Employer Liability Under the Third Party Provision of the Washington Industrial Insurance Act: the Dual Capacity and Dual Persona Doctrines in Evans v. Thompson

• Publication year: 1995
• Citation: Vol. 19 No. 01

UNIVERSITY OF PUGET SOUND LAW REVIEWVolume 19, No. 1FALL 1995

NOTE

Employer Liability Under the Third Party Provision of the Washington Industrial Insurance Act: The Dual Capacity and Dual Persona Doctrines in Evans v. Thompson

Melissa M. Jackson(fn*)

I. Introduction

Most workers' compensation schemes are designed to provide a swift and sure source of benefits to injured workers by placing on employers the risks and burdens of modern industry.(fn1) In keeping with this policy, Washington's Industrial Insurance Act(fn2) (IIA) requires injured workers to relinquish the right to sue at common law for damages sustained on the job, and it requires employers to accept liability for a measure of damages set out by the statute.(fn3) However, if a worker's injuries are caused by the negligence of a third person who is not in the worker's same employ, the IIA's third-party provision allows the worker to pursue an independent cause of action against the third person in addition to his workers' compensation claim.(fn4)

This type of third-party liability provision has prompted considerable debate as to whether an injured employee may ever sue his employer or a co-employee as a third-party tortfeasor.(fn5) Attempts by injured workers to circumvent the exclusive remedy principle in this way have given rise to the dual capacity and dual persona doctrines,(fn6) under which the employer or co-employees of an injured worker may be found independently liable for the worker's injuries, regardless of whether the worker also recovered workers' compensation benefits. These doctrines are premised on the concept that when an employer or co-employee also serves in a distinct nonemployment capacity toward the employee, or has a legal persona other than that of employer or co-employee, the exclusive remedy principle will not bar the employee's common-law remedies.

The application of the dual capacity and dual persona doctrines has an enormous impact on employers, particularly employers who run small businesses or closely-held corporations. For example, many individuals who serve as the sole shareholder, director, and officer of a small, closely-held corporation also, as individuals, own the land on which the corporation is located. Under a recent judicial decision in Washington State, these small businesses, and the individuals who run them, may be subject to a new threat of liability.(fn7)

This Note will first explain the structure of Washington's IIA and the exclusive remedy principle. Next, it will explore the third-party provision of the IIA and the judicially-created doctrines that have made employers and co-employees vulnerable to tort suits by injured workers regardless of the exclusive remedy principle. Finally, this Note will discuss the Washington Supreme Court's recent decision in Evans v. Thompson(fn8) and argue that the court should not have allowed consideration of the dual persona doctrine on remand because the doctrine, if applied, will circumvent the exclusive remedy principle and put the landowners at unjustifiable risk of being held liable for workplace injuries.

II. Washington's Industrial Insurance act

This section first gives a general introduction to Washington's IIA, then describes the exclusive remedy principle and the third-party provision, and finally explores the dual capacity and dual persona doctrines as two exceptions to the exclusive remedy principle.

The IIA provides for compensation to injured employees regardless of fault.(fn9) For example, if a worker is injured while on the job, the worker may make a claim to the state workers' compensation fund regardless of whether the worker's employer legally caused the injury. The IIA requires all employers(fn10) to pay into the accident fund premiums necessary to maintain "actuarial solvency of the accident and medical aid funds in accordance with recognized insurance principles."(fn11)

A. The Exclusive Remedy Principle

In exchange for this guaranteed right of recovery, workers lose the right to bring common-law suits against their employers for on-the-job injuries.(fn12) In such cases, the IIA provides the exclusive remedy.(fn13) As a result, the IIA bars all independent causes of action brought by employees against their employers for damages arising out of unintentional work-place injuries.(fn14) The IIA similarly bars all independent causes of action against an injured worker's co-employees.(fn15)

The courts have carefully construed this statutorily created quid pro quo in order to eliminate common-law claims and to further the purposes of the IIA.(fn16) Thus, workers who receive workers' compensation benefits under the IIA have no separate remedy for injuries except where the IIA specifically authorizes a cause of action.

