Harrell v. Pineland Plantation, Ltd.

494 S.E.2d 123, 329 S.C. 185, 1997 S.C. App. LEXIS 166

• Court: Court of Appeals of South Carolina
• Decided: December 8, 1997
• Docket: No. 2762
• Status: Published

Opinions

CONNOR, Judge:

William R. Harrell sued Pineland Plantation Company in negligence for injuries he sustained on Pineland’s property. The trial court granted Pineland’s motion to dismiss. Harrell appeals. We reverse and remand.

FACTS

Pineland Plantation Company, a California partnership, owns Pineland Plantation in Colleton County. Haynes Kendall, Pineland’s general partner, maintains the plantation primarily for his family’s personal enjoyment. Pineland contracted with Folk Land Management to oversee the plantation. Folk Land employed Harrell as the plantation’s daily manager. His duties included identifying maintenance and upkeep needs, repairing equipment and machinery, managing timber and wildlife, and helping entertain plantation guests.

Harrell also assisted Pineland in developing a marketing plan focusing on renting the plantation. Pineland produced a brochure, but never widely distributed it. Nor has the plantation ever had a paying guest or realized any income from the undertaking.

On July 23, 1993, Kendall invited Harrell and his family to a dinner party with members of Harrell’s extended family. In preparation for the party, Harrell checked on the activities of the handyman, scraped the driveway, and cleaned out the barbeque shed. He also made arrangements for the food.

As they waited for the out-of-town guests to arrive, Harrell and Kendall swam with their children in a pond on the property. Several times Kendall and Harrell each swung out over the pond from a rope tower and dropped into the water. During one jump Harrell broke his neck in a shallow area of the pond.

Harrell brought a workers’ compensation claim against Folk Land. That claim resulted in a settlement agreement which was approved by the Workers’ Compensation Commission.

Harrell then brought this negligence action against Pine-land. The trial court granted Pineland’s motion to dismiss, holding 1.) As Pineland’s statutory employee, Harrell could not sue Pineland, because under the exclusivity provisions of the Workers’ Compensation Act the court had no subject matter jurisdiction; and 2.) Harrell could not deny his activities were work-related because he had previously filed a workers’ compensation claim against Folk Land.

ANALYSIS

The determination of whether a worker is a statutory employee is jurisdictional. We must “review the entire record and decide the jurisdictional facts in accord with the preponderance of the evidence.” Glass v. Dow Chem. Co., 325 S.C. 198, 202, 482 S.E.2d 49, 51 (1997).

Harrell first argues Pineland cannot be his statutory employer because the plantation was not maintained as a “business,” but was kept for Kendall’s personal use and enjoyment.

In a leading case, the Supreme Court of Pennsylvania interpreted the word “business” to mean “the habitual or regular occupation that the party was engaged in with a view to winning a livelihood or some gain.” Marsh v. Groner, 258 Pa. 473, 102 A. 127, 129 (1917). Since then, courts have “followed the example of that case in giving the word its ordinary and popular meaning.” 4 Arthur Larson, Workers’ Compensation Law § 50.22 (1997).

Although Pineland produced a rental brochure, it made no diligent effort to widely distribute the brochure or otherwise market the plantation. Furthermore, it has never entertained a paying guest. To the contrary, Kendall used the plantation almost exclusively for personal enjoyment. The one-time production of a brochure can hardly be enough to characterize Pineland as a business. Cf. Marsh 102 A. at 129 (activity which is not regular or habitual is not business).

Moreover, Kendall, Pineland’s general partner, openly admitted Pineland existed to serve as a tax write-off. An inactive tax shelter used primarily for personal enjoyment provides gain to its beneficiary, but does not constitute business in the “ordinary and popular meaning” of the word. Cf Marsh at 129 (“Eliminate them, livelihood and gain, and it is no longer business, but amusement, which no one ever confounds with business.”); 4 Arthur Larson, Workers’ Compensation Law § 50.22 (1997).

Because Pineland was not engaged in business at the time of Harrell’s injury, it cannot be deemed Harrell’s statutory employer. S.C.Code Ann. § 42-1^110 (1985).

