Blue Diamond Coal Co. v. Holland-America Ins. Co.

• Decision Date: 07 May 1984
• Docket Number: HOLLAND-AMERICA
• Citation: 671 S.W.2d 829
• Court: Tennessee Supreme Court
• Parties: BLUE DIAMOND COAL COMPANY, Plaintiff-Appellant, v.INSURANCE COMPANY, Lexington Insurance Company, John Basil Thomas Bird & Companies and American Re-Insurance Company, Defendants-Appellees. 671 S.W.2d 829

Page 829

671 S.W.2d 829

BLUE DIAMOND COAL COMPANY, Plaintiff-Appellant, v. HOLLAND-AMERICA INSURANCE COMPANY, Lexington Insurance

Company, John Basil Thomas Bird & Companies and

American Re-Insurance Company,

Defendants-Appellees.

671 S.W.2d 829

Supreme Court of Tennessee,

at Knoxville.

May 7, 1984.

Foster D. Arnett, Dan D. Rhea, Knoxville, for plaintiff-appellant; Speight & Parker, Nashville, Wyatt, Tarrant & Combs, Louisville, Ky., of counsel.

E. Bruce Foster, Jr., Knoxville, Richard J. Geddes, Chicago, Ill., John David Cole, Bowling Greene, Ky., for defendants-appellees.

OPINION

DROWOTA, Justice.

This case involves a question of insurance coverage. Plaintiff-Appellant, Blue Diamond Coal Company, contends that the insurance policies at issue extend coverage to it for common law liability resulting from wrongful death actions brought against it by the survivors of fifteen miners who were killed by a mine explosion in a Kentucky coal mine. Defendants-Appellees, Holland-America Insurance Company et al., ¹ argue that the policies in question do not extend coverage to Blue Diamond because the deceased miners were working for Scotia Coal Company when the accident occurred. Because the insurance policy purports to extend coverage to the insureds for liability resulting from injury to employees only, Holland-America contends that Blue Diamond is not covered.

The case was heard by the trial court on cross-motions for summary judgment after numerous affidavits, interrogatories, requests for admissions and production of records had been filed and discovery depositions taken. The trial judge granted Blue Diamond's motion and ordered a writ of inquiry to determine the amount of recovery. Judgment was entered entitling Blue Diamond to recover $4,788,607.00. Holland-America filed an appeal and the Court of Appeals, in a split decision, reversed the trial court and dismissed the complaint against Holland-America.

I

Blue Diamond has its home office in Knoxville and has extensive underground coal mining operations at several locations in Kentucky. The Kentucky mines are actually operated by wholly owned subsidiary corporations. Blue Diamond and its subsidiaries have identical officers and directors. Scotia Coal Company was the first subsidiary formed by Blue Diamond and operates the mine in Lechter County, Kentucky. Blue Diamond Mining, Inc., a second subsidiary formed by Blue Diamond, operates the Leatherwood mines. Although some engineering services are supplied to the subsidiaries, Blue Diamond conducts no active mining operations directly but functions as a holding company.

During the period in which the questioned insurance policies were in effect two explosions at the Scotia mine resulted in the death of thirty miners. The next of kin of fifteen of the deceased miners brought suit against Blue Diamond in the United States District Court for the Eastern District of Kentucky for wrongful death. The plaintiffs alleged that Blue Diamond was negligent in maintaining the safety conditions of the mine.

Blue Diamond defended the wrongful death actions by asserting a workmen's compensation "shield." Blue Diamond contended that it was the "employer" or "contractor" of the deceased miners and therefore entitled to immunity under the Kentucky Workmen's Compensation Act. The District Court found that Blue Diamond had the primary responsibility for mine safety functions at the Scotia mine, but granted Blue Diamond's motion for summary judgment concluding that Blue Diamond was a "contractor" under the Act. The Sixth Circuit Court of Appeals reversed and held that Blue Diamond should not be characterized as either a "contractor" or "employer" under Kentucky's Workmen's Compensation Act. The Court concluded that "a parent [corporation] is not immune from the tort liability to its subsidiary employees for its own, independent acts of negligence." Boggs v. Blue Diamond Coal Co., 590 F.2d 655, 663 (6th Cir.1979). The Court specifically "held that Blue Diamond is not an 'employer' of Scotia's miners for purposes of the [Kentucky Workmen's Compensation] Act." Id. at 663.

Holland-America refused to defend Blue Diamond in the Boggs suit or to extend coverage because the deceased miners were employees of Scotia Coal and not Blue Diamond. Following remand by the Sixth Circuit, the Boggs case was settled for approximately 5.8 million dollars. Blue Diamond then initiated this action against Holland-America seeking coverage under the insurance policies at issue.

