Upheld: Injured Subcontractor’s Lent Employee Has No Claim Against Landowner or General Contractor After Choosing Workers’ Compensation and Failing to Prove Landowner Controlled the Work

By Rick Erickson (http://www.swlaw.com/attorneys/rick_erickson)

On this Memorial Day 2015, I write in honor of my U.S. Marine Corps colleague, Megan McClung, who was killed in Iraq nine years ago this December.  Major McClung and I served together in Anbar Province in 2006.  She was the first female Marine Corps officer to be killed in Iraq and the first female graduate of the U.S. Naval Academy to be killed in action.  She is buried at Arlington National Cemetery.

In Lee v. M and H Enterprises, Inc., — P.3d —- (decided Apr. 21, 2015), the Arizona Court of Appeals recently clarified why, in most cases, landowners and general contractors are not liable when subcontractor employees are injured or killed on construction projects.

First, landowners are generally not responsible for injuries to contractors’ employees who are covered by their employer’s workers’ compensation insurance.  Neither are landowners liable for injuries sustained by contractor employees performing work that landowners do not control.  Second, contractors are immune from tort liability when other contractors lend employees who elect coverage under their own workers’ compensation insurance.  These general legal principles have a few exceptions, but none of these exceptions applied in the Lee case.

Lee was a general laborer from a sourcing company called Able Body Labor.  M&H was the general contractor that directed Lee’s work once Able Body dispatched Lee to the project.  Lee fell and was seriously injured at one of Wal-Mart’s Sam’s Club stores in Arizona.

After Lee claimed and received workers’ compensation benefits from Able Body, Lee also sued M&H and Wal-Mart for negligence and premises liability.  Lee alleged Wal-Mart and M&H negligently caused an unsafe worksite.  Lee further claimed M&H and Wal-Mart could not pass off or delegate safety obligations to others because Wal-Mart and M&H controlled Lee’s work.

As a temporary employee sourced by Able Body and assigned to M&H, however, Lee could not choose workers’ compensation from Able Body and also pursue tort recovery from M&H.  The “lent employee doctrine” immunized M&H from liability in the same way Able Body was immune from liability once Lee elected workers’ compensation as his remedy.

The “independent contractor rule” equally shielded Wal-Mart, as the landowner, from being liable for the contractors’ negligence.  An exception to this rule was if Wal-Mart was vicariously or independently liable for exercising actual control over Lee or his work.

Lee, to the contrary, was assigned by Able Body and under actual direction and control of M&H when Lee fell.  That M&H controlled the worksite was, moreover, expressly provided in its contract with Wal-Mart.  The appellate court, therefore, enforced “the general rule that a landowner is not liable for injuries suffered by an employee of an independent contractor performing work on the property.”  Id., ¶ 20.

Like all subcontractor employees injured on the job, Lee had a choice of available remedies.  He decided upon the insurance his employer provided.  Only under limited circumstances could Lee choose workers’ compensation and tort remedies against the general contractor.

Furthermore, a subcontractor employee like Lee would rarely have additional remedies against the landowner merely on the basis of property ownership and premises liability.  Lee, in other words, did not fall at Wal-Mart as a customer in the store.  He was a lent employee working on construction of the store.  His injuries were suitably covered by his employer’s workers’ compensation insurance.

The Lee case is nonetheless a warning to landowners to pay attention on the issue of control.  Let contractors build the project and provide for worker safety and remedies.  If landowners intervene and actually control a subcontractor’s work, landowners may find themselves unprotected by the independent contractor rule—and liable for a worker’s injuries even after the worker receives workers’ compensation from another source.