Gonzalez v. O & G Indus., Inc.

• Decision Date: 02 August 2016
• Docket Number: No. 19377.,19377.
• Citation: 140 A.3d 950,322 Conn. 291
• Parties: Elvira R. GONZALEZ et al. v. O AND G INDUSTRIES, INC., et al.
• Court: Connecticut Supreme Court

322 Conn. 291

140 A.3d 950

Elvira R. GONZALEZ et al.

v.O AND G INDUSTRIES, INC., et al.

No. 19377.

Supreme Court of Connecticut.

Argued Jan. 20, 2016.

Decided Aug. 2, 2016.

James J. Healy, Hartford, with whom were Joel T. Faxon and, on the brief, Eric P. Smith and Jason K. Gamsby, New Haven, for the appellants (plaintiff James L. Thompson II et al.).

Michael S. Lynch, with whom were Charles W. Fleischmann and, on the brief, Thomas M. McKeon, Shelton, and Kimberly A. Knox, Hartford, for the appellee (named defendant).

PALMER, ZARELLA, EVELEIGH, ESPINOSA, ROBINSON, VERTEFEUILLE and LAVINE, Js.

ROBINSON

, J.

The sole issue in this appeal is whether a general contractor that implemented a contractor controlled insurance program (CCIP) to centralize the purchasing of workers' compensation insurance for a major project has “paid compensation benefits” to the employees of its subcontractors, thus entitling it to “principal employer” immunity under General Statutes § 31–291¹

from further claims by those employees. The plaintiffs, James L. Thompson II, Carol M. Thompson, and James McVay,² seek to recover damages resulting from the alleged negligence of the named defendant, O & G Industries, Inc.³ The plaintiffs appeal⁴ from the trial court's grant of the defendant's motion for summary judgment with respect to their tort claims. On appeal, the plaintiffs claim that the trial court improperly concluded that the defendant had “paid compensation benefits” on the basis of an incorrect interpretation of that term as used in § 31–291

. We agree with the plaintiffs' claim that the trial court improperly interpreted the term “paid compensation benefits” in § 31–291, but further conclude that, even under the proper construction of the statute, no genuine issue of material fact exists as to whether the defendant paid compensation benefits to Thompson and McVay. Accordingly, we affirm the judgment of the trial court.

The record reveals the following undisputed facts and procedural history. In 2009, the defendant served as the general contractor for the construction of a gas fired power plant in Middletown. The defendant hired a subcontractor, United Anco Services, Inc. (United Anco), to assemble scaffolding at the site. Thompson was an employee of United Anco. The defendant hired a second subcontractor, Ducci Electrical Contractors, Inc. (Ducci Electrical), to perform inspection and testing of instrumentation. Ducci Electrical, in turn, hired a third subcontractor, Instrument Sciences and Technologies, Inc. (Instrument Sciences), to perform the instrumentation and control work. McVay was an employee of Instrument Sciences.

Both United Anco and Ducci Electrical agreed to the standard subcontract used by the defendant. The defendant's standard subcontract required all bidders to include, as a line item in their bids, their insurance costs to complete their work. The subcontractors would calculate these costs using their individual insurance rates and anticipated payroll, plus allowances for any overhead and profit. The standard subcontract stated, however, that the defendant “may” elect to implement a CCIP to “centralize the purchasing of insurance” for the project. This “consolidated purchasing of insurance” would include, inter alia, workers' compensation insurance for the defendant and all tiers of subcontractors. If the defendant opted to implement a CCIP, participation in the program would be “mandatory,” and, after enrolling in the program, each subcontractor would be relieved of its contractual duty to provide workers' compensation insurance. The defendant would then use a change order process to reduce the price of each subcontract by the amount identified for the subcontractor's insurance costs.

The defendant subsequently implemented a CCIP, which provided workers' compensation coverage for itself and all enrolled subcontractors through policies issued by the Old Republic General Insurance Corporation (Old Republic).⁵ Both United Anco and Instrument Sciences enrolled in the program, and each received individual insurance policies in their names. As the “[s]ponsor” of the program, the defendant was solely responsible for paying the premiums for its own coverage and that of all enrolled subcontractors. The defendant subsequently paid a premium in the amount of $1,150,465 for workers' compensation coverage provided under the CCIP.

