Brown v. Indiana Ins. Co., No. 2004-SC-0065-DG.

Decision Date22 December 2005
Docket NumberNo. 2004-SC-0065-DG.,No. 2004-SC-0070-DG.,No. 2004-SC-0071-DG.,No. 2004-SC-0067-DG.
Citation184 S.W.3d 528
PartiesCharles K. BROWN, Administrator of the Estate of Jose Garcia; Maria Puente Salanda, Individually; Maria Puente Salanda, as Next Friend of Ruben Villicana Puente; Maria Puente Salanda, as Next Friend of Maria Consuelo Villicana; and Maria Puente Salanda, as Next Friend of Jesus Villicana Puente Appellants, v. INDIANA INSURANCE COMPANY; Darren Akers; Shelby and Finch Garden, LLC, D/B/A Willowbank Garden Company; Matt Zehnder; CSX Transportation; and Wendy O'Banion, as Administratrix of the Estate of Chase O'Banion Appellees. Shelby and Finch Garden, LLC, D/B/A Willowbank Garden Company; Matt Zehnder; and Darren Akers Appellants, v. Indiana Insurance Company; Wendy O'Banion, as Administratrix of the Estate of Chase O'Banion; CSX Transportation; Charles K. Brown, Administrator of the Estate of Jose Garcia; Maria Puente Salanda, Individually; Maria Puente Salanda, as Next Friend of Ruben Villicana Puente; Maria Puente Salanda, as Next Friend of Maria Consuelo Villicana; and Maria Puente Salanda, as Next Friend of Jesus Villicana Puente Appellees. CSX Transportation, Inc. Appellant, v. Indiana Insurance Company Appellee. Wendy O'Banion, as Administratrix of the Estate of Chase O'Banion Appellant, v. Indiana Insurance Company; Charles Brown, Administrator of the Estate of Jose Garcia; Maria Puente Saldana, Individually; Maria Puente Saldana, Next Friend of Ruben Villicana Puente; Maria Puente Saldana, Next Friend of Maria Consuelo Villicana; Maria Puenta Saldana, Next Friend of Jesus Villicana Puente; Shelby & Finch Garden Company D/B/A Willowbank Garden Company; Matthew Zehnder; CSX Transportation; and Darren Akers Appellees.
CourtUnited States State Supreme Court — District of Kentucky
184 S.W.3d 528
Charles K. BROWN, Administrator of the Estate of Jose Garcia; Maria Puente Salanda, Individually; Maria Puente Salanda, as Next Friend of Ruben Villicana Puente; Maria Puente Salanda, as Next Friend of Maria Consuelo Villicana; and Maria Puente Salanda, as Next Friend of Jesus Villicana Puente Appellants,
v.
INDIANA INSURANCE COMPANY; Darren Akers; Shelby and Finch Garden, LLC, D/B/A Willowbank Garden Company; Matt Zehnder; CSX Transportation; and Wendy O'Banion, as Administratrix of the Estate of Chase O'Banion Appellees.
Shelby and Finch Garden, LLC, D/B/A Willowbank Garden Company; Matt Zehnder; and Darren Akers Appellants,
v.
Indiana Insurance Company; Wendy O'Banion, as Administratrix of the Estate of Chase O'Banion; CSX Transportation; Charles K. Brown, Administrator of the Estate of Jose Garcia; Maria Puente Salanda, Individually; Maria Puente Salanda, as Next Friend of Ruben Villicana Puente; Maria Puente Salanda, as Next Friend of Maria Consuelo Villicana; and Maria Puente Salanda, as Next Friend of Jesus Villicana Puente Appellees.
CSX Transportation, Inc. Appellant,
v.
Indiana Insurance Company Appellee.
Wendy O'Banion, as Administratrix of the Estate of Chase O'Banion Appellant,
v.
Indiana Insurance Company; Charles Brown, Administrator of the Estate of Jose Garcia; Maria Puente Saldana, Individually; Maria Puente Saldana, Next Friend of Ruben Villicana Puente; Maria Puente Saldana, Next Friend of Maria Consuelo Villicana; Maria Puenta Saldana, Next Friend of Jesus Villicana Puente; Shelby & Finch Garden Company D/B/A Willowbank Garden Company; Matthew Zehnder; CSX Transportation; and Darren Akers Appellees.
No. 2004-SC-0065-DG.
No. 2004-SC-0067-DG.
No. 2004-SC-0070-DG.
No. 2004-SC-0071-DG.
Supreme Court of Kentucky.
December 22, 2005.
Rehearing Denied March 23, 2006.

