Title: American Media, Inc. v. Home Indemnity Co.

State: kansas

Issuer: Kansas Supreme Court

Document:

232 Kan. 737 (1983)
658 P.2d 1015
AMERICAN MEDIA, INC., Appellee,
v.
THE HOME INDEMNITY COMPANY, Appellant.
No. 54,065

Supreme Court of Kansas.
Opinion filed February 19, 1983.
*738 Roger M. Theis, of Render & Kamas, of Wichita, argued the cause, and Paul L. Thomas, of the same firm, was with him on the brief for appellant.
David A. Gripp, of Crockett & Gripp, of Wichita, argued the cause, and David G. Crockett, of the same firm, was with him on the brief for appellee.
The opinion of the court was delivered by
MILLER, J.:
This is an appeal by defendant, The Home Indemnity Company (The Home) from a judgment of the Sedgwick District Court finding that plaintiff, American Media, Inc. (AMI), an insured, was entitled to recover a judgment for some $34,000 against The Home under the provisions of a policy of insurance issued by the defendant.
The matter was presented to the trial court on a written stipulation of fact, which is substantially as follows: American Media, Inc., was a holding company owning stock in three subsidiary corporations. Each of the subsidiary corporations was incorporated separately and was a different corporate entity. AMI owned 93.65 percent of the stock of Mr. D's Radio, Inc., which operated radio stations KBUL and KEYN-FM in Wichita, Kansas; 93.1 percent of the stock in American Radio Corporation (ARC), an Oklahoma corporation, which operated radio station KOFM-FM in Oklahoma City, Oklahoma; and 96.7 percent of the stock in American Radio Corporation of Kansas (ARCK), which operated radio stations KCSJ and KDJQ (FM) in Pueblo, Colorado. AMI was created specifically to hold the stock of and to manage the other three corporations. All the corporations had identical officers and directors.
The Home Indemnity Company issued its policy to Mr. D's Radio, Inc., providing workers' compensation coverage to Mr. D's in the State of Kansas for the policy period April 17, 1975, to April 17, 1976. An All States Endorsement attached to the policy further provides:
On April 25, 1975, AMI was endorsed as an additional insured on the policy.
On July 28 or 29, 1975, during the policy period, Gloria Saldana, an employee of ARCK, was injured in the course and *739 scope of her employment with radio station KCSJ in Pueblo, Colorado. At that time, ARCK carried no workers' compensation insurance. At the conclusion of proceedings (brought by Saldana against ARCK before the Colorado workers' compensation authority, the Colorado Division of Labor), ARCK was ordered to pay Gloria Saldana compensation, medical expenses and penalty in the amount of $32,176.35.
Because of limited funds on the part of ARCK, portions of the judgment were paid by AMI directly by AMI checks; other portions of the judgment were paid by KCSJ check using funds which had been forwarded to it by AMI.
In addition to the written stipulation set forth above, the parties orally stipulated that an employee of The Home audited the payroll records of AMI and Mr. D's on May 25, 1976. Policy premiums were calculated, based on those payrolls. The auditor was not shown the payroll records of ARC or ARCK, and the employees of those two corporations were not considered in fixing the policy premium. Had they been included, the premium would have been larger.
The trial court stated the controlling question in the case as follows:
The court then quoted the All States Endorsement of the policy, and concluded:
The court thus based its resolution of the lawsuit on what it thought a Colorado court would do if it were necessary, in order for the worker to recover. We conclude that this was error.
Before going further, we should first review the general rules for construction of insurance policies. In the case of Mah v. United States Fire Ins. Co., 218 Kan. 583, 586-87, 545 P.2d 366 (1976), we said:
In Fancher v. Carson-Campbell, Inc., 216 Kan. 141, 145-46, 530 P.2d 1225 (1975), we said:
Finally, we should note that as between the employer and the insurer, the usual incidents of insurance law apply. 4 Larson, *741 Workmen's Compensation Law § 94. We should emphasize that the injured employee is not a party to this action; the employee has already received the workers' compensation to which she was found entitled under the provisions of the Colorado law, applicable where the injury occurred. The issues here are between the insured and the insurance carrier.
The parties view the issues differently. The defendant contends that it did not intend to cover employees of ARCK and that neither Mr. D's nor AMI, as insureds under the policy, intended the policy to cover the employees of ARCK. Defendant also argues that AMI's payments were voluntary and not required of it, and therefore were outside the coverage provided by the All States Endorsement; and that AMI should not be allowed to "pierce the corporate veil" for its own benefit and thereby extend coverage to parties not designated as insureds in the policy. AMI does not argue the intent issue. It contends that since ARCK had no workers' compensation insurance, AMI, as the parent corporation, was obligated under Colorado law to pay the workers' compensation award. It then concludes that since it was required to pay the workers' compensation benefits, it, as a named insured, is clearly entitled to be reimbursed by The Home under the terms of the All States Endorsement of the policy. It does not argue that ARCK is insured under the policy; it simply asserts that it paid an obligation which The Home agreed to meet.
Is the intention of the parties to a workers' compensation insurance contract pertinent to the determination of coverage as between the insured and the insurer? We conclude that it is. In 100 C.J.S., Workmen's Compensation § 372, under Risks and Coverage, we find the following discussion:
....
In the case at hand, Mr. D's Radio, Inc., and American Media, Inc., were the named insureds; neither ARC nor ARCK were included as insureds in the policy. When the payroll records were audited some ten months after the employee was injured, payroll records of ARC and ARCK were not disclosed. The insurer was not informed of the corporate structure, of the existence of ARC and ARCK, or of their employees. There is no evidence that either AMI or The Home intended that the policy provide coverage for employees of ARC and ARCK, and we find that the parties did not intend for those employees to be covered.
This brings us to the principal and controlling issue: Were the compensation and benefits paid by AMI or with funds furnished by it to Gloria Saldana "required of the insured," under the Workmen's Compensation Law of Colorado, as that phrase is used in the endorsement to the policy? AMI was not a party to the Colorado workers' compensation proceeding. No judgment was entered against it. No claim was asserted against it by the injured employee. Judgment was entered only against ARCK, doing business as Radio Station KCSJ. There is no showing that ARCK was unable to pay the judgment; the stipulation indicates only that, "Because of limited funds on the part of ARCK," the judgment was paid by AMI or with funds provided by it. "Required of the insured" carries a connotation of compulsion or legal obligation; it does not imply voluntary action, even though such acts may be prudent, expedient, or good business practice. In Newcomb v. Victory Life Ins. Co., 159 Kan. 403, 407, 155 P.2d 456 (1945), we discussed the meaning of "required" as follows:
"Require" is defined in Webster's Third New International Dictionary as:
*743 The Colorado workers' compensation authorities did not determine that AMI was liable for the compensation; no Colorado court has so held; and upon the record before us, we are unable to say with certainty what determination Colorado authorities or courts might have made, had the issues been raised.
The policy provision is clear and unambiguous, and as between the parties is entitled to be construed in accordance with the plain and ordinary meaning of its terms. The Home is obligated to reimburse its insured only when compensation and other benefits have been "required of the insured." The fact that the compensation was paid by AMI or with its funds is not determinative of the issue; the facts clearly indicate that AMI made payment and furnished funds voluntarily and not because of any compulsion or legal requirement.
We have not overlooked the various other arguments and authorities presented in the briefs of the parties, but we find them unpersuasive. For the reasons stated, the judgment is reversed.
HERD, J., not participating.