Shorter v. Tulsa Used Equipment

• Decision Date: 10 October 2006
• Docket Number: No. 102,280.,102,280.
• Citation: 2006 OK 72,148 P.3d 864
• Parties: John SHORTER, Petitioner, v. TULSA USED EQUIPMENT AND INDUSTRIAL ENGINE SERVICES, National American Insurance Company and the Workers' Compensation Court, Respondents.
• Court: Oklahoma Supreme Court

148 P.3d 864

2006 OK 72

John SHORTER, Petitioner, v. TULSA USED EQUIPMENT AND INDUSTRIAL ENGINE SERVICES, National American Insurance Company and the Workers' Compensation Court, Respondents.

No. 102,280.

Supreme Court of Oklahoma.

October 10, 2006.

Rehearing Denied December 4, 2006.

COPYRIGHT MATERIAL OMITTED

On Certiorari to the Court of Civil Appeals, Div. III.

¶ 0 Claimant, sole shareholder of a Subchapter S corporation, filed a compensation claim alleging a work-related injury. The company and its insurance provider denied liability. Claimant urged that because his wages were used in calculation of the policy's premiums, respondents were estopped from denying liability by the terms of 85 O.S.2001 §§ 65.2 and 65.3 (the estoppel act).¹ The trial tribunal ruled it had jurisdiction and claimant could invoke the estoppel act. A three-judge panel vacated the order. It held that under the terms of 85 O.S.2001 §§ 3(8) and (9)² claimant was neither an employer nor an employee, and the terms of § 65.2 were hence inapplicable. The Court of Civil Appeals (COCA) sustained this ruling. On certiorari granted upon claimant's petition,

THE COURT OF CIVIL APPEALS' OPINION IS VACATED AND THE TRIAL TRIBUNAL'S ORDER IS REINSTATED.

M. Scott Ash, Tulsa, OK, for Petitioner.

W. Jeffrey Dasovich, Oklahoma City, for Respondents.³

OPALA, J.

¶ 1 The question presented on certiorari is whether COCA erred when it sustained the three-judge panel's order that ruled the terms of 85 O.S.2001 § 65.2⁴ (the estoppel act) may not be invoked by claimant in today's cause. We answer in the affirmative.

I. ANATOMY OF THE LITIGATION

¶ 2 John Shorter (Shorter or claimant) is sole shareholder of Tulsa Used Equipment and Industrial Engine Services (Tulsa Used Equipment), a Subchapter S corporation engaged in heavy equipment sales and service. National American Insurance Company (NAIC) is Tulsa Used Equipment's workers' compensation insurance provider (these two entities together with the Workers' Compensation Court (WCC) are collectively called respondents). Tulsa Used Equipment's compensation policy contains a "partners, officers and others exclusion endorsement" which excludes from compensation coverage those whose names are listed on the form. Shorter's name is listed on this endorsement.

¶ 3 Shorter filed a compensation claim alleging he sustained a work-related injury to his hands on 28 July 2003. NAIC initially provided 52 weeks of benefits to claimant but later denied its liability for the injury. At a hearing before the WCC, Shorter urged respondents were estopped to deny liability by the provisions of 85 O.S.2001 §§ 65.2 and 65.3 (the estoppel act)⁵. This is so because, despite Shorter's name appearance on the exclusion endorsement, his salary was in fact included in the calculation of the workers' compensation insurance premiums to be paid by Tulsa Used Equipment.

¶ 4 Respondents urged that the estoppel act may not be invoked because NAIC did not accept an insurance premium that included Shorter's wages in the calculation; rather, it accepted only a deposit. This is so because Shorter's wages, which were included in determining the premium at the beginning of the policy's term, were deducted from the computations in the annual end-of-policy audit and refunded to Tulsa Used Equipment.⁶ In their post-trial briefs respondents challenged the WCC's jurisdiction over the cause⁷ and urged Shorter is not one who may invoke estoppel's protection because 1) he excluded himself from coverage and there is no employer-employee relationship between him and the insured and 2) Shorter's actions prevent application of estoppel here.⁸

¶ 5 The trial judge ruled that: 1) the court has jurisdiction and 2) Shorter is within the compensation policy's coverage by the estoppel act. This is so because, according to the judge, NAIC breached the terms of its exclusion endorsement.⁹ A three-judge panel vacated the trial judge's order. It held that under the Workers' Compensation Act (Act)¹⁰ Shorter was neither an employer nor an employee. The express text of § 65.2¹¹ — referencing the "scheduling of any employee ..." — was inapplicable. COCA sustained the panel's ruling.¹² Claimant seeks certiorari review.

II. STANDARD OF REVIEW

¶ 6 The issue presented calls for resolution of a question of law. Review of contested law is governed by a de novo standard.¹³ In its re-examination of the trial tribunal's legal rulings an appellate court exercises plenary, independent and nondeferential authority.¹⁴

III.