Thereafter, the defendant issued change orders deducting the insurance costs specified in the bids from United Anco and Ducci Electrical from their respective subcontracts.⁶ Ducci Electrical, in turn, issued a corresponding change order to its subcontract with Instrument Sciences, reducing it by the amount equal to Instrument Sciences' insurance costs.

Over approximately the next eighteen months, the payrolls of United Anco, Ducci Electrical, and Instrument Sciences increased due to certain demands necessary to complete the power plant project. According to the CCIP Insurance Manual (manual),⁷ if a subcontractor's payroll increased, the subcontractor would issue a change order to the subcontract accounting for the additional labor, including the cost the subcontractor would have incurred to provide its own insurance for that labor, had a CCIP not been in place.⁸ This amount would represent the amount that would have been included in the subcontractor's original bid. The defendant would then issue its own change order to the subcontract to reduce it by the subcontractor's increased insurance costs, because it now provided insurance to all of the subcontractor's employees through the CCIP. During that time period, the defendant issued several additional change orders to its subcontract with United Anco to account for its increased payroll and insurance costs.⁹

On February 7, 2010, an explosion occurred at the power plant construction site, injuring Thompson and McVay.¹⁰ Under the terms of the CCIP, the defendant was required to pay a $250,000 deductible in the event that workers' compensation benefits were to be paid. The defendant paid this deductible to Old Republic, along with a claim handling fee in the amount of $17,500 to administer workers' compensation benefits. Both of these payments were made to Old Republic by checks drawn on the defendant's account. Thompson and McVay subsequently applied for and received workers' compensation benefits under the CCIP, including medical expenses and lost wages.¹¹

The plaintiffs brought the present action against the defendant under General Statutes § 31–293(a)

,¹² asserting, inter alia, negligence and strict liability claims in connection with injuries caused by the explosion. The defendant moved for summary judgment on these claims, arguing that it was immune from civil actions under § 31–291 because it was a “principal employer” that had paid workers' compensation benefits to Thompson and McVay. The plaintiffs did not challenge the defendant's status as a principal employer, but asserted that a genuine issue of material fact existed as to whether the defendant had “paid” workers' compensation benefits. In particular, the plaintiffs argued that, although the defendant sponsored a CCIP and paid the premium under the policies, it was the subcontractors that had actually paid the benefits, because the defendant effectively shifted the cost of the premium to its subcontractors by issuing change orders in the amount of each subcontractor's insurance costs. The plaintiffs further argued that § 31–291

requires a principal employer to demonstrate that it paid for “all or the entirety” of the workers' compensation benefits to an injured employee, and that the defendant had not done so.

The trial court granted the defendant's motion for summary judgment. In its memorandum of decision, the trial court first concluded that the plain and unambiguous meaning of the word “paid” as used in § 31–291

is “simply to transfer money.” As such, because it was undisputed that the defendant had paid the premium, deductible, and other costs for the CCIP, the trial court concluded that no genuine issue of material fact existed as to whether the defendant “paid” workers' compensation benefits to Thompson and McVay. In essence, the trial court determined that the factual dispute about whether the subcontractors reimbursed the defendant for the costs of the CCIP through the change order process was not material to whether the defendant had paid the benefits. The trial court further concluded that § 31–291 does not require a principal employer to prove that it paid all of the workers' compensation benefits to an injured employee in order to obtain immunity. Accordingly, the trial court granted summary judgment in favor of the defendant on the plaintiffs' claims. This appeal followed.

On appeal, the plaintiffs claim that the trial court improperly interpreted the term “paid compensation benefits” in § 31–291

, and that, under the proper construction, a genuine issue of material fact exists as to whether the defendant paid such benefits. The plaintiffs contend that the trial court adopted an unduly narrow definition of the word “paid” as “simply to transfer money,” and that the plain and unambiguous meaning of “paid” is to bear a cost. Alternatively, the plaintiffs argue that the word “paid” is ambiguous, and that the legislative history and purpose of § 31–291

supports their definition. The plaintiffs also reiterate their claim that the defendant was required to prove that it paid all of their benefits to obtain immunity under § 31–291. According to the plaintiffs, this interpretation of § 31–291 yields a genuine issue of material fact as to whether the defendant paid, namely, bore the entire cost of, the workers' compensation benefits provided to Thompson and McVay.

In response, the defendant contends that the trial court properly interpreted the term “paid compensation benefits” in § 31–291

, but posits that, under either interpretation, it paid such benefits. The defendant argues that the...