Defoe vs. Phillip: The 'Employee' is not an 'Employer'

On January 5, 2012, the Supreme Court of the Virgin Islands issued their decision in Defoe vs. Phillip.  The decision concerns the Virgin Islands’ Worker’s Compensation Act (WCA) and the WCA’s definition of ‘Employer.’  By the terms of the decision, the Virgin Islands now stands amongst a small minority of U.S. jurisdictions that allows worker injured on-the-job to bring injury suits against their negligent coworkers.

Factual Background: The Path to the Courthouse

Lenroy Phillip, an employee of St. Croix’s HOVENSA oil refinery, was driving on the refinery grounds when the vehicle he was driving struck and injured Timothy Defoe, a fellow HOVENSA employee.  HOVENSA was insured under the VI’s Worker’s Compensation scheme and Worker’s Compensation approved Defoe’s claims.  As Defoe’s employer, HOVENSA was immune from further suit under Section 284 of the WCA.  Defoe did not bring suit against HOVENSA but he did bring suit against his co-worker, Phillip, alleging that Phillip’s negligence was the cause of the accident.  The Superior Court granted summary judgment to Phillip on the grounds that Phillip, as a co-employee of Defoe, was provided with the same protections as the employer under the ‘exclusivity provision’ set out in Section 284 of the WCA.  The decision by the Superior Court to grant Mr. Phillip summary judgment on the claim relied upon a 2004 decision by the Third Circuit Court of Appeals, Tavarez vs. Klingensmith.

Legal Background: Tavarez and the ‘Employee’ as ‘Employer’

Before the Supreme Court of the Virgin Islands was created in 2006, decisions of the Superior Court were reviewed by the Appellate Division of the District Court of the Virgin Islands.  Those decisions, in turn, were reviewed by the Third Circuit Court of Appeals in Philadelphia.  In the Tavarez case, an employee was injured at work due to the negligent act of his supervisor.  The employee sued the supervisor in the Superior Court.  At the close of evidence, the supervisor moved for judgment on the basis that he was immune from suit under Section 284 of the WCA.  The Court agreed and issued judgment for the supervisor.  The Appellate division affirmed the decision, as did the Third Circuit.  The Third Circuit reasoned that the acts of any corporation are necessarily through its agents and the “acts of corporate … employees on behalf of the corporation are the acts of the corporation.”  While there is an argument that Tavarez applied only to supervisory co-workers, the decision placed the Virgin Islands alongside the majority of U.S. jurisdictions that allow for co-worker immunity.  It is the ‘general rule’ in the US that a worker cannot sue his coworker for on-the-job injuries.

The Supreme Court’s Reasoning: Shifting the Burden to the Legislature

The Supreme Court, in Defoe, holds that Third Circuit decisions interpreting VI law are ‘entitled to great respect’ but are not technically binding upon the Territory’s highest court.  Once the Defoe Court decides that Tavarez is not binding upon them, they analyze the WCA by looking very particularly at the language of the statute as enacted by the Legislature.  The exclusivity provision only provides protection to the ‘employer.’  While “employer” is defined throughout VI Code, the particular section in question does not provide a definition.  The Supreme Court employs the common definition in deciding that a fellow employee is not the ‘employer’ entitled to immunity, but rather a ‘third person’ who may be amenable to suit.  The Supreme Court determines that while the lack of co-worker immunity puts the Virgin Islands in the minority of jurisdictions on the issue, the burden falls upon the Legislature to re-craft the statute.  The decision of Defoe means that until the Legislature does agree upon a change, employees can be sued by their coworkers for negligent acts which result in on-the-job injuries.

So what does this mean for the VI Employer and their Insurers? 

First, the decision in Defoe arguably creates a duty for employers to inform their employees that employees may be personally liable for injuries visited upon fellow employees -- insulated by neither Worker’s Compensation nor by the Company’s General Liability policy, which excludes workplace injuries to employees.  The failure to provide such a warning could expose the employer to the claim that they breached their duty of good faith and fair dealing.

Secondly, third party insureds will be stuck at the defense table with a co-tortfeasor who is maximally culpable but will be largely unable to satisfy a judgment for which both parties are jointly and severally liable.  For instance, Adam is injured on the job when he is struck by a forklift being driven by Bob, his intoxicated co-worker.  Adam sues Bob but also sues CraneCo, the forklift manufacturer.  Adam alleges that Bob drove negligently but also alleges that CraneCo’s forklift lacked safety equipment that might have prevented the accident.  Instead of being alone at the defense table, CraneCo now sits next to Bob.  Even if Bob is deemed 99% at fault and CraneCo only 1% at fault, CraneCo is jointly and severally liable for the verdict – a verdict that it is unlikely that an uninsured Bob will be able to contribute to.

Finally, this may offer businesses and insurers a good opportunity to lobby amendments to the WCA.  The Supreme Court has invited the Legislature to amend the statute.  In the meantime, this is an opportunity for insurers to educate their clients as to this change in the law and to provide those clients with additional protection in the form of policies which cover the now-existing gap regarding workplace injuries caused by coworkers.

If you have any questions about the impact of Defoe vs. Phillip, please contact Mark Wilczynski at 340-998-0937 or mark@usvilaw.com.