Case Title: US Fidelity v. TECHNICAL INC.

Citation: 934 S.W.2d 266

Docket Number: 95-SC-1051-DG

State: kentucky

Court: Kentucky Supreme Court

Date: 1996-11-21T00:00:00Z

Document:
934 S.W.2d 266 (1996) UNITED STATES FIDELITY & GUARANTY COMPANY, Appellant, v. TECHNICAL MINERALS, INC., and Douglas Edward Hawkins, Appellees. No. 95-SC-1051-DG. Supreme Court of Kentucky. November 21, 1996. Walter Charles Jobson, William A. Miller, Sr., Ferreri & Fogle, Louisville, for appellant. Danny E. Darnall, Kim Quick, Collier, Arnett & Coleman, Elizabethtown, for appellees. *267 GRAVES, Justice. A contract labor company leased an employee, the appellee Douglas Edward Hawkins, (hereinafter "Hawkins") who was injured while working temporarily for Appellee Technical Minerals, Inc., (hereinafter "TMI"). Hawkins was paid workers' compensation benefits by contract labor company's insurance carrier, United States Fidelity & Guaranty Company, (hereinafter "USF & G"). Appellee Technical Minerals, Inc., paid the contract labor company a contract price for the employee's services. The determinative issue is whether TMI was a contractor for the purposes of the workers' compensation statute. It is uncontested that the injury occurred in the course of the regular or recurrent part of TMI's business. Accordingly, workers' compensation benefits were paid by USF & G. Hawkins subsequently brought an action in tort claiming that his injuries resulted from the negligence of TMI's employees. USF & G intervened seeking to recover workers' compensation payments made under its policy of insurance. The trial court granted a summary judgment to TMI because the "exclusive remedy" provision of KRS 342.690(1) insulates it from tort liability for Hawkins' injuries. The trial court ruled that TMI was a contractor as defined in the Workers' Compensation Act, and therefore, Hawkins was barred from maintaining an action in tort. The Court of Appeals affirmed the trial court. The viability of Hawkins' tort claim depends on whether the case of M.J. Daly Co. v. Varney, Ky., 695 S.W.2d 400 (1985), was overruled by implication in Fireman's Fund Insurance Co. v. Sherman & Fletcher, Ky., 705 S.W.2d 459 (1986). The Kentucky Workers' Compensation Act at KRS 342.610, as paraphrased by Justice Vance in Fireman's Fund Ins., supra at 461 provides that: TMI contracted to have work performed by a contract employee. The work performed was a regular and recurring part of TMI's business. Therefore, under the clear statutory definition, TMI is a "contractor" within the meaning of the Kentucky Workers' Compensation Act and the contract labor company is a "subcontractor." KRS § 342.690(1), the "exclusive remedy" provision of the act, provides, in pertinent part: Hawkins cannot, therefore, as the circuit court correctly ruled, maintain an action in tort against TMI since his exclusive remedy is through the workers' compensation provisions. Hawkins has, in fact, received compensation for his injury, which was paid by the contract labor company's workers' compensation insurance carrier, USF & G. Relying upon M.J. Daly Co. v. Varney, Ky., 695 S.W.2d 400 (1985), USF & G nonetheless argues that the term "contractor" is limited to its common usage and does not include the situation involved in this case. M.J. Daly involved facts virtually identical to the case sub judice. The injured plaintiff *268 was an employee of a contract labor company who leased him to M.J. Daly in the same fashion in which Hawkins was leased to TMI. In holding that M.J. Daly Company was not a "contractor," and thus not entitled to the "exclusive remedy" defense, we cited with approval and quoted Bright v. Reynolds Metals Co., Ky., 490 S.W.2d 474, 476 (1973), for the following proposition: To conclude that the M.J. Daly Company was not a contractor is erroneous because the statutory scheme under which Bright was decided was repealed effective January 1, 1973. Acts 1972, ch. 78, section 36. Prior to that date, the "exclusive remedy" provision was found in KRS 342.015(1) and the contractor's liability provision was found in KRS 342.060. The latter provision made a "principal contractor, intermediate or subcontractor" liable for payment of compensation benefits to the same extent as the immediate employer; and that provision had been interpreted to extend the "exclusive remedy" defense to a "principal contractor, intermediate or subcontractor" who was potentially liable for workers' compensation