ATTORNEYS FOR APPELLANT ATTORNEYS FOR APPELLEE
Mark D. Ulmschneider Alan VerPlanck
Andrew L. Teel Richard P. Samek
William A. Ramsey James P. Fenton
Fort Wayne, Indiana Howard J. Cohen
Fort Wayne, Indiana
______________________________________________________________________________
In the FILED
Indiana Supreme Court Apr 29 2010, 10:35 am
_________________________________
CLERK
of the supreme court,
court of appeals and
No. 02S03-0909-CV-395 tax court
EVERETT CASH MUTUAL INSURANCE COMPANY,
Appellant (Defendant below),
v.
RICK TAYLOR AND KATRINA TAYLOR,
Appellees (Plaintiffs below).
_________________________________
Appeal from the Allen Superior Court, No. 02D01-0706-PL-285
The Honorable Daniel G. Heath, Judge
_________________________________
On Petition to Transfer from the Indiana Court of Appeals, No. 02A03-0808-CV-386
_________________________________
April 29, 2010
Sullivan, Justice.
Rick and Katrina Taylor procured a farm personal liability policy from their insurer. The
Taylors subsequently filed an action against their insurer for breach of contract following the in-
surer‟s denial of coverage for injuries sustained on the Taylors‟s property by an employee of an
independent contractor. We hold that the exclusion in the policy for injuries covered by work-
er‟s compensation does not apply in this instance.
Background
Rick and Katrina Taylor are farmers. On July 1, 2005, the Taylors employed indepen-
dent contractor Sherlock Contract Painting (“Sherlock”) to paint a house, grain bin, and barn.
While painting, Sherlock employee Christopher Collis sustained injuries when he was shocked
by an electrical wire and fell from a ladder.
Collis filed a worker‟s compensation claim against Sherlock. When Collis discovered
that Sherlock had no worker‟s compensation insurance, he sought payment from the Taylors pur-
suant to Indiana Code section 22-3-2-14(b). This provision of the Indiana Worker‟s Compensa-
tion Act imposes liability upon a person who hires a contractor without verifying that the con-
tractor carries worker‟s compensation insurance to the same extent as the contractor for the in-
jury or death of any of the contractor‟s employees.1 The Taylors had not verified whether Sher-
lock had worker‟s compensation insurance.
Well in advance of these events, the Taylors had purchased a Farm Personal Liability
Policy from Everett Cash Mutual Insurance Company (“Everett Cash”). The Taylors had asked
their agent, Jake Owens, to secure “all risk” coverage. In particular, the Taylors requested cov-
erage for “any invitee, licensee, contractor, or employee of contractor who may come upon the . .
. [f]arm.” (Appellant‟s App. at 21.) When the Taylors first inquired as to whether the Everett
Cash policy covered the Collis claim, Owens stated that it would. However, Everett Cash subse-
quently denied coverage. On June 29, 2007, the Taylors filed suit against Everett Cash (as well
as Owens and two other insurance agencies), alleging claims for breach of contract and estop-
pel.2 The trial court denied Everett Cash‟s request for summary judgment but, on interlocutory
appeal, a divided panel of the Court of Appeals reversed. Everett Cash Mut. Ins. Co. v. Taylor,
904 N.E.2d 276, 281 (Ind. Ct. App. 2009), reh‟g denied. Judge Bailey dissented. The Taylors
sought, and we granted, transfer. Ind. Appellate Rule 58(A).
1
This provision does not apply to “an owner who contracts for performance of work on the owner‟s own-
er occupied residential property . . . .” I.C. § 22-3-2-14(a)(1).
2
We need not address whether Everett is estopped from relying on the disputed exclusion because we
find that the exclusion does not apply in this instance.
