Matlock v. Hollis

• Decision Date: 25 January 1941
• Docket Number: 35049.
• Parties: MATLOCK v. HOLLIS et al.
• Court: Kansas Supreme Court

109 P.2d 119

153 Kan. 227

MATLOCK v. HOLLIS et al.

No. 35049.

Supreme Court of Kansas

January 25, 1941

Syllabus by the Court.

In injured employee's action against employers and insurer to recover compensation for injury, evidence sustained trial court's finding that employers fraudulently concealed from insurer, when application for insurance was made, the fact that employee had been seriously injured within the term fixed in antedated policy. Gen.St.1935, 44-501 to 44-565.

The Workmen's Compensation Act is founded broadly upon considerations of public policy, its purpose being to provide protection to workmen within the limit established by the act, and particularly in hazardous employments. Gen.St.1935 44-501 to 44-565.

The Workmen's Compensation Act is given a liberal interpretation in favor of an employee. Gen.St.1935, 44-501 to 44-565.

The Workmen's Compensation Act provides penalties to employer and insurer for violation of certain provisions of the act but the state is not a guarantor of protection which the act contemplates, and if an employer has not taken out compensation insurance and if he proves not to be financially responsible, the law provides no civil recourse to the employee other than his right of action against the employer. Gen.St.1935, 44-501, 44-532.

Where employer secured and accepted a workmen's compensation insurance policy wherein the term of coverage was antedated a number of hours and included time when employee had received a serious injury, but such fact was fraudulently concealed from insurer, policy was void ab initio and did not confer right upon employee to recover for compensation from insurer against which principle of "estoppel" could not be invoked. Gen.St.1935, 44-501 to 44-565.

Employers subject to the Workmen's Compensation Act, secured and accepted a compensation insurance policy wherein the term of coverage was antedated a number of hours and included the time when an employee had received a serious injury. In an action by the employee against the employers and the insurance company to recover compensation for the injury wherein judgment was entered against the employers and in favor of the insurance company, the record is examined and it is held that:

(1) The finding of fact by the trial court that the employers fraudulently concealed from the insurance company, when the application for insurance was made, the fact that an employee had been seriously injured within the term fixed in the antedated policy, was supported by the evidence.

(2) The policy, so secured, was void ab initio, and could not confer upon the employee a right to recover compensation from the insurance company for the prior injury, no insurance policy having been issued or applied for and no right of action existing against the insurance company when the injury occurred.

Appeal from the District Court, Greenwood County; Allison T. Ayres, Judge.

Proceedings under the Workmen's Compensation Act by Ernest Matlock, by Joe Matlock, his father and next friend, against J. P. and B. P. Hollis, doing business as Hollis Brothers, employers, and the Employers' Liability Assurance Corporation, Limited, insurer. From a judgment, on appeal from the compensation commissioner, denying relief against the Employers' Liability Assurance Corporation, Limited, the claimant appeals.

Homer V. Gooing, of Eureka, for appellant.

Robert C. Foulston, George Siefkin, Sidney L. Foulston, Lester L. Morris, George B. Powers, Carl T. Smith, C. H. Morris, and John F. Eberhardt, all of Wichita, for appellees.

HOCH Justice.

This is a workmen's compensation case. Claimant, an injured workman, secured a default judgment in the district court against the employer, but was denied relief from the defendant insurance company. From the latter adverse judgment, he appeals.

The questions presented are whether the trial court's findings, as to the material facts, are supported by the evidence, and whether, if so supported, the court erred in its conclusion of law that the claimant had no right of recovery as against the insurance company. More specifically, the main law question is whether an employee can recover compensation from an insurance company, for serious injury received prior to the application or issuance of an antedated compensation insurance policy, but within the term therein fixed, the fact of such injury having been fraudulently concealed by the employers when the application was made.

