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Worker can't sue employer's insurer over amputated hand under Texas' opt-out law

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A man who was injured while working for a Texas employer who opted out of the state workers compensation system can't sue the company's liability insurer after his hand was amputated in a work accident until his employer's liability toward him has been established, the Texas Supreme Court has ruled.

Rafael Zuniga worked for San Diego Tortilla in San Diego, Texas, and his hand was amputated in September 2012 while operating a tortilla machine for the company, court records show. Glen Allen, Virginia-based Essex Insurance Co. was the tortilla company's commercial general liability insurer at the time of Mr. Zuniga's accident.

Mr. Zuniga filed a tort lawsuit against San Diego Tortilla, which is a Texas nonsubscriber and does not purchase workers comp insurance. However, Essex investigated his accident and determined that its liability policy would not cover Mr. Zuniga because he was a San Diego Tortilla employee when he was injured, court filings show.

San Diego Tortilla denied that Mr. Zuniga was an employee, instead claiming that he was an independent contractor, records show. Essex disagreed with that assessment, but agreed to defend San Diego Tortilla against Mr. Zuniga's lawsuit while noting that it had a right to refuse to indemnify the tortilla maker against employee claims.

Mr. Zuniga offered to settle his claim against San Diego Tortilla with Essex, but Essex rejected the offer, according to filings. Soon after, Mr. Zuniga filed an amended petition adding Essex as a defendant and seeking a declaration that Essex would be required to indemnify San Diego Tortilla for its alleged liability to Mr. Zuniga.

In October 2013, a Duval County, Texas, court denied Essex's request to dismiss Mr. Zuniga's claims, and Essex appealed.

The Texas Supreme Court unanimously ruled Friday that Mr. Zuniga's claims against Essex should be barred from proceeding. The court noted that Texas law has a “no direct action” rule, which prohibits plaintiffs from directly suing a defendant's liability insurer to receive benefits under a liability policy until the defendant's liability to the plaintiff has been established.

Proceedings that would determine whether San Diego Tortilla was liable for Mr. Zuniga's injuries have been stayed pending the outcome of rulings on whether Mr. Zuniga could sue Essex, records show.

Because San Diego Tortilla's liability to Mr. Zuniga has not yet been established, he cannot pursue a claim against Essex, the high court found.

“Because Texas law does not permit Zuniga to sue Essex directly for a declaration of Essex's duty to indemnify (San Diego Tortilla) before (the company's) liability to Zuniga has been determined, we conclude that the trial court abused its discretion by denying (San Diego Tortilla's) motion to dismiss Zuniga's claims in this case,” the ruling reads.