Even if Pineland were engaged in business when Harrell was injured, Pineland still may not claim immunity under the Act because it did not provide any form of workers’ compensation insurance.¹ Bean v. Piedmont Interstate Fair Ass’n, 222 F.2d 227 (4th Cir.1955) (“Numerous cases have upheld the right of an injured employee to maintain a suit at common law against an employer who has failed to obtain insurance as required by the Workmen’s Compensation laws.”); 6 Arthur Larson, Workers’ Compensation Law, § 67.22 (1997) (“A common exception to the exclusiveness of the compensation remedy is the right of suit against an employer who fails to secure his compensation liability by taking out insurance or qualifying as a self-insured.”).

The Worker’s Compensation Act imposes a duty to provide insurance. S.C.Code Ann. § 42-5-10 (1985). The Act states, “Every employer who accepts the compensation provisions of this Title shall secure the payment of compensation to his employees in the manner provided in this chapter.” Id. (emphasis added).

Pineland argues an upstream employer has secured compensation under the Act when it contracts with a direct employer who provides workers’ compensation insurance coverage for its employees. To support this proposition, Pineland points to the following language:

The fact that neither Williams & Madjanik, Inc. nor Island Properties had to pay the benefits provided is of no consequence. As a practical matter both absorbed the cost of coverage through their contracts with those who agreed to actually perform the work. This seems to have been the General Assembly’s intent when it enacted this legislation. The owner who obtains the benefit of the work inevitably absorbs the costs of providing protection for the workers. In return, the employer receives immunity from other remedies which ordinarily might be sought by the employee.

Parker v. Williams & Madjanik, Inc., 275 S.C. 65, 74, 267 S.E.2d 524, 528 (1980), (emphasis added).

In Parker, however, the plaintiffs never'asserted the companies in question had not complied with their statutory duty to secure compensation. Therefore, they did not seek to invoke the penalty provision. Id.2

Accordingly, nothing in Parker relieves upstream employers of the statutory duty to directly secure compensation. To hold otherwise would be to isolate the above language and interpret it in a way which ignores the other mandate in Parker — double protection for the worker. The court in Parker fully embraced the concept of double protection when it proclaimed, “[B]oth the owner and the contractors whom he engages to do his work are subjected to the requirements of the Act, and the workers receive double protection.” Id. at 73, 267 S.E.2d at 528 (quoting Blue Ridge Rural Elec. Coop., Inc., v. Byrd, 238 F.2d 346 (4th Cir.1956), rev’d on other grounds, 356 U.S. 525, 78 S.Ct. 893, 2 L.Ed.2d 953 (1958)).

A statutory analysis leads to the conclusion the Legislature fully intended to provide double protection for workers. The Act requires employers to secure compensation “in the manner provided in this chapter.” S.C.Code Ann. § 42-5-10 (1985). Moreover, the very next section specifies the manner for securing compensation. It gives employers the option of either purchasing insurance, or submitting to the commission satisfactory proof of their ability to directly pay compensation. S.C.Code Ann. § 42-5-20 (1985) (amended 1996). Pineland did neither of these.

Additionally, nothing in the chapter provides an exemption for an upstream employer who contracts with a direct employer who is insured.³ To the contrary, the Act directly contradicts Pineland’s contention it could secure compensation indirectly through its agreement with Folk Land Management:

No contract or agreement, written or implied, and no rule, regulation or other device shall in any manner operate to relieve any employer, in whole or in part, of any obligation created by this Title except as otherwise expressly provided in this Title.

S.C.Code Ann. § 42-1-610 (1985). (emphasis added).

Our Supreme Court has recognized that some states have Workers’ Compensation Acts which require the “owner or principal to see that the contractor carries compensation insurance” and impose liability on the owner “only in instances where he fails to do this.” Marchbanks v. Duke Power Co. et al., 190 S.C. 336, 351-52, 2 S.E.2d 825, 831-32 (1939). The court has noted, however, that these acts are “materially different from that in force in this State.” Id. Our Act specifically allows employees to pursue an action “at law” against “[a]ny employer required to secure the payment of compensation under this Title who refuses or neglects to secure such compensation.” S.C.Code Ann. § 42-5-40 (1985).