A. THE PARTIES' ARGUMENTS

¶ 7 Respondents urge COCA's analysis— Shorter, in essence, must first be found to be an employee in accordance with the Act before he may invoke the terms of § 65.2¹⁵ — is correct. Claimant, according to respondents, may not use the estoppel act as a means of "bootstrapping" jurisdiction. They urge an employer-employee relationship must first be established and the jurisdictional requirements met before the estoppel act is applicable.¹⁶ Shorter, on the other hand, continues to assert that because his wages were used in calculating the compensation premium, he stands eligible to invoke the estoppel act's protection. Both parties' lower-court briefs cite cases deemed to support their divergent view of the applicable law.

¶ 8 Respondents cite to the teachings of Rosamond Construction Co. v. Rosamond.¹⁷ There a sole proprietor obtained worker's compensation insurance for his business, paid the premium (calculation of the premium included the owner's wage), and, later the same day, sustained an on-the-job injury. The court ruled the terms of the Act then in force anticipated that the parties be two separate individuals and unless there is an employer-employee relationship, no liability can arise under the Act.¹⁸ Although claimant there sought the estoppel act's protections, the court maintained the enactment could not be invoked by the claimant unless an employer-employee relationship is first established.¹⁹

¶ 9 Claimant, in his lower-court materials, cites Young v. the City of Holdenville²⁰ and the court's decision in a series of Indian sovereignty cases.²¹ Young teaches that an insurance company is estopped to deny that an elected city official is an employee when the official's wages were used in calculating compensation premiums and the claimant's relationship with the city is in the nature of employer and employee. The court in Young plainly instructs that the enactment of the estoppel provisions disposes of the contention that the relation of master and servant or employer and employee must be shown to exist as a prerequisite to recovery in those causes where the estoppel act is invoked.²² Young further distinguished Rosamond by noting that there was no representation of an employer-employee relationship in favor of which an estoppel could be asserted.²³ Dominic²⁴ and its progeny (the Indian sovereignty causes) dealt with the WCC's jurisdiction where an employer's status as a covered entity under the Act was challenged.²⁵ These cases teach that a compensation insurer who collects insurance premiums that are based on claimant's monetary compensation is estopped to deny insured's status as a covered employer.²⁶ In these latter cases the court held that once the existence of a workers' compensation insurance policy that covers the claimant is established, jurisdictional requirements for proceeding before the trial tribunal are deemed met.

B. DOMINIC CONCRETIZED THE APPLICATION AND OUTER REACHES OF THE ESTOPPEL ACT, 85 O.S.2001 §§ 65.2 and 65.3, TO PROVIDE COMPENSATION PROTECTION FOR ALL CLAIMANTS WHO AT THE TIME OF INJURY WERE ACTING FOR THE INSURED AND UPON WHOSE EARNINGS THE INSURER COLLECTED PREMIUMS

¶ 10 Claimant's status is of no consequence in determining here whether the estoppel act may be invoked. The sole legal question presented is whether the insurance carrier is statutorily estopped from denying workers' compensation coverage. When denying an award to this claimant, the three-judge panel clearly relied on, and gave paramount importance to, Shorter's express exclusion from the compensation protection to be provided by the carrier. This analysis was clearly in error. The terms of §§ 65.2 and 65.3 are utterly devoid of requirements that either contractual or consensual elements of claimant's relationship to the insured be established.²⁷ The focus is, rather, on the rights of an injured claimant against the insurance carrier of the entity for whom claimant was acting when injured. These rights are purely statutory.²⁸

¶ 11 Respondents' interpretation of and reliance on the court's pre-Dominic jurisprudence (dealing with the estoppel act) is in error. Indeed, a review of this body of law reveals the cacophony of voices entangling application of the estoppel provisions.²⁹ The discord stands clearly resolved by Dominic³⁰ and its progeny.

¶ 12 An insured's compensation policy is treated as a guarantee that its workers are protected by the Act.³¹ Once the existence of workers' compensation insurance covering claimant is established, jurisdictional requirements for proceeding in the compensation court are deemed met.³² The tribunal then acquires power to entertain the claim. Although the Indian sovereignty causes used terms that addressed themselves to an employer's status under the Act, Dominic concretizes³³ the doctrine of estoppel by imposing on a claimant who invokes the doctrine the duty to prove but three elements: 1) the claimed injury occurred during the time the premium-paying insured maintained a compensation liability policy 2) claimant's earnings were used in the calculation of the premium that was paid by the insured and 3) claimant's injury occurred while he was acting for the insured.³⁴ Once this proof is met, coverage is effected under the estoppel act through the law's conclusive presumption in claimant's favor. The presumption is created by premiums on the policy having been collected or a worker's...