AMERICAN INSURANCE ASSOCIATION: H.B. 1657 INCREASE LITIGATION & CONSTRUCTION COSTS

AMERICAN INSURANCE ASSOCIATION on workers’ compensation insurance: H.B. 1657 WILL INCREASE LITIGATION AND CONSTRUCTION COSTS

WASHINGTON, DC, April 16, 2009 – The American Insurance Association (AIA) today expressed its strong opposition to H.B. 1657 which seeks to overturn a recent unanimous decision by the Texas Supreme Court. In 2008, the Texas Supreme Court held in Entergy v. Summers that a premises owner may provide workers’ compensation insurance for an entire jobsite, and therefore be protected from third-party lawsuits. H.B. 1657 would expose premises owners to third-party lawsuits, serve as a disincentive for jobsite owners to provide workers’ compensation insurance and will lead to increased litigation and construction costs.

“We are very concerned about this legislative attempt to overturn a well reasoned decision by the Texas Supreme Court,” said John Marlow, assistant vice president for AIA’s Southwest Region. “Under current law, injured workers are able to obtain fair compensation for a workplace injury from an employer who carries workers’ compensation coverage without proof of fault in a court of law. H.B. 1657 will force injured workers to go to court to prove fault for their injury before receiving appropriate compensation for medical care and lost wages,” Mr. Marlow said.

H.B. 1657 seeks to undermine the Texas workers’ compensation system by eliminating tort immunity for owners of a jobsite, currently accorded “statutory employer” status by virtue of the Entergy decision, and by fostering third-party lawsuits. Like many states at the turn of the 20th Century, Texas’ workers’ compensation laws were adopted to provide speedy and just compensation to injured workers because the reliance on a common law tort system was found to be an exceedingly inadequate method of resolving these claims. Texas is unique, however, in declining to make workers’ compensation a mandatory requirement for employers.

“If enacted, HB 1657 would generate more litigation while raising the cost of construction and create impediments to securing compensation for injured workers,” said Mr. Marlow. “Texas’ workers and the state’s workers’ compensation system will be best served if “statutory employer” provisions affirmed in the Entergy case remain in place,” concluded Mr. Marlow.

H.B. 1657 passed out of the House Business and Industry Committee on April 14, 2009 and is now pending before the House Calendars Committee. AIA has joined a broad coalition of the business community to urge committee members to not advance the bill further.

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The American Insurance Association represents approx 350 major insurance companies of all lines of property and casualty insurance. Collectively they write $123+ billion in annual premiums. The association is based in Washington, D.C., with representatives in each state.