Harris v. Casualty Reciprocal Exchange

Citation632 S.W.2d 714
Decision Date28 April 1982
Docket NumberNo. C-922,C-922
PartiesJohn R. HARRIS et al., Petitioners, v. CASUALTY RECIPROCAL EXCHANGE, Respondent.
CourtSupreme Court of Texas

Daugherty, Kuperman, Golden, Carlisle & Morehead, John F. Morehead, Joel B. Mitchell, Austin, for petitioners.

Michael A. Wash, Austin, for respondent.

POPE, Justice.

This is a workers' compensation case arising out of the death of Paul C. Stone, Jr., who received a fatal gunshot wound on December 26, 1978, while working at an Austin, Texas, discotheque called "The Green House." Stone was a vice-president and director of Marju Enterprises, Inc., which was doing business as "The Green House." On the night of the shooting, he was acting as the night manager of the club, replacing another manager who had ended his employment several months earlier.

The present suit for workers' compensation benefits was brought by John R. Harris and Paul C. Stone, Sr., executors of the deceased Stone's estate, and by the deceased's ex-wife and two minor children. The suit was filed against Marju Enterprises' compensation insurance carrier, Casualty Reciprocal Exchange, hereafter referred to as Casualty. The jury found that Stone was employed in two capacities and that he was performing the duties of a substitute manager when he was shot. The trial court rendered judgment in accordance with the verdict, but the court of appeals reversed that judgment and rendered judgment that the plaintiffs take nothing. 623 S.W.2d 154. The sole issue on appeal to this court is whether Stone's status as an officer in the corporation precluded recovery of benefits accruing under the corporation's workers' compensation policy. We reverse the judgment of the court of appeals and affirm the judgment of the trial court.

Marju Enterprises, Inc. was incorporated on October 21, 1975, by Gerald Hickson, John Pruitt, and Paul Stone. Hickson and Stone were named vice-presidents of the organization. Pruitt became the secretary-treasurer, and Hickson's wife became the corporation's president. All of the officers received a salary for performance of their duties. Besides the four officers, Marju Enterprises, doing business as "The Green House," employed bartenders, bar "backers," waitresses, doormen, a disc jockey, a gardener, a janitor, and a night manager. The last position mentioned, that of the night manager, was left open as of October 1978 by the departure of the acting manager, Frank Beck. From the time of Beck's termination until the shooting in December 1978, Paul Stone assumed managerial duties at the club. Those duties included hiring and firing workers, scheduling work shifts, and overseeing operations of the club during business hours.

Paul Stone was working as the night manager at The Green House on the evening of December 26, 1978. During a confrontation with two patrons who had been asked to leave the club at closing time but had refused to surrender their drinks, a gun was drawn and Paul Stone was shot. He died of the wounds on January 11, 1979.

The record shows that the compensation insurance premium that was paid by Marju Enterprises during the latter part of 1978 was calculated upon a wage base that included the salary of the night manager. The premium was collected during the time Stone served as substitute manager.

Casualty contends that there is no liability for benefits in this case because Paul Stone was never brought within the coverage of Marju Enterprises' compensation policy, as coverage is defined by this state's workers' compensation statute. Tex.Civ.Stat.Ann. arts. 8306-09h. That statute was clearly written for the coverage and protection of "employees" working within the state. Section 1 of article 8309 of the act provides that the term "employee" as used in the context of workers' compensation "shall mean every person in the service of another under any contract of hire, expressed or implied, oral or written...." Tex.Civ.Stat.Ann. art. 8309, § 1. This general definition is followed by section 1a of the same article, which provides more specifically:

(a) Notwithstanding any other provision of this law, a subscriber may cover in its insurance contract a partner, a sole proprietor, or a corporate executive officer, except an officer of a state educational institution. The insurance contract shall specifically include the partner, sole proprietor, or corporate executive officer ; and the elected coverage shall continue while the policy is in effect and while the named individual is endorsed thereon by a subscriber.

Tex.Civ.Stat.Ann. art. 8309, § 1a (emphasis added). Since it is undisputed in this case that there was no endorsement on Marju Enterprises' policy electing coverage for Paul Stone or any other officer in the corporation, Casualty contends that Stone was not covered by the policy at the time of his death. In response, Stone's survivors point to the jury finding that Stone was hired to work in two capacities. They conclude from this finding that, while Stone was not covered for injuries sustained while acting as an executive officer, he was covered while serving the corporation as an employee/manager.

