Amerisure Ins. Companies v. Time Auto Transp., Inc.

• Decision Date: 02 November 1992
• Docket Number: Docket No. 131877
• Parties: AMERISURE INSURANCE COMPANIES, Plaintiff-Appellant, v. TIME AUTO TRANSPORTATION, INC., Defendant-Appellee.
• Court: Court of Appeal of Michigan — District of US

Page 482

493 N.W.2d 482

196 Mich.App. 569

AMERISURE INSURANCE COMPANIES, Plaintiff-Appellant, v. TIME AUTO TRANSPORTATION, INC., Defendant-Appellee.

Docket No. 131877.

Court of Appeals of Michigan.

Submitted July 8, 1992, at Detroit.

Decided Nov. 2, 1992, at 9:25 a.m.

Released for Publication Jan. 19, 1993.

Kallas, Lower, Henk & Treado, P.C. by Constantine N. Kallas and Edward J. Lee, Bloomfield Hills, for plaintiff-appellant.

Colombo & Colombo by Michael J. O'Shaughnessy, Birmingham, for defendant-appellee.

Before MURPHY, P.J., and SHEPHERD and EVELAND, ^* JJ.

MURPHY, Presiding Judge.

Plaintiff appeals as of right from an August 3, 1990, judgment in favor of defendant. We affirm.

Defendant transports automobiles across the continental United States in tractor-trailers. In January 1988, defendant procured workers' compensation insurance from plaintiff for the policy year January 21, 1988, through January 21, 1989. Defendant paid plaintiff a premium of $1,532 for six employees that defendant had on its payroll. At the end of the policy year, plaintiff performed an audit of defendant's records and determined that numerous truck drivers who were performing services for defendant were subject to the Workers' Disability Compensation Act. Defendant, however, contended that these drivers were independent contractors. Plaintiff then sent defendant an invoice for an additional premium of $161,553. When defendant refused to pay this amount, plaintiff, in April 1989, filed a claim against defendant for breach of contract. Defendant then counterclaimed for declaratory relief, alleging misrepresentation.

A bench trial was then conducted. On July 9, 1990, the trial court issued its opinion, finding that six drivers whose deposition testimony was presented at trial were independent contractors and not employees of defendant under the Workers' Disability Compensation Act:

As to the request for declaratory relief, this Court cannot enter a declaratory judgment that none of defendant's open lease drivers are employees under the Workers' Compensation Act. Each driver's relationship is dependent upon its own facts. This Court holds only that those drivers who testified were independent contractors and not employees.

The trial court thus held:

For the foregoing reasons, this Court finds no cause of action for breach of contract. Judgment on this claim shall be entered in favor of defendant, TIME AUTO TRANSPORTATION, INC. Likewise, this Court finds no cause of action for misrepresentation on the counter-claim. Judgment on this claim shall be entered in favor of plaintiff and counter-defendant, AMERISURE INSURANCE COMPANIES. Judgment for defendant and counter-plaintiff, TIME AUTO TRANSPORTATION, INC., is granted in part on the counterclaim for declaratory relief.

Plaintiff first argues that the Bureau of Workers' Disability Compensation has exclusive jurisdiction to determine whether an individual is an employee or an independent contractor under the Workers' Disability Compensation Act and that the trial court was therefore prohibited from making such a determination with regard to the six drivers. We disagree.

In Sewell v. Clearing Machine Corp., 419 Mich. 56, 62, 347 N.W.2d 447 (1984), our Supreme Court held:

Properly stated, the Szydlowski [Szydlowski v. General Motors Corp., 397 Mich. 356, 245 N.W.2d 26 (1976) ] principle is that the bureau has exclusive jurisdiction to decide whether injuries suffered by an employee were in the course of employment. The courts, however, retain the power to decide the more fundamental issue whether the plaintiff is an employee (or fellow employee) of the defendant.

In applying Sewell to this case, we believe that the trial court had jurisdiction to determine if the six drivers were employees. Plaintiff filed an action for breach of contract against defendant, alleging that defendant owed plaintiff additional premiums. In order to determine whether defendant breached the contract, the trial court had to determine whether the six drivers were independent contractors or employees of defendant. The trial court, ruling in favor of the defendant, held that the six drivers were independent contractors and not employees. Thus, in accordance with Sewell, the trial court had the jurisdiction to decide this "fundamental" issue.

Plaintiff next claims that the trial court erred in its interpretation of M.C.L. Sec. 418.161(1)(d); M.S.A. Sec. 17.237(161)(1)(d). We disagree.

In deciding that the six truck drivers were not employees of defendant and that defendant was not responsible for additional insurance premiums, the trial court went through the various factors of the economic reality test. This test is utilized to determine whether an individual is an employee for purposes of the workers' compensation act. The trial court, however, also addressed M.C.L. Sec. 418.161(1)(d); M.S.A. Sec. 17.237(161)(1)(d). Section 161(1)(d) was added in 1985, long after the development of the economic reality test and provides a definition of an employee. In determining whether an individual is an employee under the Workers' Disability Compensation Act, we believe that Sec. 161(1)(d) is to be construed in conjunction with the economic reality test.

Section 161(1)(d) provides:

(1) As used in this act, "employee" means:

* * * * * *

(d) Every person performing service in the course of the trade, business, profession, or occupation of an employer at the time of the injury, provided the person in relation to this service does not maintain a separate business, does not hold himself or herself out to and render service to the public, and is not an employer subject to this act. [Emphasis added.]

Our research has found that no published case has interpreted this section. Plaintiff argues that the correct interpretation of Sec. 161(1)(d) is that a person is an employee if he performs a service in the course of business of an employer, unless (1) the person maintains a separate business, (2) holds himself out to and renders service to the public, and (3) is an employer subject to the act. Plaintiff has disregarded the use of the word "not." Thus, under plaintiff's interpretation, all three provisions must be satisfied for an individual to be an independent contractor and not an...