II

The policies under which Blue Diamond seeks coverage were purchased in 1973 through Marsh & McLennan, an insurance broker in Atlanta, Georgia. Marsh & McLennan obtained layered group coverage for Blue Diamond and its subsidiary Scotia Coal. Blue Diamond Mining, Inc. was added to these policies in 1974 after its formation. The amount of coverage provided by each defendant insurer is shown in the following chart:

NOTE: OPINION CONTAINS TABLE OR OTHER DATA THAT IS NOT VIEWABLE

The underlying policy followed by the other policies was that of Holland-America. The disputed provision of that policy provides:

EXCESS WORKMEN'S COMPENSATION

In consideration of the premium charged, Underwriters hereon hereby agree to indemnify the Employer, who shall have accepted the Workmen's Compensation Act and shall have been duly qualified as a Self-Insurer under that Act in the State(s) set forth in Paragraph 1 Section (b) of this Certificate and shall during the period of this Certificate remain so duly qualified, in the manner following:

1. (a) If at any time during the period commencing at 12:01 AM on the 1st Day of April, 1975 and ending at 12:01 AM on the 1st day of April, 1976 any Employee in the immediate service of the Employer shall sustain any personal injury (fatal or non-fatal) by accident or occupational disease while engaged in the service of the Employer in work forming part of or process in his business and the Employer shall be liable to make compensation for such injury solely under or by virtue of the Workmen's Compensation Law and/or the Employers' Liability Law and/or Common Law Liability and/or the Occupational Disease Law of the State(s) set forth in Section (b) of this paragraph which may be in force at the time such injury is sustained the Underwriter shall indemnify the Employer to the extent hereinafter mentioned against all sums for which the Employer shall be so liable and will, in addition, be responsible for 'Costs' as hereinafter defined and limited.

Holland-America insists that the insurance afforded by these policies is limited by the words "Employees in the immediate service of the Employer." Therefore, Blue Diamond is not covered because the deceased miners were employees of Scotia and were killed while in the immediate service of that corporation. They further assert that this same question was decided in the Boggs case, and that Blue Diamond is barred by collateral estoppel to relitigate the issue. We do not agree that Boggs settles the question involved in this litigation.

As stated above, the question in the Boggs case was whether a parent corporation is immune from common law liability as a result of its own, independent acts of negligence causing injury to employees of its wholly-owned subsidiary corporation. The Sixth Circuit held that Blue Diamond was not the employer of the deceased miners for purposes of the Kentucky Workmen's Compensation Act. Consequently, Blue Diamond was exposed to common law liability and could not rely on immunity from such action by virtue of the Workmen's Compensation Act. ² The present action involves different parties and the issues, although similar, are by no means identical.

In King v. Brooks, 562 S.W.2d 422 (Tenn.1978), this Court stated that "[u]nder the doctrine of collateral estoppel, when an issue has been actually and necessarily determined in a former action between the parties, that determination is conclusive upon them in subsequent litigation." Id. at 424. The application of collateral estoppel requires identity of issues and identity of parties or their privies. King v. Brooks, supra; Shelley v. Gipson, 218 Tenn. 1, 400 S.W.2d 709 (1966). The issue before this Court concerns coverage for common law liability under the insurance policies in question and not Blue Diamond's relationship to the Scotia Coal miners as defined by the Kentucky Workmen's Compensation Act. Resolution of the issues in the present litigation requires interpretation of the language of the policies whereas the Boggs court was faced with the construction of the Kentucky Workmen's Compensation Act with regard to the relationship of the parent corporation to the employees of its subsidiary corporation.

III

The trial court, in granting Blue Diamond's motion for summary judgment, found that the deceased miners were not employees of Blue Diamond, rather, that they were employees of Scotia Coal. In his memorandum opinion, the trial court stated:

In determining whether an individual is an employee of another many factors must be considered and no single one is absolutely determinative. Those indicia most often referred to are: who hired the person in question and who has the authority to fire him; who pays the employee; who instructs him as to his hours and the details of his duties; who pays the employer's share of Social Security taxes; who withholds his income tax and remits it to the revenue service. In this case the answers to all of the questions is the same i.e. Scotia Coal Company.

However, the court further found that this was not controlling and that the various insurance policies must be examined "to discover if this plaintiff has coverage for its losses suffered" as a result of the Scotia Coal mining disaster.

It is first noted that throughout the insurance documents the term insured, assured or employer is in the singular. Only two policies in their language even recognize that there might be more than one insured....