McQuade v. Draw Tite, Inc.

• Court: Indiana Supreme Court
• Writing for the Court: SULLIVAN; SHEPARD
• Citation: McQuade v. Draw Tite, Inc., 659 N.E.2d 1016 (Ind. 1995)
• Decision Date: 15 December 1995
• Docket Number: No. 44S05-9512-CV-1353,44S05-9512-CV-1353
• Parties: Mary Jane McQUADE, Appellant, v. DRAW TITE, INC., Appellee.

Page 1016

659 N.E.2d 1016

64 USLW 2446

Mary Jane McQUADE, Appellant, v. DRAW TITE, INC., Appellee.

No. 44S05-9512-CV-1353.

Supreme Court of Indiana.

Dec. 15, 1995.

Patrick F. O'Leary, Yoder Ainlay Ulmer & Buckingham, Goshen, for Appellant.

Douglas A. Hoffman, Miller Carson Boxberger & Murphy, Fort Wayne, for Appellee.

ON PETITION TO TRANSFER

SULLIVAN, Justice.

In several recent cases we have rejected plaintiffs' attempts to "pierce the corporate veil" in claiming contract and tort liability against a corporation's owner or parent. Aronson v. Price (1994), Ind., 644 N.E.2d 864; Winkler v. V.G. Reed & Sons, Inc. (1994), Ind., 638 N.E.2d 1228. Similarly, in this case, we reject defendant's attempt to disregard the corporate form in claiming the protection of the exclusivity provision of the Indiana Workers' Compensation Act for an employer's parent. ¹

Background

In April, 1992, Mary Jane McQuade (plaintiff) sustained injuries while performing her work at Mongo Electronics (Mongo), a subsidiary of Draw Tite, Inc. The parent corporation, Draw Tite, Inc., alone is the defendant in this action. Following the accident, plaintiff made a claim for compensation pursuant to the Indiana Worker's Compensation Act. ² Plaintiff's claim was honored but had not been resolved at the time she filed this action. Plaintiff asserted that defendant was liable to her for assuming and then negligently breaching a duty of care for her job safety. Defendant moved for summary judgment, and the trial court granted the motion. The trial court ruled that plaintiff could not pursue this cause of action because the exclusive remedy for her injuries against her employer was under Indiana's Worker's Compensation Act and defendant was so interconnected with Mongo that it would be considered plaintiff's employer under the Act. The Court of Appeals affirmed. McQuade v. Draw Tite, Inc. (1994), Ind.App., 638 N.E.2d 818. Plaintiff now seeks transfer.

Discussion

I

This is the first case in which Indiana courts have addressed the issue of whether the exclusivity provision of Indiana's Worker's Compensation Act prevents an employee from suing her employer's parent corporation for injuries sustained in the course of employment. The right of an injured employee to bring a legal claim against her employer is governed by Indiana Code § 22-3-2-6 (1993) which provides that the benefits under Indiana's Workers Compensation Act constitute the exclusive remedy to the employee as against the employer:

The rights and remedies granted to an employee subject to I.C. § 22-3-2 through I.C. § 22-3-6 on account of personal injury or death by accident shall exclude all other rights and remedies of such employee, his personal representatives, dependents, or next of kin, at common law or otherwise, on account of such injury or death, except for remedies available under I.C. § 5-2-6.1. ³

Indiana Code § 22-3-2-13 (1993) leaves intact the injured employee's right to pursue a legal claim against any "other person than the employer":

Whenever an injury or death, for which compensation is payable under chapters 2 through 6 of this article shall have been sustained under circumstances creating in some other person than the employer and not in the same employ a legal liability to pay damages in respect thereto, the injured employee, or his dependents in case of death, may commence legal proceedings against the other person to recover damages notwithstanding the employer's compensation insurance carrier's payment of or liability to pay compensation under chapters 2 through 6 of this article.

Indiana Code § 22-3-6-1 (1993) defines "employer" and "employee" as follows:

(a) "Employer" includes the state and any political subdivision, any municipal corporation within the state, any individual, firm, association, or corporation or the receiver or trustee of the same, or the legal representatives of a deceased person, using the services of another for pay. If the employer is insured, the term includes the employer's insurer so far as applicable. However, the inclusion of an employer's insurer within this definition does not allow an employer's insurer to avoid payment for services rendered to an employee with the approval of the employer.

(b) "Employee" means every person, including a minor, in the service of another, under any contract of hire or apprenticeship, written or implied, except on whose employment is both causal and not in the usual course of the trade, business, occupation, or profession of the employer.