2
Discussion
Although the Indiana appellate courts are called upon to adjudicate worker compensation
cases with some regularity, we have never before been presented with the provision of the Work-
er‟s Compensation Act at issue here:
The state, any political division thereof, any municipal corporation, any
corporation, limited liability company, partnership, or person, contracting for the
performance of any work exceeding one thousand dollars ($1,000) in value by a
contractor subject to the compensation provisions of IC 22-3-2 through IC 22-3-
6,[3] without exacting from such contractor a certificate from the worker‟s com-
pensation board showing that such contractor has complied with section 5 of this
chapter, IC 22-3-5-1, and IC 22-3-5-2,[4] shall be liable to the same extent as the
contractor for compensation, physician‟s fees, hospital fees, nurse‟s charges, and
burial expenses on account of the injury or death of any employee of such con-
tractor, due to an accident arising out of and in the course of the performance of
the work covered by such contract.
I.C. § 22-3-2-14(b). As mentioned supra, this provision of the Indiana Worker‟s Compensation
Act imposes on a person who hires a contractor without verifying that the contractor carries
worker‟s compensation insurance liability to the same extent as the contractor for the injury or
death of any of the contractor‟s employees. (As noted in footnote 1, this obligation is not im-
posed upon “an owner who contracts for performance of work on the owner‟s owner occupied
residential property.”) It is undisputed that the Taylors did not “exact” the requisite certificate
from Sherlock and that Sherlock had no worker‟s compensation insurance.
Although this litigation arises in the context of this provision of the Act, the Taylors con-
tend that Collis‟s claim is a straightforward premises liability claim, precisely the kind they pur-
3
These chapters comprise the principal substantive provisions of the Worker‟s Compensation Act, includ-
ing the requirements for coverage and claims and benefit payment procedures.
4
These sections of the Worker‟s Compensation Act require employers to carry worker compensation in-
surance from authorized insurers or secure from the Worker‟s Compensation Board a certificate authoriz-
ing the employer to self-insure; and to make periodic filings with the Board confirming compliance with
the requirements. Special rules are specified for employers that are governmental units and financial in-
stitutions.
3
chased protection against when they bought Everett Cash‟s Farm Personal Liability Policy. In
this respect, they highlight the following policy provisions:
PRINCIPAL PERSONAL LIABILITY COVERAGES
Coverage L -- Liability -- We pay, up to our limit, all sums for which an in-
sured is liable by law because of bodily injury or property damage caused by
an occurrence to which this coverage applies. We will defend a suit seeking
damages if the suit resulted from bodily injury or property damage not ex-
cluded under this coverage. . . .
Coverage M -- Medical Payments to Others -- We pay the necessary medical
expenses if they are incurred or medically determined within three years from the
date of an accident causing covered bodily injury. . . . This applies only to:
1. a person on the insured premises with permission of an insured . . . .
(App. at 61.) Everett Cash responds that Collis‟s claim is for worker‟s compensation benefits,
which are excluded from coverage by the very terms of the policy. In this regard, it argues that
the policy defines an “occurrence” as “an accident,” id., and that the claim here arose not from an
accident but from the Taylors failure to “exact” the requisite certificate of worker‟s compensa-
tion insurance as required by the Act. And Everett Cash maintains – and the majority opinion of
the Court of Appeals agreed – that the following policy language excludes coverage in this situa-
tion:
ADDITIONAL EXCLUSIONS THAT APPLY ONLY TO COVERAGE L
Coverage L does not apply to:
…
6. bodily injury to a person, including a domestic employee, if the insured has
a workers‟ compensation policy covering the injury or if benefits are payable or
are required to be provided by an insured under a workers‟ compensation, non-
occupational disability, occupational disease or like law . . . .
Id. at 64.
4
We reject Everett Cash‟s argument that the claim here was not triggered by an “occur-
rence” as defined in the policy. While it is true that the Taylors did not “exact” a certificate of
compliance, Collis‟s claim was filed as a result of an “accident” in which he suffered bodily in-
jury and incurred medical expenses. This was an occurrence within the meaning of the policy;
the policy covered bodily injury caused by an “occurrence,” which is defined as an “accident.”
