Republic-Franklin Ins. Co. v. City of Amherst

• Decision Date: 18 April 1990
• Docket Number: REPUBLIC-FRANKLIN,No. 89-137,89-137
• Citation: 50 Ohio St.3d 212,553 N.E.2d 614
• Parties: INSURANCE COMPANY, Appellee, v. CITY OF AMHERST, Appellant, et al.
• Court: Ohio Supreme Court

Page 212

50 Ohio St.3d 212

553 N.E.2d 614

REPUBLIC-FRANKLIN INSURANCE COMPANY, Appellee, v. CITY OF AMHERST, Appellant, et al.

No. 89-137.

Supreme Court of Ohio.

Submitted Feb. 6, 1990.

Decided April 18, 1990.

Syllabus by the Court

1. The fact that workers' compensation premiums were paid for a person performing community service through an order of a court in lieu of sentence is not determinative of whether that person is an employee of the agency where the community service is performed.

2. A person who consents to perform community service in lieu of sentence enters into an agreement with the court, not the agency where the work is performed. There is no express or implied contract of hire between the community service worker and the agency using his services. The community service worker, therefore, cannot be considered an employee of the agency where the work is performed. (R.C. 4123.01[A][a], construed and applied.)

On July 10, 1985, the Oberlin Municipal Court found Ronald W. Leoni guilty of driving under the influence of alcohol in violation of R.C. 4511.19(A)(1). The court sentenced Leoni "to pay a fine of $450.00 plus costs, 6 months in the Lorain County Jail and drivers license suspended 6 months with work, alcohol program and community service privileges. * * * Jail sentence suspended on condition of 30 days community service with Amherst Police Department. Defendant to work 8:00 A.M. til 4:00 P.M. * * * " Such community service was in lieu of incarceration and Leoni was not compensated in any manner for this service. The city of Amherst, defendant-appellant herein, paid premiums for workers' compensation coverage for persons, such as Leoni, who engage in community service work in lieu of sentence. The city also purchased a policy of comprehensive automobile liability insurance from Republic-Franklin Insurance Company, plaintiff-appellee herein, which provided coverage for the city from July 15, 1984 to July 15, 1987.

On July 18, 1985, Leoni was injured while riding on a service truck owned by the city of Amherst. As a result of his injury, Leoni filed an application for payment of medical benefits with the Ohio Bureau of Workers' Compensation. The parties have stipulated that the city opposed Leoni's application for the reason that Leoni was not an employee of the city on the date of his injury.

The Industrial Commission, on April 3, 1986, issued an order denying Leoni's claim for workers' compensation, finding that Leoni "was not an employee of the named employer [city of Amherst]." According to the parties' stipulation of facts, Leoni did not appeal this order.

The parties have further stipulated that prior to the denial of his workers' compensation claim, Leoni, on February 3, 1986, filed a suit in the court of common pleas against the city of Amherst and others, alleging that negligence of the city and its employees caused his injury. The city forwarded Leoni's complaint to appellee for defense. According to the complaint filed in the instant case, appellee entered a defense for the city while reserving its rights.

In September 1986, appellee filed a declaratory judgment action, seeking a determination as to whether it had an obligation to pay any judgment, settlement or verdict in the suit filed by Leoni against the city. Appellee essentially asserted that Leoni was an employee of the city and, as such, was excluded from coverage under the insurance policy.

The trial court found that Leoni was not an employee of the city of Amherst at the time of the injury and that appellee must defend the city and "pay any judgment, settlement, etc. entered against the city * * *." The court of appeals reversed this decision finding that appellee had no duty to defend the city.

This cause is now before this court pursuant to the allowance of a motion to certify the record.

Means, Bichimer, Burkholder & Baker Co., L.P.A., Kevin R. Campbell and John E. Britton, Cleveland, for appellee.

Thomas H. Sanborn, Director of Law, for appellant.

Blaszak, Shilling, Coey & Bennett Co., L.P.A. and Larry E. Coey, Elyria, for intervenor, Ronald W. Leoni.

ALICE ROBIE RESNICK, Justice.

