Title: Cherry v. Tanda, Inc.

State: arkansas

Issuer: Arkansas Supreme Court

Document:

Howard CHERRY v. TANDA, INC., and
Transcontinental Insurance Co.

96-1229                                            ___ S.W.2d ___

                    Supreme Court of Arkansas
                Opinion delivered March 17, 1997


1.   Workers' compensation -- tort immunity -- immunity under
     statute extends to insurance carrier. -- According to the
     Workers' Compensation Act, an employee's remedy against his
     employer for injuries sustained on the job is to file a claim
     with the Workers' Compensation Commission; the employer's tort
     immunity under the exclusive-remedy provision, Ark. Code Ann.
      11-9-105(a) (Supp. 1995), extends to the employer's
     insurance carrier.       

2.   Workers' compensation -- exception to exclusivity provision --
     indemnitee may enforce express indemnity agreement against
     employer. -- There is an exception to the exclusivity
     provision of the Workers' Compensation Act for the enforcement
     of indemnity contracts such that an indemnitee to an express
     indemnity contract may seek indemnity from an employer who 
     has already paid the injured employee full workers'
     compensation benefits.  

3.   Workers' compensation -- indemnity exception -- expanded to
     situations where employer's indemnity obligation is implied by
     law. -- The "indemnity exception" has been expanded to
     situations where the employer's indemnity obligation is
     implied by law and is not part of an express contract; in such
     a situation, the indemnitees are permitted to sue the
     employers for reimbursement of damages they paid to the
     injured employees; the indemnitees are allowed to sue on the
     indemnity contract, and not in tort, and thus their claims are
     not barred by the exclusive-remedy provision found at Ark.
     Code Ann.  11-9-105 (Supp. 1995).

4.   Workers' compensation -- when implied-indemnity agreement will
     arise -- no such obligation arises under a sales contract. --
     An implied-indemnity agreement will only arise when there is
     a special relationship carrying with it the obligation to
     indemnify; no such "special relationship" exists between
     parties to a mere sales contract, thus there can be no implied
     obligation for indemnity; when the relation between the
     parties involves no contract or special relation capable of
     carrying with it an implied obligation to indemnify, the basic
     exclusiveness rule generally cannot be defeated by dressing
     the remedy itself in contractual clothes, such as indemnity.

5.   Contracts -- presumption that parties contract only for
     themselves -- when contract is actionable by third parties. -- 
     There is a presumption that parties contract only for
     themselves, and a contract will not be construed as having
     been made for the benefit of third parties unless it clearly
     appears that such was the intention of the parties; however,
     a contract is actionable by a third party where there is
     substantial evidence of a clear intention to benefit that
     third party; it is not necessary that the person be named in
     the contract if he is a member of a class of persons
     sufficiently described or designated in the contract.  

6.   Contracts -- when indemnitor's obligation to reimburse against
     loss generally becomes due -- there can be no third-party
     beneficiary to an indemnity contract. -- As a general
     proposition, an indemnitor's obligation to reimburse against
     loss does not become due until after the indemnitee has paid
     damages to a third party; once the indemnitee has made such
     patments, the third party's claim will have been satisifed;
     therefore, there can be no third-party beneficiary to an
     indemnitee contract.

7.   Workers' compensation -- appellee's liability did not arise
     until city sustained loss -- appellant not an intended third-
     party beneficiary to contract -- suit in tort barred by
     exclusivity provision. --  Where appellee's liability under
     its indemnity contract with the city did not arise until the
     city sustained a loss or expense, the city's payment of
     damages resulted in satisfaction of the third party's claim;
     appellant was merely an incidental, and not intended, third-
     party beneficiary to the indemnity contract.

8.   Workers' compensation -- appellant suing appellee in tort --
     exclusivity provision barred his action. -- Because appellant
     was suing appellee in tort, and no on the indemnity contract,
     the exclusivity provision of the Workers' Compensation Act
     barred his action against his employer; the employer could not
     be held liable indirectly in an amount that could not be
     recovered directly, for this would run counter to one of the
     fundamental purposes of the compensation law.