(Appellant‟s App. at 61.) An accident is “„an unexpected happening without an intention . . . .”‟
Tri-Etch, Inc. v. Cincinnati Ins. Co., 909 N.E.2d 997, 1002 (Ind. 2009) (quoting Auto-Owners
Ins. Co. v. Harvey, 842 N.E.2d 1279, 1283 (Ind. 2006)).
We now turn to the exclusionary language in the policy. Although special rules of con-
struction have developed for interpreting insurance policies as a result of the disparity in bargain-
ing power between insurers and insureds, insurance contracts are generally governed by the same
rules of construction as other contracts. Bradshaw v. Chandler, 916 N.E.2d 163, 166 (Ind. 2009).
It is firmly established that clear and unambiguous language in an insurance policy should be
given its plain and ordinary meaning, Cinergy Corp. v. Associated Elec. & Gas Ins. Servs., Ltd.,
865 N.E.2d 571, 574 (Ind. 2007), even if those terms limit an insurer‟s liability. But where poli-
cy language is ambiguous, it is to be construed strictly against the insurer and in favor of the in-
sured. Id. This is especially true where a policy excludes coverage. Bradshaw, 916 N.E.2d at
166. Although insurers are free to limit coverage to the extent the limitations are consistent with
public policy, the exclusionary clause must clearly and unmistakably bring within its scope the
particular act or omission that will bring the exclusion into play. Meridian Mut. Ins. Co. v. Pur-
key, 769 N.E.2d 1179, 1182 (Ind. Ct. App. 2002) (quoting Erie Ins. Co. v. Adams, 674 N.E.2d
1039 (Ind. Ct. App. 1997), trans. denied).
Ambiguity exists when a policy is susceptible to two or more reasonable interpretations.
See Beam v. Wausau Ins. Co., 765 N.E.2d 524, 528 (Ind. 2002). That is, an insurance policy
will be found to be ambiguous in cases where reasonable people would differ as to the meaning
of its terms. Id. The fact that the parties disagree over the meaning of the contract does not, in
and of itself, establish an ambiguity. Meridian Mut. Ins. Co. v. Cox, 541 N.E.2d 959, 961 (Ind.
Ct. App. 1989), trans. denied. Where there is an ambiguity, the contract should be construed to
5
further the policy‟s basic purpose of indemnity. USA Life One Ins. Co. of Ind. v. Nuckolls, 682
N.E.2d 534, 538 (Ind. 1997).
We acknowledge that the exclusion could be read to apply, as Everett Cash contends, to
this situation. But for Indiana Code section 22-3-2-14(b), a provision of the Indiana‟s worker‟s
compensation statutory scheme, Collis would not have asserted that the Taylors were responsible
for compensating him for his injuries. The crux of Everett Cash‟s argument is that the damages
Collis seeks are “benefits [ ] payable or are required to be provided by an insured under a work-
ers‟ compensation . . . law . . . .” (Appellant‟s App. at 64.) Under this reading of the terms in the
policy, Everett Cash would not be required to pay.
There is no dispute that the Taylors contracted with Sherlock for work exceeding $1,000;
the Taylors failed to obtain a certificate showing that Sherlock had worker‟s compensation insur-
ance; Sherlock did not have worker‟s compensation insurance; and Collis was injured in the
course of performance of the work covered by the contract. The Taylors are potentially liable
under the statute.5 See I.C. § 22-3-2-14(b). If liable, the Taylors would be required to pay com-
pensation, physician‟s fees, hospital fees, and nurse‟s charges to the injured employee. See id.
A reasonable person could conclude that the liability imposed constitutes benefits payable or re-
quired to be provided by an insured under a worker‟s compensation statute.
On the other hand, a reasonable person could interpret the exclusion differently. The ex-
clusion can also be interpreted to apply to employers who are directly within the application of
the worker‟s compensation act – those employers who are charged with procuring worker‟s
compensation insurance for their own employees. The worker‟s compensation statute provides
that every employer and every employee, except as otherwise provided, must comply with the
provisions of the statute (Indiana Code chapters 22-3-2 through 22-3-6) to pay and accept com-
pensation for personal injury or death by an accident arising out of and in the course of the em-
ployment, and must be bound thereby. I.C. § 22-3-2-2. In section 9 of that chapter, the statute
excludes farm or agricultural employees from the benefits of the statute. The Taylors do not
5
Because this section of the Act prioritizes the order of payment, beginning with the injured person‟s em-
ployer, the Taylors are only secondarily liable. I.C. § 22-3-2-14(e).