B. Third-Party Suits

One such authorized cause of action arises when a third party, not in the worker's same employ, has caused the injury.(fn17) Wash. Rev. Code § 51.24.030 provides:If a third person, not in a worker's same employ, is or may become liable to pay damages on account of a worker's injury for which benefits and compensation are provided under this title, the injured worker or beneficiary may elect to seek damages from the third person.(fn18) The underlying concept of these third-party suits is that, for moral and public policy reasons, "the ultimate loss from wrongdoing should fall upon the actual wrongdoer."(fn19) Under Washington law, the authorization for suits against third parties in Wash. Rev. Code § 51.24.030 effectuates two principal policies. First, it allows and encourages workers to seek full compensation from responsible third parties for injuries they suffer in the course of their employment. (fn20) Second, the third-party statute provides workers with immediate compensation for injuries, subject to reimbursement to the workers' compensation fund if the worker later recovers from the third party.(fn21)

Because of the exclusive remedy principle, employers and co-employees are immune from suit under this third-party statute.(fn22) Yet, the language "not in a worker's same employ" has raised some difficult issues in certain contexts. For example, some cases indicate that when an employer or co-employee has two separate roles or owes two separate sets of duties to an employee, the employer or co-employee might, in the appropriate circumstances, be subject to suit under the third-party statute regardless of the exclusive remedy principle.(fn23)

C. Exceptions to the Exclusive Remedy Principle: The Dual Capacity and Dual Persona Doctrines

In certain circumstances, courts have allowed an injured employee who has already received workers' compensation benefits to bring a common-law suit against his employer or co-employee under the IIA's third-party suit provision. This situation arises when the employer or co-employee serves in several capacities, or owes a distinct legal duty to an injured worker not stemming from the employer or co-employee's status as an employer or co-employee.

In most jurisdictions, the law in this area has developed on an ad hoc basis without legislative involvement. Two related common-law theories-the dual capacity and dual persona doctrines-provide tests to determine when employers or co-employees may be considered third parties for purposes of tort suits stemming from workplace injuries.(fn24)

1. The Dual Capacity Doctrine

The dual capacity doctrine, at one time an important exception to the exclusive remedy principle, establishes a separate relationship or theory of liability between injured workers and employers. The doctrine stems from the concept that a single legal person may be said to have many "capacities."(fn25) For example, a single legal person may serve in one capacity as an employer, but in another as a landowner who owes common-law landowner duties to the employees who work on the land. If a worker is injured on the jobsite, the employer, in his or her capacity as an employer, would be immune from common-law suit under the exclusive remedy principle. The employer in his or her capacity as a landowner, however, would not be immune from common-law suit in tort.

A few jurisdictions at one time vigorously applied the dual capacity doctrine.(fn26) However, because this broad theory effectively destroys employer immunity whenever a separate relationship or theory of liability exists, many jurisdictions have rejected it altogether. These jurisdictions see the doctrine as defeating the exclusive remedy principle of workers' compensation schemes.(fn27)

Washington courts have similarly rejected the dual capacity doctrine: The Washington Supreme Court has recognized that the dual capacity doctrine can be abused and extended such that the exclusive remedy provision becomes essentially defunct.(fn28)

Washington courts first considered the dual capacity doctrine in Thompson v. Lewis County.(fn29) In that case, Richard Thompson, an employee of the Lewis County Road Department, was driving a county truck in the course of his employment when a vehicle pulled onto the road in front of him and stalled.(fn30) In order to avoid a collision, Thompson drove the truck off the roadway and into a tree.(fn31) Thompson was seriously injured.(fn32) He made a claim under the IIA and received workers' compensation benefits.(fn33) Thompson then brought a suit against the County under a dual...