83 Hawai'i 1, Crompton v. Tern Corp.

• Decision Date: 10 September 1996
• Docket Number: No. 19297,19297
• Citation: 924 P.2d 169
• Parties: 83 Hawai'i 1 Mark CROMPTON, Claimant-Appellant, v. TERN CORPORATION and First Insurance Company of Hawai'i, Ltd., Employer/Insurance Carrier-Appellee, and K.A. Construction Company, Employer-Appellee, Delinquent, and K.A. Construction Company and California Indemnity Insurance Company, Employer/Insurance Carrier-Appellee, and Rib-Roof Industries, Inc., Employer-Appellee, Delinquent, and Special Compensation Fund, Appellee.
• Court: Hawaii Supreme Court

Page 169

924 P.2d 169

83 Hawai'i 1

Mark CROMPTON, Claimant-Appellant, v. TERN CORPORATION and First Insurance Company of Hawai'i Ltd., Employer/Insurance Carrier-Appellee, and K.A Construction Company, Employer-Appellee, Delinquent, and K.A. Construction Company and California Indemnity Insurance Company, Employer/Insurance Carrier-Appellee, and Rib-Roof Industries, Inc., Employer-Appellee, Delinquent, and Special Compensation Fund, Appellee.

No. 19297.

Supreme Court of Hawai'i.

Sept. 10, 1996.

Jeffrey S. Portnoy, Patricia J. McHenry, and Christopher I.L. Parsons of Cades, Schutte, Fleming & Wright, on the briefs, Honolulu, for claimant-appellant Mark Crompton.

Thomas E. Cook, Edquon Lee, and Steven Y. Otaguro of Lyons, Brandt, Cook & Hiramatsu, on the briefs, Honolulu, for Employer/Insurance Carrier-Appellee Tern Corporation and First Insurance Co. of Hawaii, Ltd.

Clyde Umebayashi and Muriel M. Taira of Kessner, Duca, Umebayashi, Bain & Matsunaga, on the briefs, Honolulu, for Employer/Appellee K.A. Construction Co.

Susan Y.M. Chock, on the briefs, for Employer/Insurance Carrier-Appellee K.A. Construction Co. and California Indemnity Ins. Co.

Margery S. Bronster, Attorney General, and Robyn M. Kuwabe, Deputy Attorney General, on the briefs, for Appellee Special Compensation Fund, Department of Labor and Industrial Relations.

Before MOON, C.J., and KLEIN, LEVINSON, NAKAYAMA and RAMIL, JJ.

MOON, Chief Justice.

In this factually complex workers' compensation case, claimant-appellant Mark Crompton appeals the decision and order of the Labor and Industrial Relations Appeals Board (LIRAB) granting summary judgment in favor of employer-appellee Tern Corporation (Tern) and its insurance carrier, appellee First Insurance Company of Hawai'i, Ltd. (First Insurance). On appeal, Crompton argues that the LIRAB erred in concluding that:

(1) employer-appellee delinquent Rib-Roof Industries, Inc. (Rib-Roof), a subcontractor of Tern, was Crompton's "statutory employer" under Hawai'i's workers' compensation scheme and was, therefore, secondarily liable to pay Crompton's workers' compensation benefits after employer-appellee delinquent K.A. Construction Company (KAC), Crompton's direct employer, defaulted on payment of Crompton's workers' compensation benefits for lack of insurance; and (2) the settlement and release agreement in a tort action between Crompton and Rib-Roof did not release Tern and First Insurance from liability for Hawai'i workers' compensation benefits. For the following reasons, we affirm.

I. BACKGROUND

The following facts are undisputed and are culled from the LIRAB's August 31, 1995 decision and order. On June 1, 1990, Tern entered into a "General Contract" with a property owner to erect a warehouse on property located at Campbell Industrial Park. As the general contractor, Tern subcontracted with Rib-Roof to furnish labor, materials, skill, and equipment necessary for the "design, fabrication, delivery, and erection of the [m]etal building." Rib-Roof, in turn, subcontracted with KAC, a California-based company, to construct the warehouse using Rib-Roof's designs and materials. Crompton, a sheetmetal worker, was hired in California by KAC to install water, gas, and sewer lines for the warehouse.

On September 12, 1990, while on the job, Crompton was standing on a ladder approximately fifteen feet off the ground when the screws holding a 142-pound steel beam he was installing came loose, and the beam gave way. The falling beam knocked Crompton off the ladder. He fell to the ground, and the beam fell onto Crompton's shoulder. Crompton sustained serious injuries to his spine and left arm.

At the time of the accident, neither KAC nor Rib-Roof carried Hawai'i workers' compensation insurance. KAC was, however, insured for workers' compensation coverage in California by California Indemnity Insurance Company (CIIC). Tern was insured for workers' compensation coverage in Hawai'i by First Insurance.

