Weber v. Armco, Inc.

• Decision Date: 10 May 1983
• Docket Number: No. 59314,59314
• Parties: George WEBER and Sharon Weber, Appellants, v. ARMCO, INC., an Ohio corporation, d/b/a National Wellhead Supply Company, Appellee, and Liberty Mutual Insurance, Intervenor.
• Court: Oklahoma Supreme Court

Page 1221

663 P.2d 1221

1983 OK 53

George WEBER and Sharon Weber, Appellants, v. ARMCO, INC., an Ohio corporation, d/b/a National Wellhead Supply Company, Appellee and Liberty Mutual Insurance, Intervenor.

No. 59314.

Supreme Court of Oklahoma.

May 10, 1983.

Certified Questions of Law from the United States Court of Appeals for the Tenth Circuit.

This action is pending on appeal before the United States Court of Appeals for the Tenth Circuit. The following questions have been certified by that court pursuant to the Uniform Certification of Questions of Law Act, 20 O.S.1981 §§ 1601-1613:

1. May an employee who is injured by a defective product manufactured by another person "in the same employ" as the injured employee utilize the "dual capacity" doctrine to assert a manufacturer's products liability claim against that other person as manufacturer of the product, notwithstanding the exclusivity provisions of the Oklahoma Workers' Compensation Act?

This Court has answered this question as follows:

After the amendment of 85 O.S.Supp.1982 § 12, which defines the extent of liability and immunity under the Workers' Compensation Act, an employee who is injured by a defective product manufactured by "another person" engaged in performance of a common task may assert a manufacturer's products liability claim against the other person as the manufacturer of the product. An employee may not assert such a claim before March 26, 1982, the effective date of the amendment.

2. If such an injured person may assert a claim for manufacturer's products liability in the circumstances stated in Question 1, may punitive damages be awarded under the products liability claim?

This Court has answered this question as follows:

Punitive damages may be assessed against the manufacturer of a product which injures the employee if the injury is attributable to conduct which reflects reckless disregard for public safety.

John M. Merritt, Inc. by John M. Merritt, Oklahoma City, for appellants.

Looney, Nichols, Johnson & Hayes by Burton J. Johnson, and John B. Nicks, Oklahoma City, for appellee.

HODGES, Justice.

George Weber (Weber) was an employee of Well-Tech Drilling Company (Well-Tech), a contractor hired by J.M. Huber Oil Company (Huber Oil) to drill and complete a well. Huber Oil also hired National Wellhead Supply Company, a division of Armco (Armco), to install a wellhead which Armco had manufactured. Weber assisted an Armco employee with the installation, and on January 10, 1979, while the workers were attempting to remove a back pressure valve installed below the wellhead, a piece of ice was ejected from the wellhead which struck and injured Weber.

After receiving workers' compensation benefits from Well-Tech, Weber and his wife, Sharon, brought an action in federal district court against Armco as a third party tortfeasor, alleging negligence and products liability claims, and seeking compensatory and punitive damages. The products liability claim was based on faulty design and the presence of ice in the wellhead. The Webers also asserted that the back pressure valve, manufactured and supplied by Armco, was defective. The trial court held, as a matter of law, that Armco was immune from suit and granted Armco's motion for summary judgment. The Tenth Circuit certified two questions based on its belief that whether the Webers can assert a products liability claim against Armco depends on recognition of the dual-capacity doctrine by this Court.

I

The Webers contend that Armco acted in a dual-capacity because it occupied the two-fold position of employer and manufacturer and, therefore, it can be sued in tort. We do not agree.

Workers' compensation is a mutual compromise in which the employee relinquishes his/her right to sue for damages sustained in job-related injuries; and the employer accepts no-fault liability for a statutorily prescribed measure of damages. ¹ This trade-off has the net effect of imposing a form of strict liability upon the employer to pay for industrial accidents. As a result, workers' compensation is the exclusive damage remedy for the injured employee; and the employer is given immunity from common-law tort liability. ²

