Aetna Life & Cas. v. Americas Truckway Systems, Inc.

• Court: Kansas Court of Appeals
• Writing for the Court: PIERRON
• Citation: Aetna Life & Cas. v. Americas Truckway Systems, Inc., 929 P.2d 807, 23 Kan.App.2d 315 (Kan. App. 1997)
• Decision Date: 03 January 1997
• Docket Number: No. 74721,74721
• Parties: AETNA LIFE & CASUALTY, Appellee, v. AMERICAS TRUCKWAY SYSTEMS, INC., Appellant.

Page 807

929 P.2d 807

23 Kan.App.2d 315

AETNA LIFE & CASUALTY, Appellee, v. AMERICAS TRUCKWAY SYSTEMS, INC., Appellant.

No. 74721.

Court of Appeals of Kansas.

Jan. 3, 1997.

Syllabus by the Court

1. WORKERS COMPENSATION--Workers Not Covered under Act--Election of Worker to Be Covered. Under K.S.A.1995 Supp. 44-508(b), an individual employer, limited or general partners, and self-employed persons are not covered workers or employees under the Workers Compensation Act, unless there is a valid election in effect as provided in K.S.A. 44-542(a).

2. SAME--Covered Employees under Act--Limitation on General Statutory Provision. The general provision in K.S.A.1995 Supp. 44-503(a), which defines a person who undertakes to execute any work which is part of the principal's trade or business as a covered employee of the principal, is limited by the provisions of K.S.A.1995 Supp. 44-508(b).

Luke B. Harkins, Kansas City, for appellant.

Louis J. Wade, Overland Park, for appellee.

Before ELLIOTT, P.J., and LEWIS and PIERRON, JJ.

PIERRON, Judge.

Americas Truckway Systems, Inc. (ATS), defendant/appellant, appeals the district court's granting of summary judgment in favor of Aetna Life & Casualty (Aetna), plaintiff/appellee. The district court ruled that the self-employed, independent contractor drivers employed by ATS were covered by the Kansas Workers Compensation Act and Aetna was therefore entitled to an increased premium.

The facts presented to the district court were either stipulated, admitted, or entered into evidence without contradiction. ATS describes its business as primarily a brokering service for the driving and/or "piggy-backing" of semi-tractor trucks from one place to another, a/k/a "driveaway service." ATS's customers contract with ATS to hire independent contractor drivers to drive and/or "piggy-back" trucks to a specified location. ATS's consideration is a commission based on a per-mile charge, and ATS pays the drivers a per-mile rate established by contract between ATS and the drivers.

ATS obtained workers compensation insurance coverage through Aetna for a 2-year period, effective February 25, 1988. The insurance premium was based upon payroll amounts for the applicable classifications of ATS employees. ATS only included its sales and clerical staff in estimating the payroll figures. The premium was approximately $750.

In April 1989, during the second year of coverage, Aetna audited ATS's account, using actual payroll figures from the prior policy year, in order to adjust the premium. The audit contended that ATS used the truck drivers to conduct its business and therefore the drivers' payroll should have also been used to compute the insurance premium. Aetna billed ATS for an adjusted premium of $139,194. After ATS did not pay, Aetna filed suit to collect the adjusted premium.

Aetna filed a motion for summary judgment. After two hearings, the district court granted the motion. The court found the truck drivers involved with ATS were self-employed, independent contractors and not common-law employees of ATS, but that the drivers performed work integral and essential to ATS's business. The district court adopted the rule in Thompson v. Harold Thompson Trucking, 12 Kan.App.2d 449, 456-58, 748 P.2d 430 (1987), rev. denied 243 Kan. 782 (1988), and held that the truck drivers were "statutory employees" and subject to premiums for workers compensation liability.

ATS then filed a motion for reconsideration of the court's decision of summary judgment, which was heard. Ultimately, the court found: (1) The facts were not in dispute and had been stipulated to; and (2) ATS conceded it could not prove any of the truck drivers had coverage for workers compensation which would have precluded ATS's liability to Aetna. The court concluded the insurance contract issued by Aetna could cover workers compensation claims by ATS drivers. This was the risk insured against by Aetna, thereby rendering ATS liable. Thus, the court ruled the drivers' payroll should have been included in the calculation of the premiums according to the terms and conditions of the contract.

At a later date, the court held a hearing on damages and granted judgment in favor of Aetna for $139,194.

