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Pennsylvania Court Reviews Definition of “Leased Worker” for Insurance Purposes in Injury Lawsuit, Finds in Favor of Insurance Company 

In a recent case before the Pennsylvania Superior Court, an underlying workplace injury claim developed into an insurance dispute. At issue was whether an insurance company’s exclusion violated public policy, and whether their definition of a “borrowed employee” already had been litigated in a lower court.  The appellate court reviewed the record, finding in favor of the insurance company.

Employee Jose Noe Castillo Ramos worked for BK Packaging Services, Inc.  Astra operated the facility where Mr. Ramos worked.  In 2009, Mr. Ramos suffered a serious injury to his arm and hand while cleaning an exhaust fan.  Mr. Ramos filed a workers’ compensation claim following his injury.

The Workers’ Compensation Judge (WCJ) rendered a decision on Mr. Ramos’ claim that found that he was employed by BK and not a “borrowed employee” of Astra at the time of the accident.  Westfield Insurance was a party to the proceeding.  Westfield had issued a commercial liability policy and a workers’ compensation policy to Astra.  According to the WCJ’s decision, the Westfield Insurance workers’ compensation policy did not cover Mr. Ramos’ injuries.

A personal injury action followed, and a jury verdict awarded Mr. Ramos $763,413 against Astra.  Westfield Insurance then filed a declaratory judgment action and argued that the general liability policy did not cover the incident. Westfield Insurance and Astra then filed cross-motions for summary judgment, and the trial court granted the motion for Westfield, denying Astra’s motion.

Astra argued that the trial court should not have granted Westfield Insurance’s summary judgment motion.  They contended that collateral estoppel barred the challenge to Mr. Ramos’ employment status with Astra.  Astra contended that the insurance policy definition of a leased worker, considered an employee, is identical to the doctrine of a borrowed employee.  This definition was at issue in the prior workers’ compensation proceeding, and Westfield participated in that proceeding. Astra argued that the WCJ already had determined Mr. Ramos was not employed by Astra and that Westfield Insurance was barred from re-litigating the issue of his employment status.

The appellate court defined collateral estoppel, also known as issue preclusion. The doctrine prevents a question of law or issue of fact from being relitigated. Certain requirements must be met, including determining whether the issue decided in the prior case is identical to the later case, a final judgment was issued on the merits, and the party against whom the doctrine is asserted was a party or in privity with a party in the prior case.  Additionally, the party against whom the doctrine is asserted must have had a full and fair opportunity to litigate the issue, and the determination in the prior proceeding must have been essential to the judgment.

Since applying the doctrine of collateral estoppel is a legal issue, the appellate court is not bound by the trial court’s findings of law.  In this case, the review of the insurance contract required examining the contract in its entirety.  The goal was to determine the intent of the parties.

The court stated that the doctrine of collateral estoppel did not preclude Westfield Insurance from re-litigating Mr. Ramos’ employment status with Astra.  The doctrine of a borrowed employee, at issue in the workers’ compensation proceedings, was not identical to the definition of a leased worker under the insurance liability policy.

The Pennsylvania Supreme Court has stated that the test for determining whether an individual is a borrowed employee, under the doctrine, is whether the entity has the right of control over the employee’s work and the manner of performing the work. An entity that has the right of control is an employer, even if the control is not exercised. The payment of wages is not a determinative factor, and other factors may be required for the performance of the work.

The liability insurance policy made clear that a leased worker is an individual, provided to Astra by a labor leasing firm, under an agreement to perform duties related to Astra’s business.  The court stated that the case law definition of “borrowed employee” is narrower than that of “leased worker,” since it focuses on the party that controls the worker’s performance and their manner of performing the work.

Viewing the record in the light most favorable to the non-moving party, Astra, the court stated that the issue of a leased worker under the insurance policy had not been litigated in the workers’ compensation proceeding.  The appellate court held that the trial court did not err in granting Westfield Insurance’s motion for summary judgment.

The court also addressed Astra’s claim that Westfield Insurance’s policy violated public policy by including a leased worker under the term “employee” in their exclusion policy.  According to the Pennsylvania Supreme Court, courts are to give effect to the plain meaning of a contract unless it violates express public policy. There must be clear indications, such as dominant public policy, to justify invalidating a contract for being in violation of public policy.

In this case, Astra claimed that by excluding a leased worker, Westfield Insurance was precluding coverage under both the general liability policy and the workers’ compensation policy.  The court stated that Astra purchased the liability policy to cover itself against non-employee, third-party claims.  The insurance policy did not foreclose the majority of Astra’s expected claims, and the court stated that Astra had not purchased the insurance policy to cover leased workers.  Therefore, the appellate court found the insurance policy was not against public policy.

The court affirmed the grant of summary judgment in favor of Westfield Insurance.

At Needle Law, our workers’ compensation attorneys help injured workers understand their rights and pursue claims for benefits and compensation against employers.  For a free, confidential consultation, contact our office at 570-344-1266.

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