The Oklahoma Workers' Compensation Act does not prohibit an injured employee from maintaining a common-law action against a negligent third person, not in the same employ as the injured worker, even if the injury occurs during the course of employment. ³ This kind of third-party liability provision has prompted much discussion in the law as to whether an employer could ever be sued as a third-party tortfeasor. ⁴ According to the dual-capacity doctrine, an employer who is generally immune from tort liability may become liable to his employee as a third-party tortfeasor; if he occupies, in addition to his capacity as employer, a second capacity that confers on him obligations independent of those imposed on him as an employer. ⁵ It is the second capacity which imposes tort liability on the employer for creating duties to his employees which are independent from the employment relationship. ⁶

This concept of duality, which confers third-party status upon the employer, is more meaningful when viewed in terms of an employer having a dual persona. An employer may become a third person if he possesses a second persona so completely independent from and unrelated to his status as an employer, that by established standards, the law recognizes it as a separate legal person. ⁷ The determinative issue is one of identity, not of activity or relationship. Duality may be created by statute, e.g., a one-man corporation [the corporation is a separate legal person because the statute so decrees]; or it may be recognized by long-established precedent in common-law or equity such as the status of a trustee or guardian. ⁸ The term dual persona provides legal clarity because it focuses upon the identity of the employer and not upon activity or relationship. A single legal person may be said to have many capacities, as the term capacity has no fixed legal meaning. As a result, few courts have extended the dual-capacity doctrine far enough to destroy employer immunity when only a separate relationship or theory of liability existed. ⁹

The majority of jurisdictions have refused to apply the dual-capacity doctrine under a products liability theory, when the employer manufactures, modifies, distributes or installs a product used in the employee's work. ¹⁰ Application of the dual-capacity doctrine requires that the second persona of the employer be completely independent from his obligations as an employer. If the employer is also the manufacturer of the product which caused the employee's injury, the two personas of manufacturer and employer are interrelated. An employer has a duty to provide a safe workplace for his employees. ¹¹ If an employer provides an employee with a defective machine or tool to use in his work, he has breached his duty as a manufacturer to make safe machinery, and his duty as an employer to provide a safe working environment. Yet, the two duties are so inextricably wound that they cannot be logically separated into two distinct legal personas. ¹²

The minority view in products liability cases involving an employer-manufacturer, has been to apply the dual-capacity doctrine whenever the product is sold to the public as well as furnished to the employee. ¹³ Placing this limitation upon use of the doctrine cannot justify its use in products liability cases. The important fact is that, as to the employee, the product was manufactured as an adjunct of the business and furnished to him solely as an employee, not as a member of the consuming public. This fact is a determinative aspect of the employer-employee relationship and cannot be changed regardless of what the employer does with the rest of his output. ¹⁴

We reject application of the dual-capacity doctrine to impose liability upon an employer-manufacturer. The employer has a duty arising out of the employment relationship to furnish safe equipment to its employees; and that duty arises whether the equipment is purchased or manufactured by the employer, either in connection with producing the same item for public consumption or otherwise. ¹⁵

There are circumstances in which application of the dual-capacity doctrine is appropriate. ¹⁶ The doctrine should not be used when it would serve only to evade the exclusivity provision of the Oklahoma Workers' Compensation Act. The doctrine requires a strict and limited application to avoid imposing liability in every instance upon a defendant-employer. The decisive dual-capacity test is not concerned with how separate or different the second function of the employer is from the first, but whether the second function generates obligations unrelated to those flowing from that of employer. ¹⁷ This means that the employer must step outside the boundaries of the employer-employee relationship, creating separate and distinct duties to the employee; the fact of injury must be incidental to the employment relationship. ¹⁸

The trial court was correct in granting summary judgment for Armco. In O'Baugh v. Drilling Well Control, Inc., 609 P.2d 355 (Okl.1980), this Court held that if subcontractors of the same hirer work in a cooperative manner on a common task, with overlapping contractual responsibilities, and their joint endeavor is essential to attain the immediate goal, the exclusive remedy is under the Workers' Compensation Act. The facts in this case are indistinguishable from O'Baugh. In this instance, Huber Oil was the hirer, Well-Tech and Armco were hired as subcontractors; and Weber was assisting an employee of Armco in installation of the wellhead when the injury occurred.

In Newport v. Crane Service, Inc., 649 P.2d 765, 769 (Okl.1982), we acknowledged that the O'Baugh doctrine had been abrogated by the amendment of 85 O.S.Supp.1982 § 12. ¹⁹ However, Weber cannot avail himself of the...