Okla. Top Court Rejects Indemnification as Way to Revive ‘Dual Capacity’ Doctrine

Tulsa, OK (WorkersCompensation.com) -- Could an indemnity clause overcome a state's exclusive remedy provision to allow a negligence tort to go forward?

That was the question before the Oklahoma Supreme Court in Knox v. Oklahoma Gas and Electric Company, 2024 WL 2287499 (Okla. 05/21/24), which determined that a claim for negligence was insufficient when it was based on the same physical injury that was part of the workers' compensation proceeding.

An employee died at a construction while working for his employer. The employee's spouse brought a wrongful death action in court against the owner of the work site, contractor, subcontractor, and employer.

After a series of dismissals and appeals, the contractor brought a third-party petition against the employer. This was also dismissed, so the contractor appealed to Oklahoma's top court, raising issues regarding the exclusive remedy provisions of state law.

In Oklahoma, prior to 2013, an employer and employee were not prohibited by workers' compensation statutes from voluntarily conducting their affairs for the purpose of creating a legal status, capacity, role, or relationship with associated legal rights and obligations in addition to the employer-employee status. Prior to 2013, when an employee received an accidental personal injury by an employer's breach of a duty or obligation created by this second capacity or relationship, the injured employee could treat the employer as a third person for the purpose of a personal-injury third-party negligence action. This third-party tort liability against an employer was often referenced as the “dual-capacity doctrine” or “dual-persona doctrine.”

A change in the law did away with the dual-capacity doctrine, and the statute now provides that the "the remedies and rights provided by this act shall be exclusive regardless of the multiple roles, capacities, or personas the employer may be deemed to have.”

Without the dual-capacity doctrine, an injury cannot be used for a "double recovery" by an employee against an employer as both a workers' compensation injury arising out of the course and scope of employment and a common-law negligence injury arising by means of a third-party dual capacity created by the employer.

In this case, the court found that there was no way around the exclusive remedy rules.

According to the Oklahoma Supreme Court, the exclusive remedy and liability language under state workers' compensation law does not prevent an employer from creating non-employer legal relationships, capacities, or roles; however, those relationships, capacities, or roles cannot create a negligence tort liability for the same physical injury used by a party for a compensable workers' compensation award.

Under the court's holding, an employer may not contractually create a common-law negligence liability for the employer by creating additional non-employer roles or capacities when the negligence liability is based upon the same physical injury for a compensable workers' compensation award.

Although the parties had an indemnity agreement, the court explained that the employer could not waive the mandatory language under state law by creating legal capacity or role in addition to its role as an employer.

As a result, the court ruled that the contractor's third-party petition was insufficient to state any negligence liability against the employer, and the case was remanded on the issue of the indemnification clause.

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