Fireman's Fund Ins. Co. v. Sherman & Fletcher

• Decision Date: 27 February 1986
• Docket Number: Nos. 84-SC-279-D,84-SC-274-DG,s. 84-SC-279-D
• Citation: 705 S.W.2d 459
• Parties: FIREMAN'S FUND INSURANCE COMPANY, Movant, v. SHERMAN & FLETCHER, John Sherman, Raymond Fletcher, and Otto Thillman, Respondents. Karen A. GEORGE, Administratrix of the Estate of David H. George; Active Constructors; Daniel Krusenklaus; Howard R. Clausen; and Patrick L. Devine, Movants, v. SHERMAN & FLETCHER, John Sherman, Raymond Fletcher, and Otto Thillman, Respondents.
• Court: United States State Supreme Court — District of Kentucky

Page 459

705 S.W.2d 459

FIREMAN'S FUND INSURANCE COMPANY, Movant, v. SHERMAN & FLETCHER, John Sherman, Raymond Fletcher, and Otto

Thillman, Respondents.

Karen A. GEORGE, Administratrix of the Estate of David H.

George; Active Constructors; Daniel Krusenklaus;

Howard R. Clausen; and Patrick L.

Devine, Movants, v. SHERMAN & FLETCHER, John Sherman, Raymond Fletcher, and Otto

Thillman, Respondents.

Nos. 84-SC-279-DG, 84-SC-274-DG

Supreme Court of Kentucky.

Feb. 27, 1986.

O. Grant Bruton, Middleton & Reutlinger, Louisville, for movants in No. 84-SC-274-DG.

Thomas C. Hundley, Stites & Harbison, Lexington, for respondents in No. 84-SC-274-DG.

Kenneth H. Baker, James S. Scroghan, Louisville, for movant in No. 84-SC-279-DG.

Thomas C. Hundley, Lexington, for respondents in No. 84-SC-279-DG.

VANCE, Justice.

This case presents questions concerning (1) the right of an injured employee of a subcontractor to recover in tort from an owner who has acted as his own contractor, (2) the right of a subcontractor in a suit against him in tort to implead the contractor on a claim for subrogation or indemnity, and (3) the right of an insurer which has paid compensation to the employee of a subcontractor to indemnify itself against the contractor when the negligence of the contractor caused the injury.

The complex factual situation giving rise to this case is as follows:

Sherman and Fletcher: John Sherman and Raymond Fletcher, individually and as partners, were the owners and developers of a residential construction complex consisting of 21 townhouses known as the Wessex Project. They contracted with others for most of the construction work.

David S. Elder, Inc. was a framing subcontractor engaged to do the rough framing carpentry on the Wessex construction project.

David H. George was an employee of Elder, Inc. who was killed when a concrete block wall at the construction site collapsed.

Active Constructors is a partnership which subcontracted to construct the concrete block wall which collapsed and killed David George.

Fireman's Fund Insurance Company carried the worker's compensation insurance for Elder, Inc. and paid benefits to the estate of David George.

The trial court dismissed all claims against Sherman & Fletcher. We affirm.

THE CLAIM OF KAREN A. GEORGE ADMINISTRATRIX OF THE ESTATE OF

DAVID H. GEORGE

Elder, Inc., the employer of David George, paid worker's compensation benefits to the estate of George. The estate elected to seek recovery for wrongful death against Sherman & Fletcher, claiming that Sherman and Fletcher was responsible as a third party whose negligence had caused the death. The negligence attributed to Sherman and Fletcher was that it failed to properly supervise the construction project and failed to require that the concrete block wall under construction be adequately braced.

Sherman & Fletcher was granted a summary judgment on the claim of the George Estate on the ground that the worker's compensation statutes precluded such recovery.

K.R.S. 342.610 provides that (1) every employer subject to the chapter shall be liable for compensation for injury without regard to fault, (2) a contractor who subcontracts any part of his contract shall be liable for the payment of compensation to the employees of the subcontractor unless the subcontractor primarily liable for the payment of such compensation has secured its payment as provided by Chapter 342, and (3) a person who contracts with another to have work performed of a kind which is a regular or recurrent part of the work of the trade, business, occupation or profession of such person, shall be deemed a contractor and such other person a subcontractor.

