Joe Martosella, the senior vice president and general counsel for Philadelphia-based contractor Buckley & Co., says his company’s workers’ compensation insurer paid out “three very serious claims” that cost the insurer $5.5 million over the past year.
What was unusual was that the claims were made against Buckley & Co. by employees of subcontractors who should have been carrying workers’ compensation coverage of their own. In most states, workers’ compensation statutes require employers to have insurance to pay wages or medical costs of injured employees. In exchange, the laws generally prevent employees from making claims of negligence against legally defined employers.
That’s the way the law had worked in Pennsylvania for decades up until 2012, when a state appeals court denied an appeal of a state court jury decision from 2009 that effectively ended the old system of dividing up risk and liability between subs, generals and insurers in the state.
Now, a recent ruling has overturned the unusual decision and restored the usual order—but too late for some contractors and insurers.
“We got caught in the window when that erroneous opinion was out there,” says Martosella. “We have that loss experience on our record, and there’s nothing we can do about it. It will come out of our pocket in the next few years, when our insurance rates go up.”
Patton vs. Worthington Associates, as the case that turned Pennsylvania workers’ compensation upside down is known, has a long history.
In 2001, Christ Methodist Church in Levittown, Pa., hired Worthington Associates Inc., a Tullytown, Pa.-based general contractor to perform construction work on the church building. Worthington then hired Patton Construction, Inc. of Langhorne, Pa., a sole proprietorship owned by Earl Patton, to perform finish carpentry work.
According to court records, Patton was spackling soffits located along the ceiling of the church’s fellowship hall using a rented scissor lift. Patton had covered two large holes in the hall’s concrete floor with plywood previously, but on the day of the accident the two-ft-diameter holes were uncovered. Whle maneuvering the lift to complete the spackling, a wheel fell into one of the holes, overturning the lift and pinning Patton, who sustained serious back and spine injuries. Patton and his wife sued Worthington in 2003. The complaint admitted Patton was acting as an employee of Patton Construction, but he nevertheless won a jury verdict and sustained the verdict and award of $1.5 million when a panel of state Superior Court judged upheld the trial court decision.
Essentially, the legal precedent in Pennsylvania from then on has been that a sole proprietor could sue the general contractor for worker’s compensation benefits.
The Graham Co., a Philadelphia insurer, led a group of 21 state contractors and eight construction associations that sought to overturn Patton v. Worthington Associates Inc. They claimed that Pennsylvania companies and their insurers had been forced to pay millions in claims for injuries to workers for which they previously had no liability
The case hinges on a long-held legal precedent in Pennsylvania, established in the 1930 case of McDonald vs. Levinson Steel Company. In that case the state instituted the “statutory employer” defense.
“The state Superior Court’s decision eliminated that certainty and disrupted the industry’s long-standing risk-management paradigms,” the group’s Amicus Brief states.
Patton v. Worthington did not last long as a precedent.
On Mar. 26, the Pa. Supreme Court overturned the appeals court. But for a while, the world of worker injury and liability in Pennsylvania was upside down
“For all we knew, that would be the last word on that decision and it wouldn’t go to the Supreme Court,” says Peter Prinsen, Vice-President/General Counsel/Principal of The Graham Co.