The position asserted by claimants is frequently referred to as the "dual capacity" doctrine. This rule provides that an executive officer may be considered to be in an employer-employee relationship for workers' compensation purposes if, at the time of an injury, he is performing the tasks of an ordinary employee, as distinguished from his usual executive activities. Bolnick v. Industrial Commission, 81 Ill.2d 22, 405 N.E.2d 771 (1980). Section 54.21 of Larson's Workmen's Compensation Law explains the rule in greater detail:

As long as an officer's or director's duties are confined to the executive functions associated with the office, such as policy making, hiring and firing, negotiating of important contracts, and the like the compensation act does not apply. It could be argued, of course, that since technically the only true employer is the corporate entity the officers should be ranged on the employee rather than the employer side. This reasoning overlooks the practical fact that some human beings must exert the powers that belong to the employer-corporation, and those persons, the officers and directors, must therefore for compensation purposes be identified with the employer while exercising those powers.

It is quite common, however, especially in small corporations whose demands upon their officers take only a small fraction of their time, to find that the officers also discharge duties which, if performed by anyone else, would unquestionably confer employee status. In such cases, when the normal incidents of employment attend the performance of the non-executive work, it is uniformly held that the compensation act applies. The clearest instances are those in which the officer engages in manual or non-supervisory tasks, as in the case of a corporation president working in a coal yard at two dollars a day under the orders of the general manager, * * * a president and principal stockholder doing selling, manual work, and the like, a secretary-treasurer-director-stockholder doing collection work, or an officer doing sales work on the road or behind a counter. In addition, the vast majority of the cases have awarded compensation even when the employment duties were of a supervisory character, such as those of a general manager, superintendent of a department, foreman, or superintendent of construction, since these are all jobs that, in ordinary circumstances, would make the holder an employee.

Id., quoted in M. E. Badon Refrigeration Co. v. Badon, 231 Miss. 113, 95 So.2d 114, 117 (1957). See also 99 C.J.S., Workmen's Compensation, § 82(b) (1958).

Examination of decisions in various jurisdictions reveals a widespread adherence to the "dual capacity" doctrine. Although the precise version of the rule adopted in a particular state varies according to the wording of the applicable compensation statute, 1 the effect in almost all instances is the same-an officer is not precluded from recovering compensation benefits merely because of his title as an officer, provided he is required to perform some functions in the company similar to work performed by the company's ordinary employees, and provided the claimant is injured while acting in that nonexecutive role. See Queen City Furniture Co. v. Hinds, 274 Ala. 584, 150 So.2d 756 (1963); Brook's, Inc. v. Claywell, 215 Ark. 913, 224 S.W.2d 37 (1949); Bolnick v. Industrial Commission, supra; M. E. Badon Refrigeration Co. v. Badon, supra; Updike Advertising System, Inc. v. State Industrial Commission, 282 P.2d 759 (Okla.1955); Alsup v. Murfreesboro Bread & Ice Cream Co., 165 Tenn. 591, 56 S.W.2d 746 (1933); Stotts v. State Compensation Director, 149 W.Va. 272, 140 S.E.2d 604 (1965). But see Allen v. State Industrial Accident Commission, 200 Or. 521, 265 P.2d 1086 (1954); Melham v. Watertown Sash & Door Co., 67 S.D. 254, 291 N.W. 735 (1940).

The "dual capacity" doctrine was first recognized in Texas in Millers' Mutual Casualty Co. v. Hoover, 235 S.W. 863 (Tex.Comm'n App.1921, judgmt adopted). In that case, the court awarded compensation benefits for the accidental death of Hoover, an officer of a corporation who was engaged in the work of an employee at the time of his death. The compensation statute applicable at the time of the injury defined the term "employee" as

every person in the service of another under any contract of hire, expressed or implied, oral or written, except masters of or seamen on vessels engaged in interstate or foreign commerce, and except one whose employment is not in the usual course of trade, business, profession or occupation of his employer.

1917 Tex.Gen.Laws, ch. 103, part 4, § 1 at 291. Section 1a of article 8309 then provided:

The president, vice president or vice presidents, secretary or other officers thereof provided in its charter or...

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