The owners of a mixed-use property are liable for the workers’ compensation claim of an uninsured contractor, the Supreme Court of Alaska concluded.
Case: Trudell v. Hibbert, No. S-13608, 2/17/12, published.
Facts: Lawrence Trudell, an employee of Phillips Construction Co., was injured while climbing a ladder down from the roof of a building he was working on. The injury occurred on June 13, 2006, at a building in Kenai, Alaska.
At that time, Phillips lacked workers’ compensation insurance, even though it was a contractor that was licensed by the state of Alaska. Brent and Debra Hibbert, a married couple, owned the building. They resided in the building, and also used it to run their business, AAA Alaska Cab.
Trudell filed a workers’ compensation claim against Phillips and the Hibberts, contending that AAA Alaska Cab was a “project owner” and that Phillips was a “subcontractor.” Phillips filed for bankruptcy, and the Hibberts argued that they were not a “project owner.”
Under Alaska law, a contractor’s employee can hold a “project owner” liable for workers’ compensation benefits, if the contractor is uninsured.
Procedural History: After a bench trial, the Superior Court of Alaska ruled that the Hibberts were not “project owners” or employers. As a result, the Hibberts were not liable for workers’ compensation benefits. The Hibberts filed a motion seeking attorney fees, and were awarded fees and costs totaling $16,081.
Trudell appealed.
Analysis: At the Supreme Court of Alaska, Trudell argued that the Hibberts were “project owners,” and that the Legislature intended to define “project owner” in a broad manner to cover “any business that engages contractors for business purposes.”
The Hibberts responded that they were not project owners, and argued that Trudell’s argument would unnecessarily expand the definition of “project owners.”
“Like the appellant in Anderson v. Alyeska Pipeline Serv. Co., the Hibberts assert that broadly construing ‘project owner’ would have ‘dire consequences,’ exposing many small businesses to potential liability for workers’ compensation,” the court explained.
The high court noted that the trial court had included the “usual business rule” in its analysis of “project owners.” This rule states that a party is a “project owner” if it has “contracted out its usual work to others.” Because the Hibberts did not contract out their usual work to Phillips, the trial court concluded that the Hibberts were not project owners.
The high court disagreed with the trial court’s analysis.
“We conclude that it was error to incorporate the usual business rule into the definition of ‘project owner’ in AS 23.30.045(f)(2),” the state Supreme Court wrote. “Even if the statutory language is ambiguous, the legislative history demonstrates the intent to cover many more situations than are covered by the usual business rule.”
The trial court should have considered whether Phillips’ work benefited the Hibberts’ business, or their personal interests. If Phillips’ work benefited the Hibberts’ business, then they would have up-the-ladder liability under Alaska law.
The court analyzed the facts, and concluded that the Hibberts hired Phillips to improve office space used by the taxi company. This meant that the Hibberts were project owners under the law, and are liable for Trudell’s claim.
“Trudell’s situation is one that the Legislature hoped to prevent when it enacted the project owner amendments,” the high court concluded. “The problem with uninsured contractors and their attempts to require employees to become independent contractors to avoid workers’ compensation liability was discussed in hearings in both houses. The Legislature intended that someone in the contracting chain would have workers’ compensation insurance; the legislation was limited to businesses, and for the most part businesses are required to carry workers’ compensation coverage.”
While the majority concluded that the Hibberts were project owners, Justice Craig Stowers dissented. He agreed with the legal test used by the state Supreme Court, but contended that the court should have remanded the case back to the trial court, to give the trial court a chance to apply that test.
Stowers argued that the majority’s decision to analyze the factual evidence and decide the case on its own meant that the high court was taking on the role of the trial court.
“Notably the court does not determine that the Superior Court’s factual findings were clearly erroneous, nor could it in my opinion,” he wrote. “Rather, the court proceeds to review and weigh the facts, emphasizing its own findings as described above. But this is not the Supreme Court’s proper function.”
Source: WorkCompCentral