Page 529

COPYRIGHT MATERIAL OMITTED

Page 530

C. Lewis Mathis, Jr., Nathan Riggs, Shelbyville, Counsel for Appellants Charles K. Brown, Administrator of the Estate of Jose Garcia; Maria Puente Salanda, Individually; Maria Puente Salanda, as Next Friend of Ruben Villicana Puente; Maria Puente Salanda, as Next Friend of Maria Consuelo Villicana; and Maria Puente Salanda, as Next Friend of Jesus Villicana Puente (2004-SC-0065-DG).

Allan Weiss, Ferreri & Fogle, Louisville, Counsel for Appellee Indiana Insurance Company (2004-SC-0065-DG, 2004-SC-0067-DG, 2004-SC-0070-DG and 2004-SC-0071-DG).

Donald L. Miller, II, Christopher M. Mussler, Frost, Brown, Todd, LLC, Louisville, Counsel for Appellee Darren Akers (2004-SC-0065-DG and 2004-SC-0071-DG).

Mark S. Fenzel, David J. Kellerman, Middleton & Reutlinger, Louisville, C. Gilmore Dutton, III, Shelbyville, Counsel for Appellees Shelby and Finch Garden, LLC, D/B/A Willowbank Garden Company; and Matt Zehnder (2004-SC-0065-DG).

David R. Monohan, J.T. Blaine Lewis, Woodward, Hobson & Fulton, Louisville, Counsel for CSX Transportation (2004-SC-0065-DG, 2004-SC-0067-DG, 2004-SC-0070-DG and 2004-SC-0071-DG).

Glenn Alan Cohen, Paul Joseph Hershberg, Louisville, Counsel for Appellee Wendy O'Banion, as Administratrix of the Estate of Chase O'Banion (2004-SC-0065-DG and 2004-SC-0067-DG).

Glenn Alan Cohen, Carl D. Frederick, Paul Joseph Hershberg, Louisville, Counsel for Appellant Wendy O'Banion, as Administratrix of the Estate of Chase O'Banion (2004-SC-0071-DG).

C. Gilmore Dutton, III, John C. Robinson, Shelbyville, Counsel for Appellants Shelby and Finch Garden, LLC, D/B/A Willowbank Garden Company; Matt Zehnder; and Darren Akers (2004-SC-0067-DG).

Nathan Riggs, Shelbyville, Counsel for Appellee Charles K. Brown, Administrator of the Estate of Jose Garcia (2004-SC-0067-DG).

C. Lewis Mathis, Jr., T. Sherman Riggs, Shelbyville, Counsel for Appellee Charles

Page 531

Brown, Administrator of the Estate of Jose Garcia; Maria Puente Saldana, Individually; Maria Puenta Saldana, Next Friend of Ruben Villicana Puente; Maria Puenta Saldana, Next Friend of Maria Consuelo Villicana; and Maria Puenta Saldana, Next Friend of Jesus Villicana Puente (2004-SC-0071-DG).

C. Gilmore Dutton, III, Benjamin M. Salyers, Shelbyville, Counsel for Appellees Shelby & Finch Garden Company D/B/A Willowbank Garden Company; and Matthew Zehnder (2004-SC-0071-DG).

COOPER, Justice.


The issue presented by this appeal is whether a commercial automobile liability insurance policy affords coverage for damages sought in a tort action brought against the insured employer for the wrongful death of its employee, where the action would have been barred by the exclusive remedy provision of the Kentucky Workers' Compensation Act but for the fact that the employer failed to procure a policy of workers' compensation insurance. We hold that the automobile liability policy neither affords coverage for such an action nor requires the insurer to pay the cost of defending such an action.

