Thursday, April 17, 2008

Principal Employer May Be Liable for Injuries to Employees of Subcontractor

A general contractor is secondarily liable for injuries occurring to the employees of its subcontractor if the subcontractor has failed to provide coverage and the general contractor has failed to exercise good faith to determine the existence of coverage under a valid insurance policy. 85 O.S. §11(B)(2).

Normally a policy's term of coverage is for one year. The "good faith" requirements of 85 O.S. §11(B)(2) are met when the principal employer receives a certicate of coverage that includes the period of the subcontactor's work. However, the good faith responsibility includes the continuing obligation to obtain proof of coverage on the expiration date of the policy. "Good faith is not demonstrated when a principal employer accepts proof of his subcontractor's workers' compensation coverage but remains indifferent to the stated expiration date of that coverage." Smalygo v. Green, 2008 OK 34, __ P.3d __.

David Green (Claimant) suffered a work-related injury on October 10, 2002, while working as a construction laborer for Mark Murphy d/b/a Mark Murphy Construction, an independent contractor and subcontractor of the principal employer Millard Smalygo d/b/a Smalygo Homes. When Smalygo hired Murphy, he received a certificate of coverage for a workers' compensation policy covering Murphy's employees, including Green. The policy would have expired as late as August 13, 2002, but Murphy allowed it to lapse on April 1, 2002, without informing Smalygo. When Green learned that his immediate employer had no workers' compensation coverage, he amended his claim to add Smalygo as principal employer.

If Smalygo had inquired about coverage on the anniversary date of the policy, he would have learned on August 13, 2002, nearly two months before Claimant's injury, that Murphy was uninsured. The Supreme Court found that there was competent evidence to uphold the panel's decision finding Smalygo's failure to inquire made him secondarily liable for Green's injuries (overturning the trial court order to the contrary).

It is interesting to note that Oklahoma is one of the forty-three states that allow an injured employee of an uninsured independent contractor to pursue a workers' compensation claim against the general contractor. Of those states Oklahoma is the only one to allow a general or intermediate contractor to escape liability by a good faith reliance on proof of coverage.

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