K.R.S. 342.690(1) provides:

"If an employer secures payment of compensation as required by this chapter, the liability of such employer under this chapter shall be exclusive and in place of all other liability of such employer to the employe, his legal representative, husband or wife, parents, dependents, next of kin, and anyone otherwise entitled to recover damages from such employer at law or in admiralty on account of such injury or death. For purposes of this section, the term 'employer' shall include a 'contractor' covered by KRS 342.610, whether or not the subcontractor has in fact, secured the payment of compensation. The liability of an employer to another person who may be liable for or who has paid damages on account of injury or death of an employe of such employer arising out of and in the course of employment and caused by a breach of any duty or obligation owed by such employer to such other shall be limited to the amount of compensation and other benefits for which such employer is liable under this chapter on account of such injury or death, unless such other and the employer by written contract have agreed to share liability in a different manner. The exemption from liability given an employer by this section shall also extend to such employer's carrier and to all employes, officers or directors of such employer or carrier, provided the exemption from liability given an employe, officer or director or an employer or carrier shall not apply in any case where the injury or death is proximately caused by the wilful and unprovoked physical aggression of such employe, officer or director."

The statutes make it plain that if Sherman & Fletcher is a contractor, it has no liability in tort to an injured employee of a subcontractor. It is also clear that Sherman & Fletcher is a contractor if the work subcontracted to George's employer is work of a kind which is a regular or recurrent part of the work of the trade, business, occupation or profession of Sherman & Fletcher.

Elder, Inc., George's employer, contracted to perform the rough framing carpentry on the project. It cannot be disputed that rough framing carpentry is work of a kind which is a regular or recurrent part of the work of the occupation or trade of building construction in which Sherman & Fletcher was engaged.

Mrs. George claims, however, that the subcategory of carpentry which is designated as "rough framing" was a type of carpentry which Sherman & Fletcher did not do for itself but usually subcontracted to others. We agree with the Court of Appeals that such a distinction is of no significance.

The purpose of the provision of K.R.S. 342.610 that a contractor is liable for compensation benefits to an employee if a subcontractor who does not secure compensation benefits is to prevent subcontracting to irresponsible people. Elkhorn-Hazard Coal Land Corp. v. Taylor, Ky., 539 S.W.2d 101, 103 (1976).

In Bright v. Reynolds Metals Co., Ky., 490 S.W.2d 474 (1973), we held that a principal contractor was one who performed work for another. Reynolds Metals Company acted as its own contractor, but it was not performing work for another and therefore was held not to be a principal contractor under the statute in force at that time. Because of that fact, Reynolds Metals was held to have no liability for compensation to the employee of a subcontractor and a tort claim was therefore allowed.

The decision in Bright v. Reynolds Metal Co., supra, pointed out that the statutes of many states provided that a person who contracted for work to be done by another which was of the kind he usually performed for himself was construed to be a principal contractor. Our statute had no such provision at that time.

Following the decision in Bright v. Reynolds Metals Co., supra, the General Assembly enacted K.R.S. 342.610 in its present form which provides that a person who contracts with another to do work of a kind which is a recurrent part of the work of the trade or occupation of such person shall be deemed a contractor. We construe this to mean that a person who engages another to perform a part of the work which is a recurrent part of his business, trade, or occupation is a contractor. Even though he may never perform that particular job with his own employees, he is still a contractor if the job is one that is usually a regular or recurrent part of his trade or occupation. The business or occupation of Sherman & Fletcher was building construction, and rough carpentry is work of a kind which is a regular or recurrent part of the work of the business of building construction. Sherman & Fletcher would have been liable for the worker's compensation benefits to David George if Elder, Inc., his employer, had not secured those benefits. K.R.S. 342.610(2). That potential liability for worker's compensation benefits relieves Sherman & Fletcher from tort liability. K.R.S. 342.690.

THE CLAIM OF ACTIVE CONSTRUCTORS AGAINST SHERMAN & FLETCHER

Active Constructors sought to indemnify itself against Sherman & Fletcher for any damages it might be required to pay to the administratrix of the Estate of David George because of his wrongful death. Active contended that the negligence of Sherman & Fletcher was the primary cause of the death. The trial court dismissed the claim, and the Court of Appeals affirmed.

The only contention asserted by Active Constructors in this court is that Active has a jural right to indemnity and that the time has come to determine the constitutionality of K.R.S. 342.690(1) which purports to limit that jural right. Active relies upon Sections 54 and 241 of the Kentucky Constitution for the proposition that the General Assembly has no authority to limit the right to indemnification.

The Court of Appeals did not make any determination of the constitutionality of the statute as it applies to Active Constructors. Perhaps a reason for this is that Active Constructors did not raise the constitutional issue in the Court of Appeals.

Sherman & Fletcher contended in the Court of Appeals that the constitutionality of the statute should not be considered because notice was not served upon the Attorney General as required by K.R.S. 418.075 and by C.R. 24.03.

In its reply brief filed in the Court of Appeals, Active Constructors...