Bryant v. Old Republic Insurance Company, 20190.

• Decision Date: 02 October 1970
• Docket Number: No. 20190.,20190.
• Parties: Anna Mae BRYANT, Administratrix of the Estate of James McKinley Bryant, Deceased, et al. and Della Sue Rice, Administratrix of the Estate of Will Rice, Deceased, Plaintiffs-Appellants, v. OLD REPUBLIC INSURANCE COMPANY, Defendant-Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

431 F.2d 1385 (1970)

Anna Mae BRYANT, Administratrix of the Estate of James McKinley Bryant, Deceased, et al. and Della Sue Rice, Administratrix of the Estate of Will Rice, Deceased, Plaintiffs-Appellants, v. OLD REPUBLIC INSURANCE COMPANY, Defendant-Appellee.

No. 20190.

United States Court of Appeals, Sixth Circuit.

October 2, 1970.

Clifford L. Walters, Paducah, Ky., for appellants, Williams, Walters & Miller, Paducah, Ky., on brief.

Beard, Rummage & Kamuf, Owensboro, Ky., for Della Sue Rice.

James M. Graves, Louisville, Ky., for defendant-appellee, Edward H. Stopher, Boehl, Stopher, Graves & Deindoerfer, Louisville, Ky., on brief.

Before PHILLIPS, Chief Judge, and EDWARDS and CELEBREZZE, Circuit Judges.

CELEBREEZE, Circuit Judge.

The Appellants in these consolidated cases are the personal representatives of the estates of eight coal miners who were killed in the course of their employment in the River Queen Underground Mine No. 1 of the Peabody Coal Company in Muhlenberg County, Kentucky, on August 7, 1968.

Jurisdiction is based upon diversity of citizenship. Kentucky law controls.

The eight deceased coal miners were covered by the Kentucky Workmen's Compensation Statute, KRS § 342.001 et seq. Old Republic Insurance Company (Old Republic) is the workmen's compensation insurance carrier for Peabody Coal Company.

Suit was initiated against Old Republic as a third party under the provisions of § 342.055¹ of the Kentucky Workmen's Compensation Act which allows an injured employee to sue either the employer or the third party responsible for the injury or both, but provides that he cannot recover from both parties. The complaint alleged that Old Republic had made or assumed the duty to make certain safety inspections of the mine in which the explosion occurred; that the inspections were either not made or that they were made negligently; and that this breach of duty by the insurance company resulted in the death of decedents.

The District Court granted Old Republic's motion to dismiss pursuant to Rule 12(b) (6), Fed.R.Civ.Proc., on the ground that under the substantive law of the Commonwealth of Kentucky the workmen's compensation carrier is sufficiently equated with the employer to share his immunity from common law suits by injured employees of the insured. The present appeal is from the order of the District Court dismissing the cause of action.

The question presented to this court is one of law: whether a workmen's compensation insurance carrier who is obligated under KRS § 342.365 to pay benefits to the personal representative of a deceased employee of the insured is also subject to a suit under KRS § 342.055 as a negligent third party for its failure to make adequate safety inspections. No Kentucky court has yet determined this question.

Kentucky's Workmen's Compensation Act specifically immunizes an "employer" from the ordinary common law tort action for wrongful death of an employee. Its provisions, which include no fault liability, are meant to be the exclusive remedy of the employee's personal representatives against the employer under most circumstances. Kentucky Revised Statutes § 342.015 (1962). We do not believe that under the factual allegations of this case Kentucky law extends the statutory immunity expressly granted to employers to the allegedly negligent acts or omissions of their insurance carriers.

Appellee contends that the insurance carrier is a part of the greater "employer unit" and betakes of the employer's immunity. The District Court agreed. It held under the authority of McEvilly v. L. E. Myers Co., 211 Ky. 31, 276 S.W. 1068, that the Workmen's Compensation Act deprives the appellants of their "common law right of action against the employer or anyone else except `a third party having no connection with the work.'" However, the quoted language from McEvilly upon which the District Court relied was modified in the subsequent case of Peters v. Radcliff Ready Mix Concrete, Inc., 412 S.W.2d 854 (Ky. 1967). In Peters the Kentucky Court of Appeals stated:

"It is our considered opinion that the statement in McEvilly to the effect that `employer\' includes anyone having any `connection with the general work being performed\' is far too broad. We think the meaning of `employer\' cannot be extended to people who have none of an employer\'s obligations (such as the principal contractor\'s workmen\'s compensation obligation to employes of a subcontractor) and who are not members of an integrated employment unit so that the employer\'s immunity envelops them." Peters v. Radcliff Ready Mix Concrete, Inc., supra at 856.