Pineland further argues even if the penalty provision applies, it cannot be invoked in this case because Harrell has elected his remedy by recovering a workers’ compensation award from Folk Land. Bell v. South Carolina Elec. & Gas Co., 234 S.C. 577, 109 S.E.2d 441 (1959). However, the cases on which Pineland relies are distinguishable, because in none of those was there a claim the owner had not complied with the Act.⁴ Id.

Moreover, the Act directly contradicts the contention the election of remedies provision can operate to relieve a noncomplying employer from the provided penalty. “Nothing in this Title shall be construed to relieve any employer or employee from penalty for failure or neglect to perform any statutory duty.” S.C.Code-Ann. § 42-1-640 (1985). (emphasis added).

Finally, Pineland was obviously concerned about its uninsured status. It purchased insurance after the accident, but prior to the filing of Harrell’s lawsuit. Pineland alleges purchasing insurance shows it was no longer refusing to secure compensation. However, to comply with the statutory mandate Pineland would have to have purchased insurance prior to the accident. S.C.Code Ann. § 42-5-10 (1985) {“While such security remains in force he [the employer] ... shall only be liable to any employee ... for personal injury or death by accident to the extent and in the manner specified in this Title.”) (emphasis added); 6 Arthur Larson, Workers’ Compensation Law, § 67.22 (1997) (“[I]f this [insurance in effect at the time of the injury] was not so, no amount of conscientious but belated effort to rectify the omission [of coverage] will retroactively confer immunity from tort suit.”).

In conclusion, Pineland Plantation was not engaging in business when Harrell was injured. Therefore, the partnership cannot claim immunity under the Workers’ Compensation Act because it was not Harrell’s statutory employer. Additionally, even if Pineland were Harrell’s statutory employer, the partnership failed to secure compensation in the manner provided in the Act. Therefore Harrell could sue Pineland at law under the Act’s penalty provision. S.C.Code Ann. § 42-5-40 (1985).⁵

Accordingly, the decision of the trial court is

REVERSED AND REMANDED.

CURETON, J., concurs in separate opinion and GOOLSBY, J., dissents in separate opinion.

1 . We note Pineland's failure to procure such insurance as one more piece of evidence Pineland never intended to operate as an actual business.

2 . In fact, the court listed the code sections relevant to the parties' rights in the matter and failed to list either S.C.Code Ann. § 42-5-10 (1985) or S.C.Code Ann. § 42-5-40 (1985), the provisions which impose the duty to secure compensation and provide the penalty for failure to do so. Parker at 70-72, 267 S.E.2d at 527.

3 . Although its date of enactment subsequent to this case renders it noncontrolling, the Legislature has adopted a new section creating a system whereby upstream employers can shift ultimate responsibility for workers’ compensation to contractors or subcontractors. The section’s enactment implies the Legislature believed prior to its adoption such an assignment of responsibility was prohibited. Vernon v. Harleysville Mut. Cas. Co., 244 S.C. 152, 135 S.E.2d 841 (1964) (amendment reflects an intent to change the existing law). We also note under the new section, once an upstream employer shifts the burden of workers’ compensation, it can no longer be deemed a statutory employer. S.C.Code Ann. § 42-1-415 (Supp.1996). This evidences the General Assembly’s continuing commitment to the idea ”[t]he immunity granted under the Act parallels the liability imposed by the Act.” Neese v. Michelin Tire Corp., 324 S.C. 465, 479, 478 S.E.2d 91, 98 (Ct.App.1996), cert. denied, (Sept. 19, 1997).

4 . In fact, as in Parker, the Bell opinion lists the code sections relevant to its holding and makes no mention of 1942 Code § 7035-10 or 1942 Code § 7035-71, the predecessors to today’s sections 42-5-10 and 42-5-40. Id. at 581, 109 S.E.2d at 442-43.

5 . Because of our holding on these grounds, we need not address Harrell’s remaining arguments.