The term "other person" used in Indiana Code § 22-3-2-13 is not separately defined.

Although Indiana Code § 22-3-2-6 expressly provides that it is the sole recourse for a worker against his employer for injuries sustained in the course of employment, the statute is silent as to its applicability to an injured worker seeking recourse against his employer's parent corporation. Thus, it appears that the General Assembly intended the exclusivity provision to apply only to an injured worker's employer, not an injured worker's employer's parent corporation. Moreover, the remedies provided in the Worker's Compensation Act are in derogation of common law, Federal Cement & Tile Co. v. Pruitt (1958), 128 Ind.App. 126, 132, 146 N.E.2d 557, 560, and a statute that is in derogation of common law must be strictly construed against limitations on a claimant's right to bring suit. Collier v. Prater (1989), Ind., 544 N.E.2d 497, 498.

In Stump, 601 N.E.2d at 331, this court held that the relationship of a workers' compensation insurance carrier to an employer should not afford the carrier special immunity under the worker's compensation exclusive remedy provision. We went on to observe:

By limiting the application of the exclusive remedy provision to employee claims against the employer and declining to extend its protection to the worker's compensation insurance carrier, we are ... construing the statute in a manner consistent with the purposes of the Act. The longstanding rule of this jurisdiction is that the Worker's Compensation Act should be liberally construed to effectuate the humane purposes of the Act, and that doubts in the application of terms are to be resolved in favor of the employee.

Id. at 331-32 (citations omitted) (emphasis added). Because entities in the defendant's position are not covered under the language of the exclusivity clause and any uncertainty as to the clause's applicability calls for narrow construction of the statute in favor of the employee, we find no statutory basis for the trial court's grant of summary judgment in defendant's favor.

II

A

The standard the Court of Appeals applied in considering the validity of plaintiff's claim was "whether the parent and subsidiary companies are distinct and separately operated corporations which have made significant and continuing efforts to maintain separate entities." McQuade, 638 N.E.2d at 821. It is undisputed that defendant oversees and controls Mongo's operations, "reports Mongo's earnings as profits, shares a worker's compensation policy with Mongo, and performs payroll and accounting functions for Mongo." Id. at 822. The Court of Appeals concluded that these facts alone were sufficient to show that "Draw Tite and Mongo are not distinct and separately operated corporations and that no significant and continuing efforts to maintain separate corporate entities have been made." Id. Therefore, the Court of Appeals considered both defendant and Mongo plaintiff's employers for purposes of Indiana's Worker's Compensation Act and held that plaintiff's claim was barred by the exclusivity provision of the Act. Id.

Plaintiff contends that the Court of Appeals' decision is erroneous because Indiana courts disregard the corporate form only when it has been used to promote fraud or some other injustice, and therefore, the Court of Appeals should not have permitted defendant's "defensive piercing of the corporate veil." Defendant contends that the Court of Appeals properly applied a "reverse piercing" of the corporate veil doctrine in determining that plaintiff's claim is barred. ⁴

B

This issue has been considered by the Seventh Circuit and by courts in other jurisdictions. The United States Court of Appeals for the Seventh Circuit addressed this issue under Indiana law in Reboy v. Cozzi Iron & Metal, Inc., 9 F.3d 1303 (7th Cir.1993). In Reboy, an employee at American Scrap Processing, Inc. (ASP), sued Cozzi Iron & Metal, ASP's parent corporation. The employee claimed that the parent corporation had negligently breached its duty for his proper training and supervision. Id. The United States District Court for the Northern District of Indiana (Lozano, J.) entered judgment for the employee on a jury verdict. Id.

On appeal, the parent corporation asserted that the district court should have granted its summary judgment motion because it was so highly integrated with the subsidiary corporation that the two entities should have been considered one under Indiana's Worker's Compensation Act, and therefore, employee had already exhausted his remedies with respect to the parent corporation. Id. at 1308. With Senior Judge Eschbach writing, the circuit court held that the district court correctly rejected the parent corporation's efforts to characterize the subsidiary corporation as a mere instrumentality of Cozzi because the record was replete with evidence that the subsidiary corporation and the parent corporation were distinct and separately operated corporations that had made significant and continuing efforts to maintain their separateness. Id. The Reboy court also stated that it agreed with the district court and the plaintiffs that the parent corporation's defensive use of the "piercing the corporate veil" doctrine may simply be inappropriate under Indiana law. Id. at n. 9.

C

The most widely accepted approach to this issue ⁵ was adopted by the United States Court of Appeals for the Sixth Circuit in Boggs v....