Thus, the highest court of the State of Kentucky has withdrawn from the position relied upon by the District Court that any connection with the broadly defined employment unit is sufficient to shelter the party with the employer's immunity. Rather such person may be subject to civil liability as "some other person" under KRS § 342.055 (1962).

The Peters case is not dispositive, however, of the instant case. It involved an action by an employee of a subcontractor against another subcontractor. Hence, we have no clear statement of Kentucky law as to whether an insurance carrier is to be considered an "employer" or "some other person" for purposes of immunity from the common law actions of the employees of an insured employer.

A review of the Kentucky constitution and revised statutes reveals that the personal representatives of an estate have a constitutionally protected right to recover for wrongful death, "unless otherwise provided by law." Constitution of Kentucky § 241. The General Assembly of Kentucky subsequently codified this constitutional right to recover for wrongful death and set out how the action should ordinarily be prosecuted and the amounts recovered distributed. Kentucky Revised Statute § 411.130 (1962). The Workmen's Compensation Act is an express exception to Kentucky's constitutional and statutory right to bring an action for recovery of damages from wrongful death. It expressly grants immunity from a tort action to "an employer," Kentucky Revised Statutes § 342.015, or "a principal contractor, intermediate or subcontractor," Kentucky Revised Statute § 342.060. It grants a right of recovery to the "employer or his insurance carrier," for any indemnity it may have paid under workmen's compensation if "some other person than the employer" has "a legal liability to pay damages." At no time does the statutory framework of the Workmen's Compensation Act expressly grant immunity from suit by employees or their representatives to insurance carriers of the employer.

We do not feel that in order to foster the availability of insurance the Workmen's Compensation Act impliedly grants insurance carriers the immunity which the Kentucky Workmen's Compensation Act grants employers. While an insurer may be primarily liable for the workmen's compensation indemnity, KRS § 342.365 (1962), Kentucky law does not require the insurance carrier to provide such insurance. Insurance carriers volunteer to participate in insuring workmen's compensation cases and need not undertake such contracts if they feel the premium will not justify the risk. No-where in the statutory framework is there an implication that the employer's insurance carrier should be granted immunity from his own negligent actions to induce him to insure employers seeking workmen's compensation insurance.

Just as insurance carriers are voluntarily induced into insuring workmen's compensation risks by the premiums they charge, so also do these carriers voluntarily engage in safety inspections to enhance their economic returns from their insurance coverage. Promises to make safety inspections are not taken because there is a workmen's compensation law, but are made to reduce industrial accidents and enhance carrier profits. There is nothing in the history of the Kentucky legislation which suggests that the law sought to encourage insurance inspections by granting immunity to an insurance carrier for allegedly making negligent inspections or negligently failing to make a promised safety inspection.

While we are charged to construe the Workmen's Compensation Act "liberally," KRS § 342.004, we believe that the General Assembly did not eliminate, explicitly or implicitly, an employee's right under the Kentucky constitution to bring an action for wrongful death against an allegedly negligent insurance carrier of his employer.

Since we are bound to decide this case as we believe the courts of Kentucky would have done, Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), the decisions of this Court of Appeals and others involving similar laws in other states are of marginal relevance. It should be noted, however, that the Workmen's Compensation Acts of Michigan, Ray v. Transamerica Insurance Co., 10 Mich.App. 55, 158 N.W.2d 786, leave to appeal denied, 381 Mich. 766 (1968), of Iowa, Fabricius v. Montgomery Elevator Co., 254 Iowa 1319, 121 N.W.2d 361 (1963) and of Pennsylvania, Mays v. Liberty Mutual Insurance Co., 323 F.2d 174 (3d Cir. 1963) have all been construed by courts as not bestowing the employer's immunity from an action in tort upon his insurance carrier. But see cases collected at 93 A.L.R.2d 591 for listing of state courts which have found that under Workmen's Compensation Acts of other states the insurance carrier has been treated as an "employer." We are particularly impressed with the ratio decidendi of the Court of Appeals for the Third Circuit in considering the Pennsylvania Workmen's Compensation Act, Mays v. Liberty Mutual Insurance Company, 323 F.2d at 178, in which they strongly suggest that not only is an insurance carrier not expressly or impliedly induced into offering insurance by an expectation of receiving an employer's immunity from negligent acts or omissions, but also that an insurance carrier who is to be held liable for allegedly negligent safety...