Everett Cash Mutual Insurance Co. v. Taylor

904 N.E.2d 276, 2009 Ind. App. LEXIS 649, 2009 WL 960216

• Court: Indiana Court of Appeals
• Decided: April 8, 2009
• Docket: 02A03-0808-CV-386
• Status: Published

Opinions

OPINION

BARNES, Judge.

Case Summary

Everett Cash Mutual Insurance Company ("Everett") appeals the trial court's denial of summary judgment in an action filed by Rick and Katrina Taylor. We reverse.

Issues

The issues we address are:

I. whether an exclusion in a farm personal liability policy issued by Everett applies in this case; and

II. whether Everett is estopped from relying on that exclusion.

Facts

The designated evidence most favorable to the Taylors as summary judgment non-movants is that on June 13, 2005, the Taylors purchased a farm personal liability policy from Everett. They indicated to insurance agent Jake Owens that they wanted "all risk" coverage. As is typical, however, the policy contained a number of exclusionary clauses. Among the things the policy excluded from coverage was the following:

bodily injury to a person, including a domestic employee, if the insured has a workers' compensation policy covering the injury or if benefits are payable or are required to be provided by an insured under a workers compensation, nonoccupational disability, occupational disease or like law ....

App. p. 64. In fact, Everett has never underwritten worker's compensation insurance in Indiana.

On July 1, 2005, the Taylors employed an independent contractor, Sherlock Contract Painting ("Sherlock"), to paint a house, grain bin, and barn. The Taylors did not verify whether Sherlock had worker's compensation insurance before hiring them for the job, and in fact Sherlock had no such insurance. While painting the grain bin, Sherlock employee Christopher Collis came into contact with an electric wire, which resulted in injury to Collis. Collis filed a worker's compensation claim against Sherlock. Upon discovering that Sherlock had no worker's compensation insurance, Collis amended his claim to name the Taylors as a party for failing to verify whether Sherlock had such insurance, pursuant to Indiana Code Section 22-38-2-14(b). Collis has not filed any tort-related claims against the Taylors.

Sometime after Collis was injured, Rick asked Owens whether the Everett policy would provide coverage for the incident, and Owens said that it would. However, Everett subsequently denied coverage for Collis' claim against the Taylors. On June 29, 2007, the Taylors filed suit against Everett, as well as Owens and two insurance agencies. The suit sought recovery against Everett on two theories: breach of contract and estoppel. Although this suit originally was stayed while Collis' worker's compensation action was pending, on January 28, 2008, Everett moved for summary judgment. On June 13, 2008, the trial court denied Everett's motion. The trial court certified this denial for interlocutory appeal and we have accepted jurisdiction.

Analysis

When reviewing a denial of summary judgment, we apply the same standard as the trial court. Auto-Owners Ins. Co. v. Harvey, 842 N.E.2d 1279, 1282 (Ind.2006). Summary judgment is proper "if the designated evidentiary matter shows that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Ind. Trial Rule 56(C); Harvey, 842 N.E.2d at 1282. We must construe all facts and reasonable inferences drawn from them in favor of the non-moving party. Harvey, 842 N.E.2d at 1282. We may affirm the denial of summary judgment if it is sustainable on any legal theory or basis found in the eviden-tiary matter designated to the trial court. West American Ins. Co. v. Cates, 865 N.E.2d 1016, 1020 (Ind.Ct.App.2007), trams. denied.

I. Policy Exclusion

The first issue we address is whether the policy exclusion regarding worker's compensation applies in this case.¹ Although the parties cite cases from other jurisdictions, we believe this case is readily resolved on the basis of Indiana law and standard principles of insurance policy interpretation. Insurance contracts are governed by the same rules of construction as other contracts. Id. The proper interpretation of an insurance policy, whether ambiguous or unambiguous, generally is a question of law appropriate for summary judgment. Id. "Although ambiguities in insurance policies are construed in favor of the insured, clear and unambiguous policy language must be given its ordinary meaning." Id.

This issue requires us to consider Indiana Code Section 22-8-2-14, a somewhat obscure worker's compensation provision. It is doubtful that all small business operators or, as in this case, family farmers are aware of this statute. It provides in part:

[Alny ... person, contracting for the performance of any work exceeding one thousand dollars ($1,000) in value by a contractor subject to the compensation provisions of IC 22-8-2 through IC 22-3-6, without exacting from such contractor a certificate from the worker's compensation board showing that such contractor has complied with section 5 of this chapter, IC 22-8-5-1, and IC 22-3-5-2, shall be liable to the same extent as the contractor for compensation, physi-clan's fees, hospital fees, nurse's charges, and burial expenses on account of the injury or death of any employee of such contractor, due to an accident arising out of and in the course of the performance of the work covered by such contract.

Ind.Code § 22-3-2-14(b). In other words, under this statute if a third party contracts with an injured worker's employer for the performance of work, the third party is subject to liability for worker's compensation benefits to the same extent as the employer if the third party failed to obtain a certificate of compliance with the Worker's Compensation Act and the injury resulted from an accident arising out of and in the course of the performance of the work covered by the contract.² See Rausch v. Reinhold, 716 N.E.2d 993, 998 (Ind.Ct.App.1999), trans. denied. There is no dispute that this statute applies here, i.e., that the Taylors contracted with Sherlock to perform more than $1000 worth of work, that they failed to obtain a certificate that Sherlock had worker's compensation insurance, and that Collis was injured due to an accident arising out of and in the course of performance of the painting contract. Thus, the Taylors find themselves potentially liable for payment of worker's compensation benefits to Collis just as if they directly employed him.