On the day of the accident, Crompton filed a claim for workers' compensation benefits with KAC and CIIC in California. CIIC challenged Crompton's claim for California workers' compensation benefits in California, but was ultimately found liable for Crompton's California workers' compensation benefits pursuant to a California Workers' Compensation Appeals Board decision dated May 4, 1993. CIIC thereafter paid Crompton benefits in accordance with California workers' compensation law. However, believing that the benefits afforded by Hawai'i's workers' compensation scheme were more generous than those afforded by California law, Crompton, on or about September 18, 1991, filed a claim for workers' compensation benefits with the Disability Compensation Division of the State Department of Labor and Industrial Relations (DLIR) in Hawai'i, seeking recovery of the difference between the respective benefits accorded by California and Hawai'i law.

Thereafter, on January 3, 1992, Crompton filed a negligence action in the First Circuit Court in Hawai'i against Rib-Roof and KAC for the injuries he suffered on September 12, 1990, while working for KAC. ¹ Crompton filed the civil suit against Rib-Roof and KAC premised on the theory that Tern, and not Rib-Roof or KAC, was Crompton's "statutory employer," and, therefore, neither Rib-Roof nor KAC were entitled to immunity against suits based on negligence pursuant to Hawai'i Revised Statutes (HRS) § 386-5 (1993). ²

By decision dated June 17, 1992, the Director of the DLIR (the Director) determined that Crompton suffered a work-related injury on September 12, 1990, and awarded Crompton benefits. Because KAC failed to carry insurance or provide security for workers' compensation benefits for its employees in Hawai'i as required by HRS § 386-121 (1993), ³ the Director also assessed KAC a penalty pursuant to HRS § 386-123 (1993). ⁴

As Crompton's direct employer, KAC was primarily liable for Crompton's workers' compensation benefits pursuant to HRS § 386-1 (1993). ⁵ However, because KAC was uninsured for Hawai'i workers' compensation coverage, the Director held a hearing on March 10, 1994 to determine which company was secondarily liable to Crompton for Hawai'i workers' compensation benefits pursuant to HRS § 386-1. At the hearing, Rib-Roof, undoubtedly seeking to avail itself of immunity under HRS § 386-5, represented that, as of the date of the hearing, it was ready, willing, and able to pay workers' compensation benefits due Crompton under Hawai'i law, despite the fact that it carried no Hawai'i workers' compensation insurance coverage. After the hearing, the Director took the matter under advisement.

After the hearing, but before the issuance of the Director's decision, Crompton and Rib-Roof settled the tort action for $600,000.00. ⁶ The Settlement, Release, and Indemnity Agreement, dated April 20, 1994, provided in pertinent part:

1. Release. For and in consideration of the promise by RIB-ROOF, INC. (hereinafter referred to as Releasee), to as soon as possible, but in any case within two weeks from the date of this Agreement, deliver to Cades Schutte Fleming & Wright [Crompton's attorneys] a check in the amount of $600,000.00 made payable to the order of Mark Crompton, Sharon Fraser and Cades Schutte Fleming & Wright", MARK CROMPTON and SHARON FRASER (hereinafter collectively referred to as "Releasor") hereby release and forever discharge Releasee and its insurance carrier, Northbrook Property & Casualty, from and on account of any and all claims, actions, causes of action, and damages of whatever name or nature, which in any manner concern or relate to any of the following:

a. An accident which Mark Crompton was involved in while he was employed in the erection of a building on 9/12/90 at Campbell Industrial Park, Oahu, Hawaii (hereinafter referred to as the "Accident").

b. That certain lawsuit instituted by Releasor in the Circuit Court of the First Circuit, State of Hawaii, Civil No. 92-0005-01 (hereinafter referred to as the "subject lawsuit").

....

It is further agreed and understood that the $600,000.00 being paid by Releasee is for general damages only and is not duplicative of any other benefits, including workers' compensation benefits, that have been or may be paid to Releasor.

....

3. Releasor's further understandings and agreements.

d. Complete Bar. Acceptance of the consideration above mentioned and execution of this Release is a complete and final bar to any and all claims, actions, causes of action, claims for relief, liability, liabilities, costs, expenses, fees, demands, injuries, losses, and damages of whatever name or nature against Releasee in any manner arising, growing out of, connected with or covered by this Release; and this Release forever and finally compromises, settles, and terminates any and all disputes, claims, claims for injury, loss, damage, costs, expenses and fees of whatever nature, known or unknown, in any manner arising, growing out of, connected with or in any manner involving, concerning or relating to the matters covered by this Release.

Thereafter, by decision filed May 6, 1994, the Director determined that Tern, the first contractor insured for Hawai'i workers' compensation coverage, was Crompton's "statutory employer" and was therefore secondarily liable for Crompton's workers' compensation benefits. The Director ordered Tern and First Insurance to pay for Crompton's medical and temporary total disability benefits beginning September 15, 1990. Tern and First Insurance were allowed to credit toward the amount of their liability for workers' compensation benefits to Crompton the amount of workers' compensation benefits paid to Crompton by CIIC, but Tern and First Insurance were also required to reimburse CIIC for the amount of benefits CIIC paid to Crompton, subject to the maximum benefits allowable under Hawai'i's workers' compensation law. The Director also ruled that Tern/First Insurance was entitled to...