payments even if the worker's immediate employer had secured compensation benefits for him. Simmons v. Clark Construction Co., Ky., 426 S.W.2d 930 (1968); Whittenberg Engineering & Construction Co. v. Liberty Mutual Insurance Co., Ky., 390 S.W.2d 877 (1965). That interpretation was codified in the 1972 revision of the Act: In Bright, supra at 476, it was pointed out that former KRS 342.060 did not undertake to define the term "principal contractor." Thus, the court defined it on the basis of common law principles, and that is the definition recited in M.J. Daly Co. v. Varney, supra at 401. However, unlike the former KRS 342.060, the 1972 revision of the Act did not limit vicarious liability for compensation only to a "principal contractor, intermediate or subcontractor," but expanded it to include any "contractor," which term the statute defines inter alia as follows: Thus, even though we recognized in M.J. Daly Co. v. Varney, supra, that the term "contractor" is defined in KRS 342.610(2), we overlooked the statutory definition and recited instead the common law definition of "principal contractor," which had been used in Bright v. Reynolds Metals Co. to interpret the former KRS 342.060. We corrected our previous oversight in Fireman's Fund Insurance Co. v. Sherman & Fletcher, supra, a case in which an employee of a contractor hired by the owner of the property on which the work was to be performed sued the owner in tort. Under identical facts, Bright v. Reynolds Metals Co., supra, had stood for the proposition that such an action was not barred by the "exclusive remedy" provision because an owner did not fall within the definition of "principal contractor." However, in Fireman's Fund Insurance Co. v. Sherman & Fletcher, it was held that the definition of "contractor" in KRS 342.610(2) was broad enough to include someone other than one who "engages subcontractors to assist in the performance of the work or the completion of the project which [he] has undertaken to perform for another." Based on this interpretation of KRS 342.610(2), we held that the claim of the contractor's employee against the owner was barred by the "exclusive remedy" provision. Id. Our holdings in M.J. Daly Co. v. Varney and Fireman's Fund Insurance Co. v. Sherman & Fletcher cannot be reconciled. Lee v. Porter, Ky.App., 598 S.W.2d 465 (1980). On this issue, Fireman's Fund Insurance Co. v. Sherman & Fletcher is not only a more recent decision than M.J. Daly Co. v. Varney, but it is the opinion with the sounder reasoning, since it interprets the language of the existing statute rather than adopting an interpretation of a repealed statute. Since the injury occurred while Hawkins was performing work which is a regular or recurrent part of the business, trade or occupation of TMI, his claim is barred by the exclusive remedy provision of KRS 342.690(1). TMI would have been liable for workers' compensation benefits if the contract labor company had not already secured those benefits. The contract labor company, as the subcontractor, is primarily liable for the workers' compensation benefits of its employee Hawkins pursuant to KRS § 342.610(2), which provides in pertinent part: While this is a case governed by principles of statutory construction, it is proper to consider whether the Legislature intended to adversely affect existing business enterprises. As a practical matter, if the statute here were construed to allow a common law civil action against an employer who obtains a temporary employee through a temporary services company, no employer in his right mind would hire such an employee. The effect of this would be to destroy the temporary services industry. Historically, a major reason employers were willing to provide Workers' Compensation benefits was to be free of common law civil liability. By the argument of plaintiffs in this case, such would be totally frustrated and the plaintiff would have the best of both worlds, Workers' Compensation benefits and a common law right of action. By contrast, the defendant/employer would have the worst of both worlds and this could not have been legislative intent. Our conclusions and opinions to this point preclude the necessity of addressing appellant's other contentions. The judgment of the Hardin Circuit Court and the decision of the Court of Appeals are affirmed. STEPHENS, C.J., and BAKER, GRAVES, LAMBERT, STUMBO and WINTERSHEIMER, JJ., concur. KING, J., dissents without opinion.