ATS argues the district court erred in granting summary judgment because self-employed persons are generally excluded from coverage under the Kansas Workers Compensation Act, K.S.A. 44-501 et seq. ATS contends Aetna is not entitled to the adjusted insurance premiums based on the language in K.S.A.1995 Supp. 44-503(a) and the holding in Allen v. Mills, 11 Kan.App.2d 415, 724 P.2d 143 (1986). On the other hand, Aetna argues the district court correctly entered summary judgment in its favor since ATS's truck drivers were statutory employees under K.S.A. 44-503(a) and ATS is liable for workers compensation premiums under the statute. Aetna also argues ATS is liable for premiums under the insurance contract entered into by the parties.

Our standard of review for cases decided by summary judgment is well established:

"The burden on the party seeking summary judgment is a strict one. The trial court is required to resolve all facts and inferences which may reasonably be drawn from the evidence in favor of the party against whom the ruling is sought. Summary judgment is appropriate when the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. When opposing a motion for summary judgment, an adverse party must come forward with evidence to establish a dispute as to a material fact. In order to preclude summary judgment, the facts subject to the dispute must be material to the conclusive issues in the case. On appeal we apply the same rule, and where we find reasonable minds could differ as to the conclusions drawn from the evidence, summary judgment must be denied. [Citations omitted.]" Mitzner v. State Dept. of SRS, 257 Kan. 258, 260-61, 891 P.2d 435 (1995).

There are several provisions of the Workers Compensation Act relevant to a discussion of the issue presented to the court. K.S.A. 44-501(a) provides:

"If in any employment to which the workers compensation act applies, personal injury by accident arising out of and in the course of employment is caused to an employee, the employer shall be liable to pay compensation to the employee in accordance with the provisions of the workers compensation act."

The act also defines individuals that are encompassed therein. K.S.A.1995 Supp. 44-508(b) defines "workman", "employee," or "worker" as

"any person who has entered into the employment of or works under any contract of service or apprenticeship with an employer.... Unless there is a valid election in effect which has been filed as provided in K.S.A. 44-542a and amendments thereto, such terms shall not include individual employers, limited or general partners or self-employed persons."

Pursuant to K.S.A. 44-501(a) and K.S.A.1995 Supp. 44-508(b), ATS argues the drivers would not have been able to bring claims against Aetna under the Workers Compensation Act. Aetna concedes that self-employed persons are not generally considered "workers" under K.S.A.1995 Supp. 44-508. Aetna argues the truck drivers contracted with ATS to do ATS's work and are statutory employees. Therefore, the premium must be charged for that insured risk.

ATS relies heavily on Allen v. Mills, 11 Kan.App.2d 415, 724 P.2d 143. Allen owned and operated a sawmill in Reno County. Mills operated a plant in Butler County where he sometimes used Allen's lumber to make goods for sale to the public. Usually, Mills would let Allen know when he needed a truckload of lumber, and Allen would tell Mills when it was ready. Mills would then dispatch his driver with a truck to pick up the load from Allen. On the occasion of the accident, Allen picked up Mills' truck, returned to Allen's sawmill, loaded the truck, and was injured when he delivered the wood back to Mills' plant.

The court found the case to be one of a nonelecting, self-employed person seeking workers compensation. The district court ruled that Allen was barred from bringing a civil action against Mills because his sole and exclusive remedy was under the Workers Compensation Act. The district court also ruled that Allen was his own employer, doing subcontract work for his principal, Mills. 11 Kan.App.2d at 416-17, 724 P.2d 143. This court disagreed with the district court's reliance on K.S.A. 44-503 (Ensley 1981) and hung its hat on the self-employed person language in K.S.A.1985 Supp. 44-508(b), which disqualified such individuals from the Act. The Allen court explained:

"For K.S.A. 44-503 to be operative, it is necessary that there be a contract between the contractor and the worker that creates between them the relationship of employer and employee. There cannot be such a contract when one person is purportedly both the contractor and the employee. This is for a plain and simple reason. No man can contract with himself. 1 Williston on Contracts § 18, p. 32 (3d ed. 1957); 2 Williston on Contracts § 308, p. 450 (3d ed 1959). There must be at least two parties to the making of a contract. 1 Williston on Contracts § 18, p. 32. As our Supreme Court has said:

'There must be at least two parties to a contract. It is not possible for an individual, simply by his own mental operations, to enter into a contract with himself, or with himself and others, even though he acts in different capacities.' Sinclair Refining Co. v. Long, 139 Kan. 632, Syl. p 2, 32 P.2d 464 (1934).

See Kumberg v. Kumberg, 232 Kan. 692, 699, 659 P.2d 823 (1983)." 11 Kan.App.2d at 418, 724 P.2d 143.

The Allen court ultimately held that Allen was not an "employee" under the Act for the reason that he had no contractual relationship with another as employer and employee. The...