Texas: Insurance group says bill would increase litigation, construction costs

Legislation approved by a Texas House committee threatens to increase litigation and construction costs in the state, according to an insurance group.

House Bill 1657, approved unanimously by the House Business and Industry Committee, is aimed at overturning a decision issued in early April by the Texas Supreme Court. In Entergy v. Summers, the court upheld a 2007 ruling that found a premises owner may provide workers' compensation coverage for an entire jobsite and, therefore, be protected from third-party lawsuits.

Officials from the American Insurance Association strongly opposed the bill, saying it would serve as a disincentive for jobsite owners to provide workers' comp insurance and lead to increased litigation and construction costs.

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"We are very concerned about this legislative attempt to overturn a well-reasoned decision by the Texas Supreme Court," said John Marlow, assistant vice president for AIA's southwest region. "Under current law, injured workers are able to obtain fair compensation for a workplace injury from an employer who carries workers' compensation coverage without proof of fault in a court of law. H.B. 1657 will force injured workers to go to court to prove fault for their injury before receiving appropriate compensation for medical care and lost wages."

Rep. Helen Giddings, D-Desoto, who sponsored the legislation, disagreed with AIA's assessment. She said lawmakers believe the court overstepped its bounds and ignored legislative intent. The goal of the bill, Giddings said, is to "return the policy writing to the Texas Legislature where it rightfully belongs."

Marlow, however, said H.B. 1657 seeks to undermine the state's workers' comp system by eliminating tort immunity for owners of a jobsite, currently accorded "statutory employer" status by virtue of the Entergy v. Summers decision, and by fostering third-party lawsuits. Like many states at the turn of the 21st century, Marlow said Texas' workers' comp laws were adopted to provide speedy and just compensation to injured workers because the reliance on a common-law tort system was found to be an exceedingly inadequate method of resolving these claims. Texas is unique, however, in declining to make workers' compensation a mandatory requirement for employers.

"If enacted, H.B. 1657 would generate more litigation while raising the cost of construction and create impediments to securing compensation for injured workers," Marlow said. "Texas' workers and the state's workers' compensation system will be best served if ?statutory employer' provisions affirmed in the Entergy case remain in place."

The legislation is pending before the House Calendars Committee.

May 11, 2009

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