Ramirez, Jr. v. KLM Construction, Inc.
2025 COA 99. No. 25CA0061. Workers’ Compensation Coverage and Liability—Contractors—Rejection of Coverage by Corporate Officers and Others—Statutory Damages Cap—Cause of Action Brought Against Another Not in the Same Employ—Principal Parties.
December 31, 2025
KLM Construction, Inc. (KLM) was the general contractor on a project to construct a residential duplex (the project). KLM was solely responsible for selecting and hiring the project’s subcontractors. KLM entered into an oral contract with All City Plumbing and Sewers, Inc. (All City) to install plumbing for the project. Ramirez is All City’s only employee and corporate officer and owns 100% of All City’s corporate shares. A few months before subcontracting with KLM, Ramirez, as the corporate officer of All City, rejected workers’ compensation insurance (WCI) for himself as permitted under CRS § 8-41-202(2) by filing a workers’ compensation coverage rejection form with the Colorado Division of Workers’ Compensation (the division). Ramirez’s rejection of WCI was in effect during All City’s work on the project. The project’s framing subcontractor installed a temporary subfloor over an excavated area that would be the basement. The temporary subflooring had openings for the future stairways to the basement, but there were no guardrails or warnings around the subfloor openings. Ramirez fell through one of the subfloor openings while he was installing plumbing for the project, and he sustained severe injuries. Ramirez filed a complaint against KLM under the Colorado Premises Liability Act, arguing that because he had rejected WCI in his capacity as All City’s corporate officer, the WCA allowed him to bring a civil action for his work-related injury. He also argued that under Pulsifer v. Pueblo Professional Contractors, Inc., 161 P.3d 656 (Colo. 2007), the damages cap didn’t apply to his claim because he and KLM weren’t “in the same employ.” As relevant here, KLM asserted that any damages Ramirez could recover were statutorily limited to $15,000 under § 8-41-401(3), the Colorado Workers’ Compensation Act’s (WCA) statutory damages cap (damages cap). Ramirez filed a motion for the court to determine as a matter of law whether any damages he recovered were subject to the damages cap. The district court concluded that the damages cap didn’t apply because the agreement for services for pay was between All City and Ramirez, which meant KLM was a third party and not in the same employ. The parties then stipulated to certain facts, KLM stipulated to liability, and the parties requested that the court enter a final judgment. The court adopted the parties’ stipulation and entered a $30,000 judgment in Ramirez’s favor.
On appeal, KLM argued that the damages cap applies to Ramirez’s claim. KLM asserted that the agreement for services for pay was the plumbing subcontract for the project and that the principal parties were KLM, All City, and Ramirez. Under the WCA, certain employers must provide their employees with insurance coverage for work-related injuries. But independent contractors, sole proprietors, and corporate officers are excepted from the insurance coverage requirement and are allowed to bring a common law cause of action to recover damages for work-related injuries. Section 8-41-202 allows a corporate officer to file with the division an election rejecting WCI that remains in effect until revoked, and such corporate officer may bring a common law cause of action to recover compensation for work-related injuries, subject to the damages cap. But under § 8-41-401(3), the damages cap doesn’t apply in a cause of action “brought against another not in the same employ” (the exception). In Pulsifer, the court concluded that the term “another not in the same employ” means a third party who is not a “principal party” to the agreement for services for pay. Thus, the damages cap does not apply to an injured plaintiff who sues a defendant who is not a direct party to the agreement for services for pay. Here, KLM waived its right to challenge the identity of the parties to the subcontract when it stipulated that the subcontract was between it and All City. And based on the stipulation, it’s undisputed that the agreement for pay was for All City to perform plumbing services at the project. Ramirez’s participation in the plumbing services agreement was limited to acting as the corporation’s agent, and the record doesn’t show that Ramirez or KLM agreed otherwise that he was a principal party to the plumbing services agreement. Accordingly, KLM is a third party to Ramirez, KLM is “another not in the same employ” as Ramirez, and Ramirez’s recoverable damages against KLM aren’t subject to the damages cap.
KLM also argued that permitting Ramirez the benefit of the exception would contravene the legislative intent to limit recoverable damages to $15,000 for individuals who reject WCI coverage. The court of appeals presumed that when the General Assembly enacted the damages cap, it knew of the distinct legal status of corporate entities and that corporate officers could enter into contracts as agents on behalf of their corporations without themselves becoming parties to the contract. And it is clear under Pulsifer that when determining whether the exception applies to allow an individual who rejected WCI coverage to pursue uncapped damages for a work-related injury, the controlling consideration is whether the injured plaintiff and the defendant were principal parties to the agreement for services for pay. Further, the General Assembly may amend the damages cap to the extent it didn’t intend this outcome in circumstances such as those presented here.
The judgment was affirmed.