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A claimant's status as a prisoner in a work-release program did not preclude the existence of an employer-employee relationship for workers compensation benefits, according to the Supreme Court of New Mexico.

Sierra Blanca Motors, a private business enterprise, contacted the Roswell Correctional Center to request several inmates to work on its demolition and reconstruction project. Jose Ventura Benavidez volunteered to participate through the center's work-release program. Sierra Blanca supervised and provided equipment to the prisoners. It deposited each inmate's net wages into the inmates' individual accounts after deducting the cost of each inmate's participation in the work-release program. Mr. Benavidez was injured while participating in the program. He filed for but was denied workers comp benefits. The Court of Appeals concluded he was Sierra Blanca's employee and, therefore, entitled to receive workers comp benefits.

On appeal, Sierra Blanca argued that denial of workers comp benefits to incarcerated felons furthers sound public policy. But, the appellate court said there is a trend toward treating work-release prisoners like other workers as a matter of law when on all relevant facts they are indistinguishable from those other workers. According to the court, the legislature resolved the public policy issue and determined that Mr. Benavidez' status was not sufficient to preclude coverage. However, the court remanded the case to workers comp administration for further determination as to whether an employer-employee relationship existed here.

Benavidez vs. Sierra Blanca Motors, Supreme Court of New Mexico, July 11, 1996 (BI/01/A.-$10).

Ad injury involves ideas, not just text

A competitor's lawsuit alleging misappropriation of trade secrets fell within the coverage of a policyholder's commercial general liability insurance policy, according to the 9th U.S. Circuit Court of Appeals.

Sentex Systems Inc. designs and manufactures telephone entry security systems for buildings and gated communities. In 1990, Electronic Security Services Inc., a competitor, brought an action in Maryland against Sentex and one of its employees, alleging Sentex, through the employee, misappropriated Electronic's trade secrets, including customer lists, marketing techniques and other inside confidential information. Sentex was insured under a Hartford Accident & Indemnity Co. CGL insurance policy that provided coverage for "advertising injury." Hartford refused Sentex's request to defend the suit. Sentex settled with Electronic and sued Hartford for breach of duty to defend. The trial court ruled for Sentex.

The appellate court said that "In this day and age, advertising cannot be limited to written sales materials, and the concept of marketing includes a wide variety of direct and indirect advertising strategies." The court said the policy language, given its ordinary meaning, did not limit itself to the misappropriation of an actual advertising text. "It is concerned with 'ideas,' a broader term," the court said. The trial court decision was affirmed.

Sentex Systems Inc. vs. Hartford Accident & Indemnity Co., 9th U.S. Circuit Court of Appeals, Aug. 19, 1996 (BI/02/A.-$10).

These abstracts were prepared by Mayo H. Stiegler. Copies of these decisions are available by sending a $10 check payable to Mayo H. Stiegler to Business Insurance, 740 N. Rush St., Chicago, Ill. 60611-2590. List the number for each opinion.