St. Paul Reinsurance Co., Ltd. v. Baldwin
| Decision Date | 22 March 2007 |
| Docket Number | No. CIV 05-5017-RHB.,CIV 05-5017-RHB. |
| Citation | 503 F.Supp.2d 1255 |
| Parties | ST. PAUL REINSURANCE CO. LTD., Plaintiff, v. Howard BALDWIN, individually and doing business as Live Line Maintenance; and James Cornelius, Defendants. |
| Court | U.S. District Court — District of South Dakota |
Gerald D. Johnson, Scott Sumner, Banks Johnson Colbath Sumner & Kappelman, Rapid City, SD, for Plaintiff.
Kenneth E. Barker, Barker Reynolds Law Firm, LLC, Belle Fourche, SD, for Defendants.
TABLE OF CONTENTS
I. INTRODUCTION ........................................................1258
II. BACKGROUND ..........................................................1258
A. Facts ............................................................1258
B. Procedural History ...............................................1260
III. STANDARD OF REVIEW ..................................................1260
IV. DISCUSSION ..........................................................1260
A. Diversity Jurisdiction ...........................................1260
B. Choice of Law ....................................................1261
C. South Dakota Law: Insurance Policy Interpretation ................1261
V. CONCLUSION 1265
This matter is before the Court on plaintiff St. Paul Reinsurance Company Limited's motion for summary judgment. For the reasons set forth below, plaintiffs motion for summary judgment is granted.
Defendant Howard Baldwin ("Baldwin") owns Live Line Maintenance ("Live Line") as a sole proprietorship and has been operating the business out of Sturgis, South Dakota. (Def. Cornelius's Mem. of Law in Opp'n to Pl.'s Mot. for Summ. J. ("CMLO") at 2.) Baldwin's business furnishes construction and maintenance services to electric cooperatives in rural areas of South Dakota, Wyoming, and Nebraska. (See id. at Ex. G.)
In 1996, defendant James Cornelius ("Cornelius") came to work for Baldwin and Live Line. (Howard Baldwin's Dep. at 148-49.) At the time Cornelius was hired, he received no formal training from Baldwin, because Baldwin was of the opinion that both men's level of experience was approximately the same. (Id. at 94.) Baldwin, nonetheless, was Cornelius's day-to-day supervisor, with contact between the two of them taking place three times per day. (James Cornelius's Dep. at Vol. II, 150-51.) For example, as the owner of Live Line, Baldwin decided whether Cornelius had to go to work when weather was inclement. (Id. at 164-65.)
At the outset of Cornelius's work for Live Line, Baldwin gave Cornelius $500.00 to use for purchasing necessary items for work projects and other job-related expenditures. (Baldwin's Dep. at 73-74.) As time passed, Cornelius earned the authority to instead spend whatever amount necessary and subsequently present Baldwin with the receipt for reimbursement. (Id.; Cornelius's Dep. at Vol. II, 152-53.) When he started in 1996, Cornelius was a groundsman paid for changing out poles at a rate of $15.00 per pole. (Cornelius's Dep. at Vol. I, 32-34.) During that time, pole changes were Live Line's only form of business, (id. at 35-36), and Cornelius was Live Line's only crew member, (id. at 32-34).
From 1997 to 2002, Cornelius was a primary operator of a bucket truck, which Baldwin maintain ed, serving as a Lineman for Live Line. (Id. at 65-66.) With Cornelius's new position as a lineman came an increase in compensation from $15.00 to $30.00. (Id. at 85.) At the latter part of his time with Live Line, Cornelius was making $35.00 and considered the supervisor of Live Line among Baldwin's other crew members, which included Baldwin's son, Steve. (Baldwin's Dep. at 79-80, 85.) Cornelius was also permitted to hire Ted Herring, a Live Line worker who primarily assisted Cornelius for roughly one and one-half months. (Ted Herring's Dep. at 5.)
When traveling to work sites from home, and conversely, Cornelius used a Live Line material vehicle for his commute, avoiding having to ever use a personal vehicle on the job. (Cornelius's Dep. at Vol. I, 56-57.) As for Cornelius's bucket truck, it was usually left at the job site near the location that the electrical line maintenance work ceased for the day. (Id.)
Beginning in late 1999, Live Line and Powder River Energy Corporation ("PRE Corp."), a Wyoming corporation, entered into a contractual relationship in which Live Line performed maintenance work on electrical lines owned by PRE Corp. (Baldwin's Dep. at 148-49.) When. Live Line and PRE Corp. formed their contract, Cornelius was assigned by Baldwin to work on PRE Corp.'s power lines. (Id. at 151.) Baldwin, though, limited his participation with his business to that of securing contracts with companies like PRE Corp., not performing field work. (Cornelius's Dep. at Vol. I, 37.)