If we extract the language from the worker's compensation exclusion in the Everett policy that is not relevant to this case, it reads that there is no coverage for "bodily injury to a person ... if benefits are payable or are required to be provided by an insured under a workers' compensation ... law...." App. p. 64. We conclude this language is clear and unambiguous. It excludes coverage for injuries that are or should be addressed through the worker's compensation system. More specifically, under Section 22-3-2-14, which is undoubtedly a provision of our Worker's Compensation Act, the Taylors find themselves potentially required to provide statutorily-mandated worker's compensation benefits to Collis. This situation fits within the plain language of the exclusion. The Taylors may not themselves have been able to purchase worker's compensation coverage, but they could have ensured that Sherlock did. Indeed, Section 22-3-2-14 required them to do so.

We note that the only claim Collis has made against the Taylors is that they failed to comply with Section 22-3-2-14; he has not stated any tort claims against them, such as for premises liability. If there was such a claim against the Taylors, our analysis might be different with respect to whether the Everett policy provides coverage. Specifically, we have held that in situations where a third party has hired an independent contractor but failed to certify worker's compensation coverage, and the third party also committed a tort against an injured employee, the employee may collect from the third party under both Section 22-38-2-14 and in an ordinary tort action. See Rausch, 716 N.E.2d at 998-99. The only question in this case is whether the Everett policy provides coverage for a claim made under Section 22-3-2-14. We hold that it does not.

II. Estoppel

We next address whether, notwithstanding the worker's compensation exclusion, Everett is estopped from denying coverage to the Taylors for Collis claim. Although Everett contends that es-toppel and the related doctrine of waiver cannot expand the seope of coverage of an insurance contract, there are at least two recognized exceptions to that rule. See Transcontinental Ins. Co. v. J.L. Manta, Inc., 714 N.E.2d 1277, 1281 (Ind.Ct.App.1999). The first exception applies where an insurer or its agent misrepresents the extent of coverage to an insured, thereby inducing the insured to purchase coverage that does not in fact cover the disputed risk. Id. The second exception applies if an insurer defends an action on behalf of an insured without a reservation of rights, but with knowledge of a defense to coverage. Id. The Taylors essentially seek coverage under the first exception.

Generally, an insured has a duty to read and become familiar with the contents of an insurance policy. National Mut. Ins. Co. v. Curtis, 867 N.E.2d 631, 635 (Ind.Ct.App.2007). However, reasonable reliance upon an agent's representations as to what will be covered under a policy can override the insured's duty to read the policy. Filip v. Block, 879 N.E.2d 1076, 1084 (Ind.2008) (citing Village Furniture, Inc. v. Associated Ins. Managers, Inc., 541 N.E.2d 306, 308 (Ind.Ct.App.1989), trams. denied ). "In general, this exception negates an insured's duty to read part of the policy if an agent insists that a particular hazard will be covered." Id. An insurance company may be es-topped from relying on the express language of a policy if an agent insists to a prospective purchaser that the policy will insure against a specific hazard about which the prospect is particularly concerned, and that hazard in fact materializes. Id.

Here, there is no designated evidence to suggest that the Taylors thought they were paying for and receiving coverage for the precise situation that arose here: a work-related injury to an employee of an independent contractor whom the Taylors failed to confirm had worker's compensation insurance and who in fact lacked such insurance. Every insurance policy has certain exceptions to coverage. In the absence of evidence that the Taylors were led to believe, at the time they originally purchased the policy, that it would provide coverage in a specific situation just like the one in this case, there can be no estoppel. An insured's belief that they have purchased "all risk" coverage cannot, without more, be sufficient to negate all exclusions in an insurance policy.

Moreover, any representations by Owens after the accident occurred that there would be coverage is insufficient to support a claim of estoppel. There is no indication in the record that the Taylors relied on Owens' after-the-fact representation to their detriment. In other words, this does not appear to be a case where Everett undertook to defend the Taylors without a reservation of rights. Despite Owens' initial representation, it does not appear that Everett ever defended the Taylors against Collis claim.

Conclusion

The Everett policy clearly and unambiguously excludes coverage for the particular claim Collis has made against the Taylors. Additionally, there is no genuine issue of material fact that would support the Tay-lors's estoppel argument against Everett. We reverse the denial of Everett's motion for summary judgment and direct that judgment be entered in Everett's favor.

Reversed.

MATHIAS, J., concurs. BAILEY, J., dissents with opinion.

1 . The parties also dispute whether there is even an insurable "occurrence" under the Everett policy. Everett contends the relevant, uninsurable "occurrence" is the Taylors's failure to verify that Sherlock had worker's compensation insurance, while the Taylors contend that the relevant, insurable "occurrence" is Collis' injury in the first place. We need not resolve this issue, concluding that even if Collis' injury might otherwise have been an insurable "occurrence," it is subject to the exclusion regarding worker's compensation.

2 . This statute does not apply to work performed on a person's owner occupied primary residence. See LC. § Additionally, the Worker's Compensation Board must fix the order of payment of any claims, beginning with the injured person's immediate employer. See ILC. § 22-3-2-14(e). Thus, it appears Sherlock still will be the party primarily liable to Collis for any worker's compensation recovery, with the Taylors secondarily liable.