The issue before this court is whether a person convicted of a misdemeanor who agrees to do community service work in lieu of sentence, and is subsequently injured performing such work, is, for purposes of the workers' compensation law, an "employee" of the agency to whom he is assigned. ¹

A claimant's "[e]ntitlement to workers' compensation payments is a substantive right measured by the statutes in force on the date of the injury. State, ex rel. Samkas, v. Indus. Comm. (1982), 70 Ohio St.2d 279, 281 [24 O.O.3d 364, 437 N.E.2d 288]; State ex rel. Vaughn, v. Indus. Comm. (1982), 69 Ohio St.2d 115, 117 [23 O.O.3d 161, 430 N.E.2d 1332]; State, ex rel. Jeffrey, v. Indus. Comm. (1955), 164 Ohio St. 366, 367 [58 O.O. 152, 131 N.E.2d 215]; State, ex rel. Schmersal, v. Indus. Comm. (1944), 142 Ohio St. 477, 478 [27 O.O. 404, 52 N.E.2d 863]; Indus. Comm. v. Kamrath (1928), 118 Ohio St. 1 , paragraphs one through three of the syllabus." State, ex rel. Kirk, v. Owens-Illinois, Inc. (1986), 25 Ohio St.3d 360, 361, 25 OBR 411, 411-412, 496 N.E.2d 893, 895.

At the time of Leoni's injury, sovereign immunity for municipalities had been significantly curtailed by this court's decision in Haverlack v. Portage Homes, Inc. (1982), 2 Ohio St.3d 26, 2 OBR 572, 442 N.E.2d 749. The city of Amherst has stated in its brief that as a result of the decision in Haverlack, supra, it purchased various forms of insurance, including the insurance policy at issue in this case, in order to protect itself from possible liability for injuries suffered by persons performing community service work. The city stated that it also paid workers' compensation premiums for community service workers in spite of the fact that it was unsure if such workers were covered under workers' compensation law. ²

However, payment of workers' compensation premiums for a particular worker does not necessarily mean that the worker is an "employee" for purposes of workers' compensation. In the instant case, despite the city's payment of workers' compensation premiums for persons performing community service in lieu of sentence, the Industrial Commission denied Leoni's application for workers' compensation benefits because it determined that he was not an "employee" of the city of Amherst.

The insurance policy herein was designed, in part, to provide coverage for the city in those situations where there was no workers' compensation coverage. The automobile policy exclusions from coverage for bodily injury and property damage liability state in part:

"Exclusions

"This insurance does not apply:

" * * *

"(b) to any obligation for which the insured or any carrier as his insurer may be held liable under any workmen's compensation, unemployment compensation or disability benefits law, or under any similar law;

"(c) to bodily injury to any employee of the insured arising out of and in the course of his employment by the insured or to any obligation of the insured to indemnify another because of damages arising out of such injury * * *."

Nevertheless, appellee argues that Leoni is excluded from coverage under the policy because he was an "employee" of the city at the time of his injury. Additionally, appellee contends that workers such as Leoni are excluded from insurance coverage since the city paid workers' compensation premiums for persons performing community service, even though the Industrial Commission concluded that Leoni was not an employee of the city.

The court of appeals concluded that because the city had "obtained worker's [sic ] compensation coverage for Leoni, the liability policy was not applicable. * * * " However, the fact that workers' compensation premiums were paid for a person performing community service through an order of a court in lieu of sentence is not determinative of whether that person is an employee of the agency where the community service is performed.

Appellee argues that Leoni was an employee of the city for purposes of workers' compensation because the city had the right to control Leoni's activities. Appellee cites Vandriest v. Midlem (1983), 6 Ohio St.3d 183, 184, 6 OBR 239, 240, 452 N.E.2d 321, 322, wherein this court stated that the existence of an employer-employee relationship turns not only on the source of compensation but also on " ' "the right to control the manner or means of performing the work * * *." ' " See, also, Daniels v. MacGregor Co. (1965), 2 Ohio St.2d 89, 31 O.O.2d 141, 206 N.E.2d 554. We, however, do not find Vandriest, supra, controlling.

Rather, we believe that the proper focus in these circumstances is whether a "contract of hire," either express or implied, exists between the individual and the city. R.C. Chapter 4123 neither expressly allows nor prohibits a community service worker from being granted workers' compensation benefits. R.C. 4123.01(A)(1)(a) (formerly R.C. 4123.01[A] ) defines who is an "employee" for purposes of workers' compensation. This definition expressly states that a contract of hire must exist in order for a person to be an "employee":

"(A)(1) 'Employee,' 'workman,' or 'operative' means:

"(a) Every person in the service of the state, or of any county, municipal corporation, township, or school district therein, * * * whether paid or volunteer, and wherever serving within the state or on temporary assignment outside thereof, and executive officers of boards of education, under any appointment or contract of hire, express or implied, oral or written * * *." (Emphasis added.)

It has been stated that, in the context of workers' compensation laws, "[t]he compensation concept of 'employee' is narrower than the common-law concept of 'servant' in one important respect: Most acts require that the service be performed under a contract of hire, express or implied. Among the more important...