Pacific Indem. Co. v. Hamman Wholesale Lumber & Supply Co.

• Court: Arizona Supreme Court
• Writing for the Court: BERNSTEIN; LOCKWOOD, V. C. J., and STRUCKMEYER
• Citation: Pacific Indem. Co. v. Hamman Wholesale Lumber & Supply Co., 390 P.2d 897, 95 Ariz. 362 (Ariz. 1964)
• Decision Date: 01 April 1964
• Docket Number: No. 7314,7314
• Parties: PACIFIC INDEMNITY COMPANY, a corporation, Appellant, v. HAMMAN WHOLESALE LUMBER AND SUPPLY COMPANY, Inc., a corporation, Appellee.

Page 897

390 P.2d 897

95 Ariz. 362

PACIFIC INDEMNITY COMPANY, a corporation, Appellant, v. HAMMAN WHOLESALE LUMBER AND SUPPLY COMPANY, Inc., a corporation, Appellee.

No. 7314.

Supreme Court of Arizona, In Division.

April 1, 1964.

Beer, Seaman & Polley, Phoenix, for appellant.

Ernest W. McFarland, and Allan K. Perry, Phoenix, for appellee.

BERNSTEIN, Justice.

Hamman Wholesale Lumber and Supply Company, Inc., brought suit in the Superior Court of Maricopa County against Pacific Indemnity Company, for declaratory judgment that its insurance policy covered one of its leased trucks which had been involved in an accident in California. The insurance company denied liability on the basis of a rider in the policy, known as the 'standard hired automobile clause.' ¹ The trial court held the policy covered the accident and that the exclusionary clause did not apply. The clause relied on reads as follows:

'The words 'hired automobile' shall mean a land motor vehicle, trailer or semi-trailer used under contract in behalf of, or loaned to, the named insured provided such automobile is not owned by or registered in the name of (a) the named insured or (b) an executive officer or partner thereof or (c) an employee or agent of the named insured who is granted an operating allowance of any sort for the use of such automobile. * * *'

The case was tried by the court sitting without a jury. The court made findings of fact and conclusions of law, and entered a declaratory judgment that the truck involved was covered by the policy.

The truck involved in the accident was owned by, and registered in the name of Grisham, and driven by Rogers. Another truck was owned by, and registered in the name of Rogers, but always driven by Grisham. Rogers and Grisham were related, and had a special joint bank account, but the trial court found that there was no partnership. Grisham leased his truck to plaintiff, Hamman Wholesale Lumber, by written agreement, for 20 cents a mile. Rogers drove this truck, under an oral agreement with Hamman for 5 cents a mile. A similar arrangement covered the Rogers truck which was driven by Grisham. The trucks were used to haul lumber from Oregon and California to Phoenix.

Appellant objects to the finding of fact that Rogers and Grisham were independent contractors in the face of undisputed evidence that they were treated as employees in reports to the Arizona Industrial Commission, the Federal Internal Revenue Service and other governmental agencies. All of these agencise administer statutes where the term 'employee's is broadly defined to effectuate the purposes of the act. The fact that the Arizona legislature believed that men situated as these men were should receive the benefits of the Workmen's Compensation Act if they were injured, or that Congress desired their employer to pay withholding tax or social security tax for them, and adopted a broad definition of 'employee' to achieve these purposes, does not mean that they have thereby become 'employees' for any purpose other than the application of those acts. Throop v. F. E. Young & Company, 94 Ariz. 146, 382 P.2d 560; United States v. Silk, 331 U.S. 704, 67 S.Ct. 1463, 91 L.Ed. 1757; Rutherford Food Corp. v. McComb, 331 U.S. 722, 67 S.Ct. 1473, 91 L.Ed. 1772. The trial judge was correct in his conclusing that these reports are not conclusive. We have held in the absence of a statute containing a definition of 'employee' for the purpose of that statute, the test of whether a person is an employee or an independent contractor is the right to control test adopted in Throop, supra.

We agree with the Fifth Conclusion of Law of the trial judge, which reads as follows:

'5. Proper interpretation and application of the 'Hired Automobiles Endorsement' (including the clause relied upon by defendant) warrants judgment in favor of plaintiff.'

The rider reads: 'provided such automobile is not registered in the name of * * * an agent of the named insured who is granted an operating allowance of any sort for the use of such automobile * * *.' (Emphasis supplied.)

There is here no 'operating allowance'. See Woodrich Construction Co. v. Indemnity Ins. Co., 252 Minn. 86, 89 N.W.2d 412 (1958) construing an identical rider. A payment of $3.00 per hour to the driver of his own truck was held to be an operating allowance under an identical clause. Western Casualty & Surety Co. v. Pacific Employers Ins. Co., 97 F.Supp. 965 (D.C.Okl.1951...