On June 19, 2001, Jose Garcia and Chase O'Banion were killed when the pickup truck in which they were passengers collided with a CSX railroad train. The pickup truck was owned by Shelby and Finch Garden, LLC, d/b/a Willowbank Garden Company ("Willowbank"), a landscaping business, and was being driven at the time of the collision by Darren Akers, an employee of Willowbank. Garcia and O'Banion were also employees of Willowbank, and all three were in the course and scope of their employment when the accident occurred. Ordinarily, under KRS 342.690(1), the exclusive remedy available to the estates of Garcia and O'Banion would be death benefits payable under KRS 342.750 of the Workers' Compensation Act. However, Willowbank, despite the mandatory provisions of that Act, KRS 342.630(1), had failed either to purchase a policy of workers' compensation insurance or to qualify as a self-insurer as required by KRS 342.340(1). Under that circumstance, KRS 342.690(2) also authorizes an injured employee to bring an action against the employer in tort. Thus, the estates of Garcia and O'Banion brought this wrongful death action in the Shelby Circuit Court seeking damages against Willowbank and Akers (and CSX).

Willowbank was the named insured of a policy of commercial automobile insurance issued by Indiana Insurance Company that provided liability coverage for the pickup truck operated by Akers at the time of this accident. Akers was an additional insured under the "permissive user" clause of the policy. Claiming that the policy covers the tort claims asserted by the estates of Garcia and O'Banion, Willowbank and Akers demanded that Indiana Insurance defend them against the tort actions and pay any damages recovered against them by the estates. Indiana Insurance intervened in the tort action and petitioned for a declaration of rights on the coverage question. The Shelby Circuit Court entered summary judgment in favor of Willowbank and Akers on the coverage issue. The Court of Appeals reversed with directions to enter a summary judgment in favor of Indiana Insurance. We granted discretionary review and now affirm the decision of the Court of Appeals.

Like all commercial automobile liability and comprehensive general liability (CGL) policies (except a so-called "Stop Gap" policy, which Willowbank also could have purchased but did not), the Indiana Insurance policy at issue here specifically excludes coverage for injuries falling within the purview

Page 532

of the Workers' Compensation Act. Such exclusions are "intended to be compatible with the requirements of the Workers' Compensation Act, and to prevent the payment of double premiums and the need for unnecessary coverage by insurers." Canal Ins. Co. v. Nix, 7 P.3d 1038, 1040 (Colo. Ct.App. 1999). See also United Servs. Auto. Ass'n v. Pinkard, 356 F.2d 35, 37 (4th Cir.1966) (construing Virginia law) ("It is plain that the exclusion clause used here was drafted in view of the state Workmen's Compensation Acts."). Willowbank asserts that such exclusions do not apply to injuries falling within the purview of the Workers' Compensation Act when an irresponsible employer1 fails to procure a policy of workers' compensation insurance. If so, then, ipso facto, every commercial automobile liability and CGL policy issued in Kentucky (but only in Kentucky) would be deemed to provide potential workers' compensation coverage as well as automobile and general liability coverage. It is a fact of life and good business practice in the insurance industry that increased coverage requires increased premiums. The potential impact of such a holding on insurance premiums paid by responsible business employers in Kentucky would be, to say the least, ominous. Since all other jurisdictions that have considered the issue have reached the opposite conclusion, the concomitant increased cost of doing business in Kentucky would also place responsible Kentucky businesses at a competitive disadvantage.

I. WORKERS' COMPENSATION ACT.

KRS 342.690(1) provides that "[i]f an employer secures payment of compensation," i.e., procures a policy of workers' compensation insurance, its liability and the liability of its employees for the unintentional injury or death of an employee is limited to the remedies provided by the Workers' Compensation Act. KRS 342.690(2), however, provides:

If an employer fails to secure payment of compensation as required by this chapter, an injured employee, or his legal representative in case death results from the injury, may claim compensation under this chapter and in addition may maintain an action at law or in admiralty for damages on account of such injury or death, provided that the amount of compensation shall be credited against the amount received in such action, and provided that, if the amount of compensation is larger than the amount of damages received, the amount of damages less the employee's legal fees and expenses shall be credited against the amount of compensation. In such action the defendant may not plead as a defense that the injury was caused by the negligence of a fellow servant, that the...

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