Thompson v. Harold Thompson Trucking

• Decision Date: 31 December 1987
• Docket Number: No. 60432,60432
• Citation: 748 P.2d 430,12 Kan.App.2d 449
• Parties: Harold L. THOMPSON, deceased, and Richard E. Shreve, Claimants-Appellees. v. HAROLD THOMPSON TRUCKING, Respondent-Appellee, Kansas Fire and Casualty Company, Insurance Carrier-Appellant, and Murfin Drilling Company and Reliance Insurance Company, Respondent and Insurance Carrier-Appellees.
• Court: Kansas Court of Appeals

Page 430

748 P.2d 430

12 Kan.App.2d 449

Harold L. THOMPSON, deceased, and Richard E. Shreve Claimants-Appellees. v. HAROLD THOMPSON TRUCKING, Respondent-Appellee Kansas Fire and Casualty Company, Insurance Carrier-Appellant and Murfin Drilling Company and Reliance Insurance Company Respondent and Insurance Carrier-Appellees.

No. 60432.

Court of Appeals of Kansas.

Dec. 31, 1987.

Review Denied March 4, 1988.

Syllabus by the Court

1. The general rules for construction of insurance policies are stated and applied.

2. Unless specifically included by reference, the declarations page to an insurance contract is not an actual part of the contract.

3. Under the rules of construction of contracts, an ambiguity is said to exist if the words used in the contract may be understood to reach two or more possible meanings.

4. Where an insurance contract is open to different constructions, that most favorable to the insured must be adopted.

5. An insurance company wishing to limit the scope of coverage to that classification of operations listed in the declarations can do so by express exclusion.

6. To determine whether work covered by a subcontract is a part of the principal contractor's trade or business under K.S.A. 44-503(a), the following tests apply: (1) Is the work being performed by the independent contractor and the injured employee necessarily inherent in and an integral part of the principal's trade or business? (2) Is the work being performed by the independent contractor and the injured employee such as would ordinarily have been done by the employees of the principal? If either of the foregoing questions is answered in the affirmative, the work being done is part of the principal's trade or business.

7. Under K.S.A. 44-511(a)(3), the term "wage" shall be construed to mean the total of the money and any additional compensation which the employee receives for services rendered for the employer in whose employment the employee sustains an injury by accident arising out of and in the course of such employment.

8. The rules for determining permanent partial disability are stated and applied.

Ronald J. Laskowski and Larry G. Pepperdine, of Fisher, Patterson, Sayler & Smith, Topeka, for appellant.

Robert L. Constable, Salina, for appellees, Harold L. Thompson, deceased, and Harold Thompson Trucking.

Randall W. Weller, of Jones and Weller, P.A., Hill City, for appellee, Richard E. Shreve.

Gary A. Winfrey and Don D. Gribble, II, of Kahrs, Nelson, Fanning, Hite and Kellogg, Wichita, for appellees, Murfin Drilling Co. and Reliance Ins. Co.

Before BRISCOE, P.J., ROBERT L. GERNON, District Judge, assigned, and THOMAS W. REGAN, District Judge, assigned.

BRISCOE, Judge:

This is a workers' compensation proceeding in which four actions have been consolidated. Richard E. Shreve and Mina Thompson, the wife of decedent Harold L. Thompson, brought claim against Harold Thompson Trucking and Kansas Fire and Casualty (its insurer), and against Murfin Drilling Company and Reliance Insurance Company (its insurer), for injuries arising out of an oil tank explosion and fire. Kansas Fire appeals the district court's decisions in favor of the claimants.

Harold L. Thompson, doing business as Harold Thompson Trucking, was engaged in hauling salt water, fresh water, and crude oil to and from oil field operations. Thompson Trucking employed three persons, including Richard E. Shreve, who had worked for Thompson Trucking for six to eight weeks before the accident.

On September 14, 1981, Thompson and Shreve were cleaning an oil tank on a lease operated by Murfin. Murfin had contracted with Thompson Trucking to clean the oil tank. During the course of cleaning, an explosion and fire occurred, resulting in severe burns to both Shreve and Thompson. Thompson died as a result of the accident.