This case has been here before on another question. At the initial hearing before the commissioner, counsel for the insurance company made a statement which by admission became a stipulation as to certain facts, and outlined the company's contention that on account of fraudulent representations and concealment, there was no coverage. Counsel and commissioner believing that the commissioner was without jurisdiction to consider the company's equitable defense, no testimony was introduced by the company. The commissioner made an award from which the company appealed to the district court. Pending the hearing of this appeal in the district court, the insurance company instituted an independent action in equity seeking reformation or cancellation of the policy and an injunction against enforcement of the policy. Claimant, the employers, and the compensation commissioner were made defendants in the equity action, and pending the outcome of that action, the compensation proceedings were stayed in the district court. In Employers' Liability Assurance Corp. v. Matlock, 151 Kan. 293, 98 P.2d 456, 127 A.L.R. 461, this court considered an appeal from an order of the district court sustaining a demurrer to the petition in the equity action and held, in an opinion filed January 27, 1940, that the jurisdiction of the compensation commissioner is complete, with a procedure that is exclusive for determining liability under the Workmen's Compensation Act, and that incidental thereto is the power to hear and determine equitable defenses. Accordingly, the order sustaining the demurrer was affirmed on the ground that the district court had no jurisdiction to entertain the separate action in equity until the remedies provided by the Compensation Act were exhausted. The appeal from the award by the commissioner thereupon proceeded in the district court.

The trial court made rather extended and detailed findings of fact and conclusions of law. It will suffice to summarize the findings of fact pertinent to the issue presented. The court found:

That J. P. and B. P. Hollis were drilling an oil well in Greenwood county in October, 1937;

That Ott Hollis, their father, was personally interested with his sons in the oil drilling business, employed help, paid bills, paid this claimant for his work on the well, gave directions to the workers, and was in fact a partner;

That in November, after the accident in October, Ott Hollis wrote to the claimant advising him he was sending him some money and would have something for him to do as soon as he could drive a truck, and that "then we will take care of the hospital bill and doctor";

That in the forenoon of October 22, 1937, claimant received a severe injury while working on the well for Hollis Brothers, B. P. Hollis being present at the time;That in September, 1937, Mr. Corrigan, a solicitor for the Wheller-Kelly-Hagney Company of Wichita, wrote Hollis a letter asking about their compensation insurance, but received no reply at the time;

That in the afternoon of October 22, about four hours after the accident, Ott Hollis called upon Corrigan at his office in Wichita, "and representing the partnership, made application for compensation insurance with the Employers' Liability Insurance Corporation";

That the application was received by Corrigan, together with a check for about $112 in payment of the premium, and Hollis requested that the check be held until he could get back to Eureka and send a draft for it;

That a policy was thereupon issued, dated October 22, and the term fixed to begin at 12:01 A. M. of the same day--this provision of the policy being printed thereon in harmony with what appeared to be the customary practice of the company in making such policies run from 12:01 A. M. of the date of issue;

That it does not appear from the record as to what date the policy was actually issued;

That when Hollis made the application he advised the agent that "they had carried compensation for about a five-year period; that they had only had two minor accidents prior to that period of time, and that they had never had any insurance cancelled";

That the statements so made to the agent were false for the reason that they had had compensation insurance previously which had been cancelled and that they had had losses;

That Hollis did not disclose to the company the fact that the employee, Matlock, had been injured about four hours previous to the making of the application;

That the company, having discovered later upon investigation that the employee had been injured as above stated, that Hollis Brothers had had compensation insurance previously which had been cancelled, that they had had losses, that they were not financially reliable, returned the check and cancelled the policy as of the date of issue;

That "representations made by Hollis as above were untrue and were fraudulently made for the purpose of securing said insurance, and such representations and the withholding of information of fact that an injury had already occurred to one of their employees, claimant herein, worked a fraud upon the insurance company";

That prior to the instant application "these people had carried other liability insurance," that Joe Matlock father of the claimant, testified: "'Well, of course John Hollis...