Corpus Christi, Texas, July 3, 2002: Rosario Lachuga slipped and fell after clocking out of work; sued her employer for the injury; and cost Evanston Insurance $4.2 million.
Lachuga, a hostess/waitress at San Luis Mexican Restaurant, turned in her time card and left the restaurant using the back door. As she exited, Lachuga slipped on mats lying on the ground just outside the door, severely injuring her arm. She sued her employer, Maria F. Pineda d.b.a. San Luis Mexican Restaurant, to recover damages.
Upon receiving the suit papers, Pineda notified her agent who filed the claim with Evanston Insurance Company (a division of Markel Corp.). Evanston hired defense counsel but cut off payments once it discovered that Lachuga was an employee in the “course and scope” of her employment when the injury occurred. Evanston presumably denied coverage under exclusions “d. Workers’ Compensation” and “e. Employers’ Liability” with support from the co-employee exclusion contained in the “Who Is An Insured” section.
Pineda sued her agent, Leicht General Agency, and Evanston for not providing the insurance protection she requested. Pineda’s complaint stated that she asked for and believed she had been provided the coverage necessary to protect her, individually, and the business, collectively, against bodily injury claims made by any person injured on the premises, including an employee.
A six member jury ultimately agreed with Pineda and hit Evanston with a $4.2 million judgment. Actual damages amounted to $110,000, attorney’s fees accounted for $1.2 million, and punitive damages totaled a whopping $2.89 million. News reports quote the plaintiff’s attorney as saying that Evanston could have gotten out of the suit for around $25,000 if they had settled with Lachuga initially. (Maria F. Pineda, Individually and D/B/A San Luis Mexican Restaurant V. Evanston Insurance Company and Leicht and Associates, Inc. D/B/A Leicht General Agency; Cause No. 07-61541-2; County Court at Law No. 2, Nueces County, Texas.)
Insurance Review by Line
Workers’ Compensation: Texas is the only state with a truly elective workers’ compensation law. Employers, regardless of size, are not statutorily required to purchase workers’ compensation protection. Only employers working in the construction industry doing or desiring to do work for any governmental body are mandated to procure coverage. As a result, only about 67 percent of Texas employers provide workers’ compensation protection (approximately 25 percent of all employees are unprotected).
Apparently Pineda asked, or at least thought she’d asked, the agent to provide workers’ compensation coverage to protect the business against the financial consequences of an injury to an employee. Androvett Media Law reports that there was no workers’ compensation protection in place.
Had workers’ compensation coverage been available, would this injury have been compensable? Remember, to be considered compensable, the injury must “arise out of and in the course of employment.” Lachuga had already clocked out, turned in her time card and was leaving out the back door when the injury occurred.
Courts ascribe a reasonable time for employees to reach or leave their assigned work station. During this time, the employee is considered to be in the course and scope of employment. The “clock” begins to tick (so to speak) when the employee arrives in the parking lot. The reverse is also true, the employee is considered to be within course and scope until they leave the parking lot. Injury suffered prior to and after leaving the parking lot is not covered unless another “coming and going” exception applies (outside the scope of this article).
The known facts of the case suggest that Lachuga was in the course and scope of employment. First, she was walking out the back door (not a means of egress normally available to any but an employee); second, she had not left the premises; and three, nothing in any report suggests she had “abandoned her employment” prior to leaving (gone to the dining area to eat as a customer, etc.). Each state applies the “coming and going” rule and the exceptions to that rule differently, but the vast majority would likely hold that Lachuga was still in the “course and scope” of her normal employment.
A workers’ compensation policy would likely have covered this injury and is the proper policy to look to for this coverage.
General Liability: Two commercial general liability (CGL) policy exclusions specifically remove coverage for injury to an employee: exclusions “d. Workers’ Compensation” and “e. Employers’ Liability.” Additionally, the “Who Is An Insured” policy section (Section II) contains a co-employee injury exclusion.
In short, the general liability policy is not intended to provide coverage for an injured employee. But the jury did not agree. In fact, the plaintiff attorney’s press release stated that one of the senior underwriters at Evanston stated, under oath, that there was the possibility that this injury may have been covered by the policy; but how? Below is a review of the exclusions and exclusionary wording in relation to this case. The “Who Is An Insured” co-employee exclusion will not be presented as it does not appear to be relevant to this claim.
Exclusion “d. Workers’ Compensation“: This exclusionary wording excludes any injury subject to workers’ compensation law. Texas, as highlighted earlier, is not a compulsory workers’ compensation law state (except in specific circumstances). Since work comp is not statutorily required, this exclusion does not apply to this loss. There is still the chance that coverage could exist under the CGL.
Exclusion “e. Employer’s Liability“: This exclusion does not equate to and has nothing to do with the employers’ liability part (Part II) of NCCI’s Workers’ Compensation and Employers’ Liability policy; “exclusion e.” is designed to exclude bodily injury to an employee arising out of and in the course of employment not already excluded by the workers’ compensation exclusion discussed above. The only way this exclusion would not apply (allowing for coverage) is if it were provable that Lachuga was no longer an employee in the course and scope of employment. So, even if “exclusion d.” does not apply, “exclusion e.” will exclude CGL coverage for injury to an employee.
“Course and scope” and the specific exception to the “coming and going rule” were discussed in the paragraphs spotlighting workers’ compensation coverage. Based on the facts currently available (as the transcripts have not yet been received), it appears that this finding against Evanston was incorrect. The CGL is not designed to cover the cost of injury to an employee; that’s the domain of the workers’ compensation policy.
Hopefully Evanston/Markel will appeal. If left to stand, this jury decision could cause future coverage problems in Texas (with the potential to affect other states) for two reasons:
1. Unless Lachuga was outside the course and scope of employment (which it does not appear she was), the CGL is not intended to cover this injury; this finding will expand coverage beyond its intended bounds; and
2. “Stare decisis” is a legal term that commands courts to not “rock the boat” by upsetting a previously made decision unless there is due cause. In short, past decisions have a part in future decisions (also known as a “precedent”). Allowing this to stand will make it more difficult for insurance carriers to apply ligitimate exclusions regarding injury to an employee.
Evanston, on the surface, appears to have been correct in its denial of coverage; this decision should be overturned if appealed.
“There Are No ‘Reasonable’ Or ‘Prudent’ People Left! Not Necessarily A Political Statement” for more information on the definition of negligence.
“WC Injury: The ‘Course and Scope’ Rule” for more detail on this rule.
“Workers’ Comp: Injury Gray Areas” for more detail on the “coming and going” rule and other exceptions to the “course and scope” rule.