9.   Contracts -- appellee was not in business of insurance --
     appellant could not maintain direct action against appellee as
     insurer of city. -- Appellant's argument that the City of Fort
     Smith obtained "insurance" by executing the agreement whereby
     appellee agreed to indemnify the city and obtain insurance to
     cover this indemnity responsibility was without merit; an
     insurer is "every person engaged as indemnitor, surety, or
     contractor in the business of entering into contracts of
     insurance"; it was clear that appellee was "in the business"
     of construction, not insurance, and the indemnification
     agreement was a mere incidental obligation of its contractual
     relationship with the city as a contractor; appellee was not
     "in the business of entering into contracts of insurance" as
     required by statute, and, thus, appellant could not maintain
     a direct action under Ark. Code Ann.  23-79-210 against
     appellee as an insurer of an immune entity.

10.  Insurance -- insurance defined -- three factors considered to
     determine whether particular agreement fits definition. --
     Insurance is any agreement, contract, or other transaction
     whereby one party, the "insurer," is obligated to confer
     benefit of pecuniary value upon another party, the "insured"
     or "beneficiary," dependent upon the happening of a fortuitous
     event in which the insured or beneficiary has, or is expected
     to have at the time of such happening, a material interest
     that will be adversely affected by the happening of such
     event; Ark. Code Ann.  23-60-102 (Repl. 1994); in deciding
     whether a particular agreement fits this definition, the
     appellate court looks to the following three factors:  (1)
     whether the plan is mandatory; (2) whether a profit motive
     exists in offering the plan; and (3) whether the plan is
     intended to be actuarially sound. 

11.  Contracts -- parties never intended appellee to be city's
     insurer -- indemnity agreement not insurance contract. --
     Where appellee was not receiving money in exchange for its
     promise to indemnify, nor was the plan actuarially sound, and
     where, in the construction contract, the city agreed to obtain
     its own liability and property insurance, it was clear that
     the parties never intended appellee to be the "insurer" of the
     city; the indemnity agreement was not an insurance contract,
     and thus appellant was not entitled to maintain a direct
     action against appellee as an "insurer" of the city.

12.  Workers' compensation -- action barred under exclusive-remedy
     provision -- appellant not entitled to sue appellee for
     alleged breach of contractual duty to supply safe place to
     work. -- Appellant's assertion that it was suing appellee for
     its implied contractual duty to supply a safe place to work
     was without merit; the argument was clearly contrary to the
     plain meaning of the exclusive-remedy provision, which
     unequivocally states that the rights and remedies granted to
     an employee, on account of injury or death, are exclusive of
     all other rights and remedies of the employee; Ark. Code Ann.
      11-9-105(a) (Supp. 1995); appellant's action was barred
     under the exclusive-remedy provision.  

13.  Workers' compensation -- protection of exclusive-remedy
     provision never waived -- trial court's dismissal of
     appellant's lawsuit against appellee affirmed. --   
     Appellant's argument that appellee waived the protection of
     the exclusive-remedy provision when it agreed to a particular
     clause in the construction contract was without merit where 
     appellant misconstrued the common-sense meaning of the
     contract; the clause related to the amount of liability to the
     city, and not to an employee; in no way did the provision
     relate to or affect appellee's obligations to its employees;
     the trial court's dismissal of appellant's lawsuit against
     appellee was affirmed. 

14.  Insurance -- direct-action statute -- necessary elements. --
     In order for the direct-action statute to apply the following
     elements must exist: (1) the liability insurance must be
     carried by a nonprofit corporation; (2) a person must suffer
     injury or damage on account of negligence or wrongful conduct;
     and (3) the damage or injury must be on account of the
     negligence or wrongful conduct of "servants, agents, or
    employees" of the nonprofit corporation acting within the
    scope of their agency or employment. 

14.  Insurance -- insurance contract not carried by immune city --
     first necessary element not met. -- Where the insurance
     contract was "carried by" appellee, not the immune city,
     appellant failed to establish the first element of the
     statute; appellant's attempt to circumvent the immunity
     provision by directly suing an insurance company for acts done
     by an entity other than the named insured was rejected.

