American Mut. Liability Ins. Co. v. Michigan Mut. Liability Co.

• Decision Date: 22 September 1975
• Docket Number: Docket No. 11293
• Parties: AMERICAN MUTUAL LIABILITY INSURANCE COMPANY, a Foreign Corporation, Plaintiff-Appellant, v. MICHIGAN MUTUAL LIABILITY COMPANY, Defendant-Appellee. 64 Mich.App. 315, 235 N.W.2d 769, 91 A.L.R.3d 1159
• Court: Court of Appeal of Michigan — District of US

Page 769

235 N.W.2d 769

AMERICAN MUTUAL LIABILITY INSURANCE COMPANY, a Foreign

Corporation, Plaintiff-Appellant, v. MICHIGAN MUTUAL LIABILITY COMPANY, Defendant-Appellee.

Docket No. 11293.

64 Mich.App. 315, 235 N.W.2d 769, 91 A.L.R.3d 1159

Court of Appeals of Michigan.

Sept. 22, 1975.

Released for Publication Dec. 16, 1975.

Leave to Appeal Denied Jan. 21, 1976.

James, Dark & Craig by R. M. James, Kalamazoo, Buell [64 MICHAPP 317] Doelle, Detroit, for plaintiff-appellant.

Terrence J. Lilly, Kalamazoo, for Mich. Mut.

Charles E. Starbuck, Kalamazoo, for Travelers.

Before BRONSON, P.J., and CAVANAGH and WALSH, JJ.

BRONSON, Presiding Judge.

Plaintiff-appellant, American Mutual Liability Insurance Company, is attempting by way of declaratory judgment to impose on defendant-appellee, Michigan Mutual Liability Company, the burden of satisfying a judgment owed to one Donald H. Barden for injuries he sustained in an industrial accident.

Barden was employed as a truck driver by the Graff Trucking Company. On October 19, 1962 in the course of his employment with Graff he delivered a truckload of paper pulp to the Kalamazoo Paper Company. While assisting a forklift operator--one Edward Shallhorn, a Kalamazoo employee--in unloading the bales of paper pulp, Barden was seriously injured.

Michigan Mutual, the workmen's compensation carrier for Graff, paid workmen's compensation benefits to Barden. Barden and his wife instituted an action in tort against Kalamazoo.

Kalamazoo was insured under a comprehensive general liability policy by American Mutual. American Mutual defended the Barden suit on behalf of Kalamazoo and settled for $125,000. [64 MICHAPP 318] Michigan Mutual obtained a protective order for reimbursement of the amount of workmen's compensation benefits paid to Barden and was subsequently reimbursed.

Contemporaneous with its defense of the Barden complaint, American Mutual brought this declaratory judgment action against Michigan Mutual, alleging that an automobile liability insurance policy issued to Graff by Michigan Mutual provided coverage for Shallhorn, the Kalamazoo forklift operator. The pertinent portions of the Michigan Mutual automobile policy provide as follows:

'COVERAGE A--BODILY INJURY LIABILITY--AUTOMOBILE to pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages * * * caused by accident and arising out of the ownership, maintenance or use of any automobile.

'III. DEFINITION OF INSURED. The unqualified word insured includes the named insured * * * and (2) under coverage A and C any person while using an automobile or a hired automobile and any person or organization legally responsible for the use thereof, provided the actual use of the automobile is by the named insured or with his permission.'

American Mutual maintains that Shallhorn used the Graff truck with the permission of Graff (through its employee, Barden) and that Kalamazoo was an 'organization legally responsible for the use thereof' because it was Shallhorn's employer. Accordingly, the argument continues, Kalamazoo was an 'insured' within the meaning of that term in the Graff automobile policy issued by Michigan Mutual.

Michigan Mutual responds, Inter alia, by citing the following exclusion provision contained in the automobile policy:

[64 MICHAPP 319] 'This policy does not apply: * * * (f) under coverage A and B, to any obligation for which the insured or any carrier as his insured may be held liable under any workmen's compensation, unemployment compensation or disability benefits law, or any similar law; * * * (1) under coverage A, to bodily injury to or sickness, disease or death of any employee of the insured arising out of and in the course of (1) domestic employment by the insured, if benefits therefor are in whole or in part either payable or required to be provided under any workmen's compensation law, or (2) other employment by the insured.'

Michigan Mutual contends that even if Kalamazoo is deemed to be an insured within the meaning of the automobile policy, Barden was in fact Kalamazoo's employee for purposes of the unloading operation. Since Barden's injury arose out of his employment with Kalamazoo, Michigan Mutual maintains that Kalamazoo is potentially 'liable under * * * workmen's compensation * * * law' ¹ and the above exclusion provision comes into play, rendering Michigan Mutual immune from any liability under the policy.

