Issue: June, 2009
Author: Timothy M. Stubson
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The Life, Death and Rebirth of Co-Employee Liability
Two decisions of the Wyoming Supreme Court, Bertagnolli v. Louderback, 2003 WY 50, 67 P.3d 627 (Wyo. 2003) and Hannifan v. American National Bank of Cheyenne, 2008 WY 65, 185 P.3d 679 (Wyo. 2008), have breathed new life into the issue of co-employee immunity under Wyoming’s workers’ compensation statutes. The cases and the policy choices surrounding co-employee immunity demand a new review of workers’ compensation and the principle of immunity that lies at the heart of workers’ compensation’s grand bargain.
The Path We Have Taken
The issue of an employee’s liability for injuries they may cause to co-workers has a long and vibrant history in Wyoming. The Wyoming workers’ compensation program was initiated by a constitutional amendment approved in 1914 and followed by enabling legislation in 1915. Lying at the heart of the system was the recognition that employees should be protected by no-fault insurance. The history of workplace injuries prior to workers’ compensation was fraught with inequities. Employees who were injured had no real recourse against employers who were able to fund vigorous defenses to any claims brought by the injured worker. The no-fault system cured that ill and resulted in an uneasy bargain. Employees were granted benefits regardless of fault, but employers gained protection from the expense and uncertainty of litigation in the form of immunity.
Co-employee immunity danced in the background but was not firmly addressed until 1939 in the case of In re Byrne, 53 Wyo. 519, 86 P.2d 1095 (Wyo. 1939). In that case, the Wyoming Supreme Court found that employees could not sue their co-employees for workplace injuries. The Court concluded that with the adoption of workers’ compensation, the Legislature intended immunity to extend not only to employers, but to employees as well. The rule that co-employees were immune from suit for workplace injuries remained the law until 1974. In Markle v. Williamson, 518 P.2d 621 (Wyo. 1974) the Wyoming Supreme Court once again addressed an attempt to sue a co-employee for injuries sustained in a workplace accident. In that case the Court reached a very different conclusion finding that co-employees were “third parties” not immune from suit like an employer.
The Markle decision launched co-employee immunity on a dynamic path from which it still has not recovered. In the immediate aftermath the Legislature clarified that a co-employee could be sued only if he/she was “grossly” negligent. That standard was modified in 1977 to a culpable negligence standard. Over the next nine years culpable negligence proved to be a thin line of defense and the Legislature, in a special legislative session in 1986, reinstated complete immunity for co-employees as it had existed from 1914 to 1974. Six years later, the Supreme Court rejected that approach in Mills v. Reynolds, 837 P.2d 48 (Wyo. 1992) finding that absolute immunity was unconstitutional.
In an immediate response, the Legislature adopted a standard which eliminated immunity in those circumstances where an employee intentionally acts to harm another employee. Specifically, the language provided that immunity applied “unless the employees intentionally act to cause physical harm or injury to the injured employee.” Wyo. Stat. Ann. § 27-14-104(a). That remains the effective language today.
From 1993 through 2003 there were few cases testing the limits of co-employee immunity. The Court’s current formulation was first articulated in Bertagnolli v. Louderback, 2003 WY 50, 67 P.3d 627 (Wyo. 2003). In Bertagnolli the court equated “intentionally act to cause physical harm or injury” with the concept of willful and wanton misconduct. As Justice Voigt put it in his specially concurring opinion in the case of Hannifan v. The American Natl. Bank of Cheyenne, 2008 WY 65, 185 P.3d 679 (Wyo. 2008), the court interpreted the statute as meaning “intentionally act and cause harm” rather than “intentionally act to cause physical harm.”
The vast majority of states have a workers’ compensation system that provides immunity to co-employees. Larson’s Workers’ Compensation § 111.03. Thirty-four states recognize an exception for those cases where an employee engages in an intentional wrong. At least three states have absolute immunity without an exception even for intentional wrongs. Three states, including Wyoming, allow for suits in cases of willful and wrongful acts or “gross negligence.” Id.
The Pros and Cons
Co-employee immunity makes a great deal of sense in the context of workers’ compensation’s grand bargain. That includes a system where immunity extends to all cases except for those in which an employee acts to cause harm.
An employer gives up a right to any defense in work-related cases. It matters not whether an employee is acting with a complete disregard for his own safety or not; he will be entitled to benefits if the injury is work-related. In exchange, the employer gains certainty regarding his exposure.
As the Supreme Court has acknowledged in both Bertagnolli and Hannifan, the determination of whether conduct is “willful and wanton” is extremely fact intensive. The foreseeable consequence of such a fact intensive question is that few cases will be resolved at the dispositive motion stage of a case. The real world impact of the greater uncertainty in liability and the greater certainty that cases will proceed to trial have been significant. Employers who recruit safety personnel and managers have found fewer and fewer recruits who are willing to subject themselves to the substantial liability that accompanies managerial positions in the current legal environment. Many employers have found it necessary to search out insurance that can cover their employees in the event that a co-employee case is brought. As a consequence, a system that was designed to exchange premium payments and immunity for the certainty of employee benefits has a more typical liability scheme superimposed upon it. Employers pay premiums not only for workers’ compensation, but pay additional premiums for potential co-employee claims. The result is a system of double liability that undermines the promise of the workers’ compensation system.
Intentional Harms Standard
Changing the standard from an “intent to act” to an “intent to harm” standard serves to reinforce two fundamental principles of co-employee immunity. First, it provides employers the certainty in liability that serves as the benefit for the bargain for employers who participate. It also serves to reinforce those issues that caused the Wyoming Supreme Court to nullify absolute immunity in the first place.
When holding that absolute immunity for co-employees was unconstitutional, the Court pointed out fundamental concerns with the policy. The Court noted that absolute immunity “permits an employee to intentionally harm a co-employee without being concerned about civil liability.” Mills, 837 P.2d at 49, 54. The Court found that such a result “severely burdens the State’s undeniable interest in prohibiting an individual from committing an intentional tort without the possibility of liability.” Id.
Eliminating protection for intentional acts retains the important disincentives that liability creates for those who would intentionally commit harm. It does so in a manner that maintains the essential framework of employer immunity. While an employer may have a need to ensure against errors in judgment, those same motivations do not exist with respect to intentional wrongs. Consequently, the problems of double insurance and indirect liability largely evaporate in the context of an intentional wrong standard.
Timothy M. Stubson is a partner with Brown, Drew & Massey, LLP. He also serves in the Wyoming House of Representatives where he is a member of the Committee on Corporations, Elections and Political Subdivisions and the Committee on Minerals, Business and Economic Development.
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