Summary
holding that identical workers' compensation exclusion precluded coverage, regardless of whether any workers' compensation benefits are actually paid to the injured party
Summary of this case from Progressive N. Ins. Co. v. J&S Exch., Inc.Opinion
A3-99-153
November 22, 2002
Duane A. Lillehaug, Lee Hagen Law Office, Ltd., Fargo, ND, for Plaintiffs.
Patrick W. Fisher Fisher Olson, LTD, Grand Forks, ND, Charles A. Stock, Johannson Rust Fagerlund Yon Stock, P.A., Crookston, MN, John P. Dosland, Ohnstad Twichell, West Fargo, ND, for Defendants/Cross-Defendants.
Charles A. Stock, Johannson Rust Fagerlund Yon Stock, P.A., Crookston, MN, for Garnishee.
John P. Dosland, Ohnstad Twichell, West Fargo, ND, Patrick W. Fisher, Fisher Olson, Ltd., Grand Forks, ND, for Cross-Claimants.
MEMORANDUM AND ORDER
I. Introduction
Before the Court is a motion for partial summary judgment submitted by plaintiffs Jeremy and Kim Johnson (Johnson) (doc. #53) and a motion for summary judgment submitted by garnishee Grinnell Mutual Reinsurance Company (Grinnell) (doc. #56). For the reasons articulated below, Grinnells motion for summary judgment is GRANTED, and Johnsons partial motion for summary judgment is DENIED.
II. Facts
Jeremy Johnson, a public school teacher in southern California, on summer vacation returned home to Drayton, North Dakota to work with Dave Marciniak, an electrical contractor doing business as Daves Electric (Daves). Daves business would peak in the summer months, and he would sometimes hire summer help like Johnson to assist with the increased workload. Johnson typically worked six to eight hours per day, had no set hours, and could take time off when needed.
On July 28, 1999, Daves was installing electrical fixtures in the Transystems building Footnoteon the grounds of the American Crystal Sugar Company factory in Drayton. Johnson fell approximately sixteen feet from a catwalk located in an attic area of the Transystems building. Johnson landed on the concrete floor and suffered fractures of his wrist and heel.
At the time of the accident, Daves did not have workers compensation coverage as required by the State of North Dakota. Thus, Johnson did not receive workers compensation benefits for his injuries. To recover for his injuries, Johnson brought suit against Daves, Transystems, and American Crystal Sugar. Johnson settled with all defendants, and entered into a Miller-Shugart agreement Footnotewith Daves which resulted in entry of a judgement in the amount of $85,000 against Daves. The present garnishment action followed. The present action relates to Daves insurance company, Grinnell Mutuals, denial of coverage under the business liability policy.
Grinnell Mutual denied coverage because Daves policy contained a workers compensation exclusion. Under the terms of Daves policy, any obligation of the insured under a workers compensation, disability benefits or unemployment compensation law or any similar law is excluded from coverage. In addition to its denial based on the workers compensation exclusion, Grinnell Mutual also denied coverage because of the employee exclusion. FootnoteThe Court is now presented with the question of whether the exclusion applies to the case at bar.
II. Discussion
As mentioned above, Daves policy contained a workers compensation exclusion, which excluded from coverage any obligation of the insured under a workers compensation, disability benefits or unemployment compensation law or any similar law. Johnson suggests the simple answer, here, is that he did not receive any workers compensation benefits. However, Grinnell counters that the policy excludes obligations under a workers compensations law. Daves had the obligation to procure workers compensation coverage, and as a non-complying employer Daves exposed itself to a civil action by Johnson for personal injury. The workers compensation clause precludes coverage for liability derived from an obligation which should have been handled by a workers compensation claim.
Johnson responds that the exclusion applies to any claim under a workers compensation claim and it does not apply to a claim that might, may or should be covered by workers compensation. Johnson argues that the North Dakota Supreme Court would draw the exclusion narrowly, consistent with opinions in Massachusetts and New Jersey. Johnson v. Center Mut. Ins. Co., 529 N.W.2d 568, 570 (N.D. 1995) (declaring that exclusions are to be narrowly construed in favor of coverage); Rose v. Franklin Surety Co., 281 N.E. 918 [ 183 N.E. 918] (Mass. 1933); Hunt v. Hospital Service Plan of New Jersey, 162 A.2d 561 (N.J. 1960). In those cases, the courts concluded that workers compensation benefits must actually be paid before the exclusion applies.
The Court finds compelling the case, Weger v. United Fire Casualty, 796 P.2d 72 (Co. App. 1990). In Weger, as in this case, an employee received an on-the-job injury and his employer had not complied with the state workers compensation act. Id. at 73. The employee brought an action against his employer for negligence, the suit was settled, and the employer brought a declaratory judgment action against its liability insurer. Id. The Weger court had before it an identical workers compensation exclusion clause, and it concluded, citing extensive case law, that the clause unambiguously applied and excluded coverage. Id. at 74. (citing Tri-State Construction, Inc. v. Columbia Casualty Co./CNA, 39 P.2d 899 [ 692 P.2d 899] (Wash.App. 1984); Liberty Mutual Ins. Co. v. United National Ins. Co., Ltd., 731 P.2d 167 (Haw. 1987); Producers Diary Delivery Co., Inc. v. Sentry Ins. Co., 718 P.2d 920 (Cal. 1986)).
The Court disagrees with Johnson that the North Dakota Supreme Court would concluded that workers compensation benefits must actually be paid before the exclusion applies. The Supreme Court of North Dakota strictly enforces the statutory scheme making workers compensation benefits the exclusive remedy against an employer for injuries sustained in the course of employment. See Stuhlmiller v. Nodak Mutual Ins. Co., 475 N.W.2d 136, 138 (N.D. 1991). It was Daves obligation to acquire workers compensation coverage. See N.D. Cent. Code § 65-01-08 (1999). Daves should not be rewarded for failure to obey workers compensation law. Johnsons cause of action against Daves was made possible only because of the failure to obtain workers compensation insurance. The policy clearly excluded obligations under workers compensation; if Daves would have obtained workers compensation this claim would be barred.
Johnson argues in the alternative that if the workers compensation exclusion applies, then the policy as a whole is ambiguous. Johnson claims the workers compensation exclusion would conflict with the temporary worker exception to the employee exclusion. Footnote However, Grinnell argues and the Court agrees, that the employee and workers compensation exclusions are not conflicting. Contrary to Johnsons contention, the exclusions work together. For instance, if Daves was not required to obtain workers compensation coverage for a temporary employee, liability coverage would be provided under the policy. On the other hand, if Daves was required to obtain workers compensation coverage, then liability coverage is not provided.
Thus, regardless of the Courts interpretation of the temporary worker exception to the employee exclusion, the workers compensation exclusion bars Johnsons recovery. Grinnell had no duty to defend Daves in the underlying action because the allegations in Johnsons complaint did not give rise to potential liability or the possibility of coverage under the policy. Grinnells motion for summary judgment is GRANTED. Johnsons motion for partial summary judgment and request for attorneys fees is DENIED.
IV. Conclusion
Summary judgment should be GRANTED in favor of Grinnell Mutual (doc. #56), and DENIED for Johnson (doc. #53).
IT IS SO ORDERED.