15.  Workers' compensation -- Workers' Compensation Act given
     priority as exclusive remedy -- appellant court not maintain
     direct action against appellee's insurer. -- Appellant's
     argument that pursuant to Ark. Code Ann.  23-79-210 (Repl.
     1992), it could directly sue the appellee's insurer because
     the exclusive-remedy provision found at Ark. Code Ann.  11-9-
     105 (Supp. 1995) made appellee "immune" from tort liability
     was without merit; other statutes must yield to the Workers'
     Compensation Act because it is in the interest of the public
     policy to give that act priority as an exclusive remedy; the
     exclusive-remedy provision also applied to insulate the
     employer's insurance carrier from tort liability; hence,
     appellant could not maintain a direct action against the
     appellee's insurance carrier.


     Appeal from Sebastian Circuit Court, Fort Smith District;
Floyd "Pete" Rogers, Judge; affirmed.
     R. Theodore Stricker, for appellant.
     Jones, Jackson & Moll, PLC, by:  J. Scott Hardin, for
appellees.

     Annabelle Clinton Imber, Justice.
     Howard Cherry, as administrator of David H. Cherry's estate,
appeals the dismissal of his wrongful death action against the
decedent's former employer, Tanda, Inc., and the employer's
insurance carrier, Transcontinental Insurance Co.  We affirm.
     On June 22, 1993, the City of Fort Smith ("City") entered into
a contract with Tanda, Inc. ("Tanda"), for the construction of a
sanitary landfill.  As part of the contract, Tanda agreed to
indemnify the City for all claims and damages for injuries or
deaths arising out of the performance of the contract.  In
addition, Tanda agreed to carry general liability insurance which
it subsequently obtained from Transcontinental Insurance Company
("Transcontinental").
     On September 13, 1993, the walls of the excavation site
collapsed causing the death of David H. Cherry.  On November 30,
1996, Howard Cherry, as administrator of David Cherry's estate,
filed in the Sebastian County Circuit Court a wrongful death action
against Tanda and Transcontinental.
     Tanda filed a Rule 12(b)(6) motion to dismiss in which it
alleged that the exclusive-remedy provision of the Workers'
Compensation Act, Ark. Code Ann.  11-9-105 (Supp. 1995), immunized
Tanda from Cherry's tort action.  Likewise, Transcontinental filed
a motion for summary judgment in which it claimed that Tanda, not
the City of Fort Smith, was the insured, and thus the estate could
not maintain a direct action against the insurance carrier pursuant
to Ark. Code Ann.  23-79-210 (Repl. 1992).  The trial court
granted both motions and Cherry appeals.
          I.  Immunity of Employer From Suit Under the
          Exclusive Remedy Provision of Ark. Code Ann.
                      11-9-105  (Supp. 1995)
     Cherry's first point on appeal is that the trial court erred
when it dismissed Cherry's complaint against Tanda on the grounds
of the "exclusive remedy" provision of Ark. Code Ann.  11-9-105
(Supp. 1995) of the Workers' Compensation Act.  According to the
Workers' Compensation Act, an employee's remedy against his or
her employer for injuries sustained while on the job is to file a
claim with the Workers' Compensation Commission.  Specifically,
the statute declares that:
          The rights and remedies granted to an employee
     subject to the provisions of this chapter, on account
     of injury or death, shall be exclusive of all other
     rights and remedies of the employee, his legal
     representative, dependents, next of kin, or anyone
     otherwise entitled to recover damages from the
     employer...on account of the injury or death, and the
     negligent acts of a coemployee shall not be imputed to
     the employer.  No role, capacity, or persona of any
     employer...other than that existing in the role of
     employer of the employee shall be relevant for
     consideration for purposes of this chapter, and the
     rights and remedies provided by this chapter shall in
     fact be exclusive regardless of the multiple roles,
     capacities, or personas the employer may be deemed to
     have.
Ark. Code Ann.  11-9-105(a) (Supp. 1995) (emphasis added).    
Moreover, the employer's tort immunity under this provision
extends to the employer's insurance carrier.  Burkett v. PPG
Indus., Inc., 294 Ark. 50,