Both Shreve and Mina Thompson brought workers' compensation claims against Thompson Trucking and Kansas Fire and against Murfin and Reliance for injuries arising out of the accident. The ALJ found that Shreve suffered a 90 percent permanent partial disability to the body as a whole. The ALJ further found Shreve was a statutory employee of Murfin and entered an award in favor of Shreve and against Murfin and Reliance. The ALJ found that Thompson was not a statutory employee of Murfin but was covered by Thompson Trucking's policy with Kansas Fire and entered an award in favor of Thompson and against Thompson Trucking and Kansas Fire. The Director affirmed the award to Thompson but modified the award to Shreve, entering an order in favor of Shreve and against Thompson Trucking and Kansas Fire, rather than Murfin. The district court adopted the findings and conclusions of the Director.

I. COVERAGE UNDER KANSAS FIRE POLICY

Kansas Fire contends the district court erred in finding the insurance policy issued by Kansas Fire covered Thompson Trucking's tank cleaning business.

On September 14, 1981, the date of the accident, Kansas Fire provided workers' compensation insurance to Thompson Trucking. Paragraph I of the policy reads as follows:

"Coverage A--Workmen's Compensation: To pay promptly when due all compensation and other benefits required of the insured by the workmen's compensation law."

The policy was obtained through an independent insurance agent. On the original application for coverage with Kansas Fire in 1979, the description of Thompson Trucking's business was: "Insured provides a driver & diesel mechanic to Mobil pipeline for the purpose of transporting crude oil from tank batteries in the area to the pipeline entrances and dumping the oil into the line." At all times subsequent to the original application, the classification assigned to the employees of Thompson Trucking and shown on the declarations page attached to the policy was "Truckmen." There is a special insurance classification for "tank cleaning," and, according to the insurance agent who handled the Thompson Trucking account, Kansas Fire does not insure against this risk.

During the preliminary hearing, Mina testified that she and Thompson asked the insurance agent if their employees would be covered by their workers' compensation insurance if Thompson Trucking added a water hauling truck. During her deposition, however, she testified she asked the agent whether the trucking company would be covered if any changes were made in the business. She testified the agent told them there would not be any problem with coverage for changes since any additional premium or charges would be taken care of at the time of renewal or audit.

When the policy was renewed in September 1980, Thompson Trucking was only engaged in transporting crude oil. During an audit by the insurance company in January 1981, the only business of Thompson Trucking was transportation of crude oil.

The central issue presented in this case is one of first impression in Kansas. We are asked to determine whether the declarations page, specifically the classification of operations appearing on the declarations page, limits the scope of coverage in a workers' compensation insurance contract. Kansas Fire argues it was never the intent of Kansas Fire to insure a tank cleaning operation. Murfin and Reliance counter by arguing the classification of operations does not determine what operations are in fact covered under the policy. Murfin and Reliance contend the classification of operations is used only by the insurance company to determine premium rates.

We begin our analysis by first reviewing the general rules for construction of insurance policies as stated in American Media, Inc. v. Home Indemnity Co., 232 Kan. 737, 739-40, 658 P.2d 1015 (1983):

" ' "In construing an insurance policy a court should consider the instrument as a whole and endeavor to ascertain the intention of the parties from the language used, taking into account the situation of the parties, the nature of the subject matter and the purpose to be accomplished....

" ' "Policies must be construed according to the sense and meaning of the terms used, and if the language is clear and unambiguous, it must be taken in its plain, ordinary and popular sense...." [Citation omitted.]

" ' "... As a general rule, the construction and effect of a written contract of insurance is a matter of law to be determined by the court. If the facts are admitted, ... then it is for the court to decide whether they come within the terms of the policy...." [Citation omitted.]

" ' "The language of a policy of insurance, like any other contract, must, if possible, be construed in such manner as to give effect to the intention of the parties. Where the terms of a policy of insurance are ambiguous or uncertain, conflicting or susceptible of more than one construction, the construction most favorable to the insured must prevail. Since the insurer prepares its own contracts, it has a duty to make the meaning clear. If the insurer intends to restrict or limit coverage provided in the policy, it must use clear and unambiguous language in doing so; otherwise, the policy will be liberally construed in favor of the insured. If, however, the contract is clear and unambiguous, the words are to be taken and understood in their plain, ordinary and popular sense, and there is no need for judicial interpretation or the application of rules of liberal construction; the court's function is to enforce the contract according to its terms...." [Citation omitted.]

" ' "When an insurance contract is not ambiguous, the court may not make another contract for the parties. Its function is to enforce the contract as made.... To be ambiguous the contract must contain provisions or language of doubtful or conflicting meaning, as gleaned from a natural and reasonable interpretation of its language.... Ambiguity in a written contract does not appear until the application of pertinent rules of interpretation to the face of the instrument leaves it genuinely uncertain which one of two...