The trial judge agreed with Michigan Mutual and entered judgment in its behalf at the close of trial, holding that Barden was 'in fact an employee of both the Graff Trucking Company and the Kalamazoo Paper Company for the purposes of the unloading operation'. Because of the 'employee exclusion' clause, the trial judge concluded that 'the policy of Michigan Mutual did not afford coverage to * * * the Kalamazoo Paper Company for the injuries suffered by Don Barden and the litigation arising out of said injuries'.

[64 MICHAPP 320] American Mutual appeals this decision of the trial judge and the findings of fact and conclusions of law upon which it depends. It is undisputed that if his determination that Barden was an employee of Kalamazoo at the time of the accident is upheld, the 'employee exclusion' clause in the Michigan Mutual automobile policy will protect Michigan Mutual from liability.

American Mutual's attack on the trial judge's finding of an employment relationship between Barden and Kalamazoo is two-fold: (1) the finding that Barden was Kalamazoo's employee is clearly erroneous; (2) Michigan Mutual is estopped from maintaining that Barden was Kalamazoo's employee. We discuss each argument in turn.

I.

Since the trial judge sat as trier of fact in this case, his factual findings cannot be overturned unless we find them to be 'clearly erroneous'. GCR 1963, 517.1. Put another way:

'We do not substitute our judgment in a nonjury case for that of the trial judge unless the facts clearly indicate an opposite result must be reached.' Leidig v. Rockwood & Co., 48 Mich.App. 248, 252, 210 N.W.2d 257, 259 (1973).

In order to determine whether an employment relationship existed between Barden and Kalamazoo, the trial judge consulted case law construing various provisions of the workmen's compensation and employment security acts. This was entirely appropriate, especially given the prominence of the 'employee exclusion' clause defined in terms of potential workmen's compensation liability.

Our Supreme Court applies an 'economic reality'[64 MICHAPP 321] test to determine whether an employment relationship exists. Tata v. Muskovitz, 354 Mich. 695, 94 N.W.2d 71 (1959); Schulte v. American Box Board Co., 358 Mich. 21, 99 N.W.2d 367 (1959); Goodchild v. Erickson, 375 Mich. 289, 293, 134 N.W.2d 191 (1965). In Tata, supra, the Supreme Court adopted the views of Justice Talbot Smith as expressed in his dissent in Powell v. Employment Security Commission, 345 Mich. 455, 462, 75 N.W.2d 874 Et seq. (1956). Justice Smith elaborated on his conception of the economic reality test, concurring in Schulte, supra, 358 Mich. at 33, 99 N.W.2d at 372:

'This is not a matter of terminology, oral or written, but of the realities of the work performed. Control is a factor, as is payment of wages, hiring and firing, and the responsibilities for the maintenance of discipline, but the test of economic reality views these elements as a whole, assigning primacy to no single one.'

See, also, Cronk v. Chevrolet Local Union 659, 32 Mich.App. 394, 399, 189 N.W.2d 16 (1971).

Considering the four factors listed by Justice Smith in light of the facts of the instant case, and 'assigning primacy to no single one', we conclude that the trial judge's finding that Barden was Kalamazoo's employee for purposes of the unloading operation is not clearly erroneous.

There was testimony that Kalamazoo did exercise control over the unloading process, in that Graff truck drivers followed the orders of the Kalamazoo forklift operators and the Kalamazoo shipping clerk. The assistance provided by the Graff drivers came at the request of Kalamazoo, because unloading the bales of pulp was a 'two-man job'. Though Kalamazoo had no power to hire or fire Graff drivers, Kalamazoo could discipline a given driver by insisting that he not be [64 MICHAPP 322] allowed to deliver pulp in the future. Graff drivers were paid for the time they spent assisting in the unloading process. These payments were made indirectly by Kalamazoo through the tariffs established by Graff and approved by the Michigan Public Service Commission. See Renfroe v. Higgins Rack Coating & Manufacturing Co., Inc., 17 Mich.App. 259, 266, 169 N.W.2d 326 (1969).

In terms of 'economic reality', Kalamazoo was Barden's employer during the unloading process. Kalamazoo requested and received unloading assistance from Graff truck drivers, exercised control over them, paid for their services and profited from their assistance, being spared the necessity of having an additional employee on hand to help the forklift operators unload the bales. Under these circumstances, the trial judge's finding of a 'dual employment' relationship, see Renfroe, supra, was not clearly erroneous because the facts do not show that an opposite result must be reached.

II.

American Mutual maintains, in the alternative, that Michigan Mutual should be estopped from asserting that Barden was a Kalamazoo employee at the time of the accident.

The suggestion is that because workmen's compensation is the exclusive remedy for an employee who seeks to recover damages for a work-related injury from his employer, ² Barden could not have sued Kalamazoo in circuit court unless he was Not a Kalamazoo employee. The fact that a settlement agreement was reached between Kalamazoo and Barden and approved by the circuit court is said to indicate that no one involved in the Barden-Kalamazoo[64 MICHAPP 323] suit considered Barden an employee of Kalamazoo. And because...