Diane Evans v Robert Thompson :: 124 Wn2d 435
Category: Liability, Negligence and Tort
Survivors of two workers killed in an industrial accident sought damages for wrongful death from the owners of a closely held corporation. “Plaintiffs’ complaint alleges a breach of the duties owed by Defendants as owners of the real property specifically: ‘The injuries and deaths . . . were proximately caused by the concealed (latent) ultrahazardous condition of Defendants’ property.’ . . . Defendants moved for summary judgment on the basis that Plaintiffs’ claims were barred by the Industrial Insurance Act because the Defendants and decedents were in the ‘same employ’. Therefore, Defendants claim the third party action against Defendants as individual landowners is not authorized by the third party statute, RCW 51.24.030(1).” [at 437].
RCW 51.24.030(1) provides for recovery of injuries and damages from “a third person, not in a worker's same employ . . . ” The Plaintiffs based their legal theory for recovery upon the premise that the principle owners of the corporation also held title to the property, where the deaths occurred, in their personal estate.
This appears to be a novel approach to pierce the corporate veil and recover damages beyond the statutory compensation provided under the Industrial Insurance Act. This Act was established to provide compensation to the injured employee or the deceased employee’s survivors, while providing protection from arduous liability for the employer. The employer has established a corporate shield and paid handsome taxes to acquire this protection. It should not be pierced for reasons unrelated to frauds and felonies. The Court decided upon two issues:
1. “When the defendants are landowners and constitute a completely separate legal entity from the employer of a worker, are the defendants immune under the Industrial Insurance Act?” [at 437]. The view of the majority is that the Plaintiffs were the employer, corporately and was also the landowner, individually and as such had a dual identity. There is no written lease between the corporate and individual officers. The Plaintiffs claim against the Industrial Insurance Act is as employees and their claim against the landowners is as invitees. All cites used to defend this position were from out of State, except for one, which was the only cite that was not compared, elaborated or explained. In view of this case pertaining to a State statute relating to State industrial insurance and State corporate laws, which are as diverse among the States as there are States, this writer would question the relevance of the out-of-State cites. Furthermore, the lack of relevant local citation would cause one to speculate that the Court is attempting to venture into new territory.
2. “Are the officers and directors of a corporate employer immune, as a matter of law, as coemployees of a person employed by the corporation, even though at least one of the officers and directors is not employed by the corporation and performs no duties for the corporation?” [at 437]. The Court states that each defendant must be in the same employ as the decedents and that each defendant was acting in the scope and course of their work. [at 444]. The Defendants fail because the wife, who is an officer, does not work for the company. Therefore, the Plaintiffs have a ‘valid claim’ against the individuals, piercing the corporate veil. The wife is not immune because she is not employed and could not be acting in the scope of her employment. The Court places her responsible for the accident although they admit that she was not likely at the site, nor did she have any authority or responsibility within the corporation. She lost her protection from liability because she was not a coemployee. .” . . the immunity attaches to the coemployee only when the coemployee is acting in the course of his employment.” [at 444, emphasis theirs]. It appears to me that there has been a major distortion of the statutes to arrive at this interpretation.
One aspect that the majority considered that influenced their decision was the fact that the corporation made the payments on the land, but the land was held in title by their names, individually. For this they declared the payments as personal income on their income tax returns. This is a common practice with closely held and especially subchapter S corporations in construction related fields. What the court failed to consider is that:
1. if the property had been in the corporate name and possessed an bank mortgage, the individuals would have been required to sign as guarantors. Does this also penetrate the veil of corporate protection?
2. though absent a lease, the use of the land was for the sole benefit of the corporation, the individuals held title for investment and resale purposes. According to the court records, the improvements to the property, which contained the hazards to the decedents, was installed by and benefited only the corporation.
3. had the owners of the land been unrelated to the corporation, the court would not likely have determined that the landowner’s were liable because the cause of the deaths was directly work related. The employees who died were acting upon the owners of the corporation, not the landowners.
Judge Dolliver’s dissent places the responsibility back where it belongs and returns the statutory and lawful protections to the employer, albeit the landowner. “I would hold that the Plaintiffs’ exclusive remedy lies in the Industrial Insurance Act and would, therefore, affirm the trial court and Court of Appeals. The majority reverses the trial court’s dismissal of the Plaintiffs’ claims, and in so doing it misstates the issues, ignores relevant Washington case law, relies on inapposite cases from other jurisdictions, adopts a doctrine repeatedly rejected in Washington, and issues an opinion that is itself internally inconsistent. Furthermore, the majority never clearly articulates its holding, nor does it provide guidance for the trial court on remand. Moreover, I cannot agree on a policy level with the majority’s decision to weaken the exclusivity provisions of the Industrial Insurance Act and broaden third party liability [at 448]. . . . To hold that corporate officers are employees of a corporation as a matter of law would be inconsistent with the Industrial Insurance Act’s general policy of increasing the certainty and reducing the volume of litigation of workers’ injuries [at 450]. . . . A corporate officer is immune from third party liability unless he or she possess a second persona ‘so completely independent from and unrelated to’ his or her status as a coemployee that the law recognizes it as a separate person [at 451]. . . . The ‘dual persona’ test is very stringent and, although it has been recognized in Washington, it has never been successfully applied [at 451-52]. . . . We have rejected the dual capacity doctrine because little would remain of the Industrial Insurance Act’s exclusivity provision if employer and coemployee immunity could be overcome each time a separate theory of liability is available [at 452]. . . . There are many closely held corporations such as Santana in this state, and I cannot agree with the majority’s conclusion that had the Thompsons not incorporated they would be immune, but since they have incorporated, they are not [at 455]. . . . The Thompsons’ identities as landowners are clearly related to their identities as Santana’s sole corporate officers [at 457]. . .”
Rating the Usual Suspects:
| pass | Baker, William | |
| pass | Coleman, H Joseph | |
| pass | Dolliver, James | |
| pass | Durham, Barbara | |
| pass | Madsen, Barbara | |
| pass | Martin, David | |
| pass | McCutcheon III, James E | |
| pass | Pekelis, Roselle | |
| pass | Turner, Gregory | |
| fail | Guy, Richard | |
| fail | Johnson, Charles | |
| fail | Smith, Charles | |
| fail | Stritmatter, Paul | |
| fail | Utter, Robert |