6
have worker‟s compensation insurance, nor would they be required to, if they had their own di-
rect farm employees. See I.C. § 22-3-2-9(a)(2). The Taylors had no employees at the time the
Everett Cash policy was issued and could not obtain worker‟s compensation. And Everett Cash
does not write worker‟s compensation insurance policies.
On the facts of this case, a reasonable person could conclude that the exemption simply
clarifies that the policy provides no coverage in the conventional worker‟s compensation context
– where an employee, injured in a workplace accident, seeks from his or her employer the work-
er‟s compensation “benefits [ ] payable or are required to be provided by an insured under a
workers‟ compensation . . . law . . . .” (Appellant‟s App. at 64.) It would be beyond the ordinary
understanding of the worker‟s compensation system to extend the exclusion to the matter-of-
first-impression6 scenario here – where a claim is filed against an insured by an injured worker in
the employ of a third party who did not comply with its obligations under the Act. Given that the
Taylors could not have even purchased worker‟s compensation insurance to protect themselves
from claims by Sherlock‟s employees,7 it is hard to imagine them thinking that an exclusion re-
garding worker‟s compensation could preclude them from having protection from a lawsuit by
someone injured in an accident on their property.
A reasonable construction that supports the policyholder‟s position must be enforced as a
matter of law. Eli Lilly & Co. v. Home Ins. Co., 482 N.E.2d 467, 470 (Ind. 1985). The policy
exclusion is crafted in such a manner that a reasonably prudent person applying for an “all risk”
farm personal liability policy would have understood the exclusion to mean that the policy would
not provide worker‟s compensation coverage in the event of workplace injury to the applicant‟s
employees. But the applicant would not have reasonably – as apparently Everett Cash‟s own
agent also did not – understood the exclusion to apply where an individual working on the appli-
6
Although the parties cite cases from other jurisdictions that they argue provide guidance in this case, we
find neither the facts nor the reasoning of those cases sufficiently analogous to be helpful here.
7
Wolf v. Kajima Int‟l. Inc., 621 N.E.2d 1128, 1132 (Ind. Ct. App. 1993) (Rucker, J.) (holding that a
project‟s owner cannot alter its status concerning potential tort liability to employees of contractors or
subcontractors by directly purchasing worker‟s compensation insurance on behalf of subcontractors),
adopted by 629 N.E.2d 1237 (Ind. 1994).
7
cant‟s property in the employ of another asserted a claim against the applicant as a result of bodi-
ly injuries suffered in an accident on the property.
We hold that for an insurance policy to exclude such a claim, any exclusion must be more
explicit than the language used here. As Judge Dan Heath wrote in denying Everett Cash‟s mo-
tion for summary judgment:
Everett [Cash] could have included language . . . that excludes from cov-
erage insureds who fail to exact a worker‟s compensation certificate from a con-
tractor as required by law. Its failure to do so i[s] not in keeping with the case law
. . . which requires that “a condition or exclusion in an insurance contract . . . in
order to be effective must clearly and unmistakably bring within its scope the par-
ticular act or omission that will bring the condition or exclusion into play . . . (ci-
tation omitted) and coverage will not be excluded . . . unless such clarity exists.”8
(Appellant‟s App. at 18.)
Conclusion
The judgment of the trial court is affirmed.
Shepard, C.J., and Dickson, Boehm, and Rucker, JJ., concur.
8
Gulf Ins. Co. v. Tilley, 280 F.Supp. 60, 64 (N.D. Ind. 1967) (Eschbach, J.), aff‟d, 393 F.2d 119 (7th Cir.
1968).
8