The Law

Exclusive Remedy Rule Prohibits Worker from Filing Negligence Suit Over Oil Well Explosion Injuries

After gaining injuries from an oil well explosion, one worker was denied the possibility to file a negligence claim due to exclusive remedy laws.
By: | October 15, 2018 • 2 min read

California Resources Elk Hills, (CREH) contacted independent contractor Weatherford International to perform oil well services at its Elk Hills oilfield. Weatherford sent worker Edgar Verdugo.

While Verdugo and two other Weatherford employees attempted to vent the pressure from the well, they discovered there were no flowlines connected for venting. This led the crew to vent the well pressure directly at the wellhead itself, but it wouldn’t bleed down. They closed the well, causing it to explode. The employees sustained multiple injuries and burns.

A few months later, Verdugo filed a complaint for damages against CREH, citing negligence, premises liability and strict liability for ultrahazardous activity. CREH submitted its own form, detailing a list of indisputable facts of the incident. In it, the company stated that Verdugo had trained under Weatherford to bleed wells when there are no flowlines available — a dangerous practice, CREH said.

When servicing CREH’s oil well, Verdugo instructed his crew to move forward with the process without requesting assistance, equipment or alteration of the well. This, CREH argued, stemmed from Verdugo’s training — or lack thereof — on how to handle the situation.

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CREH then pointed to a master service agreement signed between Weatherford and the oil well company: “Contractors shall take necessary measures to ensure the safety of all persons on the work site. Contractors shall comply with … all applicable federal, state and local regulatory laws in order to help prevent injury to personnel and damage to property or the environment.”

Further, CREH argued, Verdugo’s exclusive remedy for the injuries was under the workers’ compensation system, which barred this employee from seeking damage recovery against CREH.

Verdugo argued that, because CREH owned and operated the wells, they were responsible for providing the flowlines. However, the trial court granted CREH summary judgment, based on the master service agreement wording.

Further: “The general rule … when the hirer of an independent contractor delegates control over a work to a contractor, the hirer also delegates responsibility for performing the task safely. Therefore, an employee of a hired independent contractor who suffers injury resulting from risks inherent in the hired work is limited to worker’s comp and may not recover from the hirer.”

Scorecard: Due to the exclusive remedy rule, Edgar Verdugo will not be able to pursue legal action against CREH.

Takeaway: Companies that hire independent contractors are wise to include language in the contract that defines how workers’ comp exclusive remedy will work in the case of an injury. &

Autumn Heisler is the digital producer and a staff writer at Risk & Insurance®. She can be reached at aheisler@lrp.com.

More from Risk & Insurance

More from Risk & Insurance

2018 Risk All Stars

Stop Mitigating Risk. Start Conquering It Like These 2018 Risk All Stars

The concept of risk mastery and ownership, as displayed by the 2018 Risk All Stars, includes not simply seeking to control outcomes but taking full responsibility for them.
By: | September 14, 2018 • 3 min read

People talk a lot about how risk managers can get a seat at the table. The discussion implies that the risk manager is an outsider, striving to get the ear or the attention of an insider, the CEO or CFO.

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But there are risk managers who go about things in a different way. And the 2018 Risk All Stars are prime examples of that.

These risk managers put in gear their passion, creativity and perseverance to become masters of a situation, pushing aside any notion that they are anything other than key players.

Goodyear’s Craig Melnick had only been with the global tire maker a few months when Hurricane Harvey dumped a record amount of rainfall on Houston.

Brilliant communication between Melnick and his new teammates gave him timely and valuable updates on the condition of manufacturing locations. Melnick remained in Akron, mastering the situation by moving inventory out of the storm’s path and making sure remediation crews were lined up ahead of time to give Goodyear its best leg up once the storm passed and the flood waters receded.

Goodyear’s resiliency in the face of the storm gave it credibility when it went to the insurance markets later that year for renewals. And here is where we hear a key phrase, produced by Kevin Garvey, one of Goodyear’s brokers at Aon.

“The markets always appreciate a risk manager who demonstrates ownership,” Garvey said, in what may be something of an understatement.

These risk managers put in gear their passion, creativity and perseverance to become masters of a situation, pushing aside any notion that they are anything other than key players.

Dianne Howard, a 2018 Risk All Star and the director of benefits and risk management for the Palm Beach County School District, achieved ownership of $50 million in property storm exposures for the district.

With FEMA saying it wouldn’t pay again for district storm losses it had already paid for, Howard went to the London markets and was successful in getting coverage. She also hammered out a deal in London that would partially reimburse the district if it suffered a mass shooting and needed to demolish a building, like what happened at Sandy Hook in Connecticut.

2018 Risk All Star Jim Cunningham was well-versed enough to know what traditional risk management theories would say when hospitality workers were suffering too many kitchen cuts. “Put a cut-prevention plan in place,” is the traditional wisdom.

But Cunningham, the vice president of risk management for the gaming company Pinnacle Entertainment, wasn’t satisfied with what looked to him like a Band-Aid approach.

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Instead, he used predictive analytics, depending on his own team to assemble company-specific data, to determine which safety measures should be used company wide. The result? Claims frequency at the company dropped 60 percent in the first year of his program.

Alumine Bellone, a 2018 Risk All Star and the vice president of risk management for Ardent Health Services, faced an overwhelming task: Create a uniform risk management program when her hospital group grew from 14 hospitals in three states to 31 hospitals in seven.

Bellone owned the situation by visiting each facility right before the acquisition and again right after, to make sure each caregiving population was ready to integrate into a standardized risk management system.

After consolidating insurance policies, Bellone achieved $893,000 in synergies.

In each of these cases, and in more on the following pages, we see examples of risk managers who weren’t just knocking on the door; they were owning the room. &

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Risk All Stars stand out from their peers by overcoming challenges through exceptional problem solving, creativity, clarity of vision and passion.

See the complete list of 2018 Risk All Stars.

Dan Reynolds is editor-in-chief of Risk & Insurance. He can be reached at dreynolds@lrp.com.