In rendering his services under the con tract, Baldwin was responsible for providing his workers any necessary equipment and tools to perform Live Line's work, such as, bucket trucks, air guns, pneumatic wrenches, hammers, pliers, insulated gloves, and insulated sleeves, (Baldwin's dep. at 135-36, 157-58), though PRE Corp. supplied all of the material used on its electrical lines, (id at 58). Baldwin was also obligated to take care of Live Line's safety procedures for its workers, to hire qualified workers, and to comply with governmental statutes, regulations, or rules applicable to the business's services. (Id. at 135-36.) As a corollary, the contract mandated that Baldwin "take out and maintain throughout the period of this Agreement ... minimum amounts of insurance." (CMLO at Ex. G.) PRE Corp., however, did not provide Live Line workers with training, instruction, or safety courses, since Baldwin and his linemen were not PRE Corp. employees. (Baldwin's Dep. at 95, 156-58.) Although PRE. Corp. supervisors occasionally observed Live Line's work, and although PRE Corp. retained a right under the contract to inspect Live Line's work, , Baldwin's work crews retained discretion on how to proceed with their job, (Baldwin's dep. at 158-59). In addition, PRE Corp. did not withhold employment taxes, income taxes, or workers' compensation premiums from any payments made to Live Line. (Id. at 157.)
On February 21, 2002, a meeting was held with Baldwin and four PRE Corp. employees, which included a supervisor with the company, Lyle Brice. (Id. at 53-54.) The purpose of the meeting was to address safety and operational issues as they pertained to Live Line and its workers. (Id. at 54-55.) Specifically, the discussion centered around the quality of Live Line's work, a problem with one of Live Line's trucks leaving oil slicks near PRE Corp. power lines, an issue relating to material being left at PRE Corp. job sites, and a complaint regarding the smell of alcohol emanating from Cornelius during work hours. (Id. at 55-58.) Because PRE Corp. would, or at least have a reason to, terminate the contract with Live Line, (id. at 59-60), Baldwin expressed the most concern over the last topic of discussion, wanting to grab Cornelius "by the throat and squeeze." (Id. at 55.)
Confronting Cornelius with the alcohol issue at the next available opportunity, Baldwin questioned Cornelius and asserted that such conduct was intolerable. (Id. at 59.) Baldwin also informed Cornelius that if he continued to drink while performing services under the PRE Corp. contract, both of them would be out of work. (Id.) In response, Cornelius denied the accusation of drinking on the job. (Id. at 60.)
Due to unresolved issues between PRE Corp. and Live Line, which were unrelated to Cornelius's purported on-the-job drinking, PRE Corp. terminated the contract with Live Line on February 25, 2002. (CMLO at 3.) The effective termination date of the contract was set for March 25, 2002. (Id.)
On March 11, 2002, two weeks prior to the effective termination date, Cornelius was electrocuted while performing maintenance on a live electrical line owned by PRE Corp., whereby he sustained serious bodily injuries. (Id. at 1-2.) Earlier that same day, Cornelius used a Live Line material truck to pick up another Live Line worker and drive to the work location. (Cornelius's Dep. at Vol. II, 21.) Cornelius kept that material truck at his residence in order to travel to the work site. (Id.) At the time of the incident, Cornelius was using equipment and a bucket truck that were provided by Baldwin. (CMLO at 2.) Until the date he suffered these injuries, Cornelius was usually the only Live Line crew member to use the bucket truck in which he was injured. (Cornelius's Dep. at Vol. I, 55-56.)
On September 8, 2005, plaintiff St. Paul Reinsurance Company Limited filed its complaint seeking declaratory relief. Plaintiff originally brought this declaratory action against defendants Baldwin, individually and doing business as Live Line, Cornelius, and PRE Corp. On November 7, 2006, PRE Corp. was dismissed, with prejudice, as a party to this lawsuit. In its complaint, plaintiff requests that the Court declare that the insurance policy plaintiff issued to Baldwin and his business, Live Line, contained an exclusion in coverage for Live Line "employees" and "bodily injuries" sustained by an employee while operating in the course of Live Line's business. (Compl. at 1, 3; see Pl.'s Br. in Supp. of Mot. for Summ. J. ("PBS") at 2.) Plaintiff filed a motion for summary judgment on November 1, 2006, with defendant Cornelius responding in opposition on November 28. Defendants Baldwin and Live Line failed to file a responsive brief to plaintiff's motion. On December 8, 2006, plaintiff submitted a reply to defendant Cornelius's response, with defendant Cornelius again filing a response on December 22, 2006, as to the issue of timeliness raised by plaintiff. On February 28, 2007, plaint...
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