealt a fatal blow to so-called "indemnity" provisions in contracts with subcontractors in work-related injury cases. Such indemnity agreements are common in the oil and gas industry, the employee leasing business, and in other areas. We have also seen provisions in contracts of janitorial services that indemnify the building owner in the event of third-party liability.

The case is Knox v. Oklahoma Gas and Electric Co., 2024 OK 37. Seven justices concurred in the result, two dissented in part, and two justices dissented to the entire decision. Justice Edmondson wrote the majority opinion.

 The facts—OG&E contracted with sub "A" to develop property for a solar power facility. Sub "A" contracted with Sub "B" who contracted with Sub "C" who was the employer of Mr. Knox who was killed in an accident while performing construction work. His widow brought a wrongful death action in district court. The widow received statutory workers' compensation benefits.

 As is common in oil field operations, the Employer (Sub "C) signed a contract agreeing to indemnify Sub "B" for any sums paid out in a third-party claim.

 Here is what we believe the opinion holds:

 (1) An employee cannot sue his or her employer BOTH in workers' comp and under common law negligence theories. (That's exclusive remedy) The dual capacity doctrine does not appear in the Administrative Workers' Compensation Act.

 (2) An employer cannot be held liable twice, under workers' comp, and by an indemnity agreement with another party. The Supreme Court opinion reasons that an employer cannot agree to indemnify a third party guilty of negligence if the third-party claim is based upon the same physical injury covered by workers' compensation. An employer is allowed to agree to indemnify contractors above in the case of an INTENTIONAL TORT, just not in negligence cases. 

 Parties other than the employer can still be sued based upon common law negligence in a traditional third-party case.  But those third parties cannot look to a subcontractor who is the employer for reimbursement for any negligence damages, even though the employer agreed to such terms.

 There have been claims in which a drilling contractor, the employer of the injured worker, signed an indemnity agreement with the owner of the oil or gas well. Because of the indemnity agreement, the drilling contractor paid BOTH the comp claim and the third-party negligence tort claim. It appears this will no longer be the case.   

 This decision could be far-reaching. Insurance risk managers must look at a general contractor for possible third-party liability because indemnity agreements won't prevent damage awards any longer.