Title: SHORTER v. TULSA USED EQUIPMENT AND INDUSTRIAL ENGINE SERVICES

State: oklahoma

Issuer: Oklahoma Supreme Court

Document:

SHORTER v. TULSA USED EQUIPMENT AND INDUSTRIAL ENGINE SERVICES  SHORTER v. TULSA USED EQUIPMENT AND INDUSTRIAL ENGINE SERVICES 2006 OK 72 148 P.3d 864 Case Number: 102280 Decided: 10/10/2006 THE SUPREME COURT OF THE STATE OF OKLAHOMA JOHN SHORTER, Petitioner, v. TULSA USED EQUIPMENT AND INDUSTRIAL ENGINE SERVICES, NATIONAL AMERICAN INSURANCE COMPANY and THE WORKERS' COMPENSATION COURT, Respondents. ON CERTIORARI TO THE COURT OF CIVIL APPEALS, DIV. III ¶0 Claimant, sole shareholder of a Subchapter S corporation, filed a compensation claim alleging a work-related injury. The company and its insurance provider denied liability. Claimant urged that because his wages were used in calculation of the policy's premiums, respondents were estopped from denying liability by the terms of 85 O.S. 2001 §§ 65.2 and 65.3 (the estoppel act).1 The trial tribunal ruled it had jurisdiction and claimant could invoke the estoppel act. A three-judge panel vacated the order. It held that under the terms of 85 O.S. 2001 §§ 3(8) and (9)2 claimant was neither an employer nor an employee, and the terms of § 65.2 were hence inapplicable. The Court of Civil Appeals (COCA) sustained this ruling. On certiorari granted upon claimant's petition, THE COURT OF CIVIL APPEALS' OPINION IS VACATED AND THE TRIAL TRIBUNAL'S ORDER IS REINSTATED. M. Scott Ash, Tulsa, Oklahoma, for Petitioner. W. Jeffrey Dasovich, Oklahoma City, for Respondents.3 OPALA, J. ¶1 The question presented on certiorari is whether COCA erred when it sustained the three-judge panel's order that ruled the terms of 85 O.S. 2001 § 65.24 (the estoppel act) may not be invoked by claimant in today's cause. We answer in the affirmative. I. ANATOMY OF THE LITIGATION ¶2 John Shorter (Shorter or claimant) is sole shareholder of Tulsa Used Equipment and Industrial Engine Services (Tulsa Used Equipment), a Subchapter S corporation engaged in heavy equipment sales and service. National American Insurance Company (NAIC) is Tulsa Used Equipment's workers' compensation insurance provider (these two entities together with the Workers' Compensation Court (WCC) are collectively called respondents). Tulsa Used Equipment's compensation policy contains a "partners, officers and others exclusion endorsement" which excludes from compensation coverage those whose names are listed on the form. Shorter's name is listed on this endorsement. ¶3 Shorter filed a compensation claim alleging he sustained a work-related injury to his hands on 28 July 2003. NAIC initially provided 52 weeks of benefits to claimant but later denied its liability for the injury. At a hearing before the WCC, Shorter urged respondents were estopped to deny liability by the provisions of 85 O.S. 2001 §§ 65.2 and 65.3 (the estoppel act)5. This is so because, despite Shorter's name appearance on the exclusion endorsement, his salary was in fact included in the calculation of the workers' compensation insurance premiums to be paid by Tulsa Used Equipment. ¶4 Respondents urged that the estoppel act may not be invoked because NAIC did not accept an insurance premium that included Shorter's wages in the calculation; rather, it accepted only a deposit. This is so because Shorter's wages, which were included in determining the premium at the beginning of the policy's term, were deducted from the computations in the annual end-of-policy audit and refunded to Tulsa Used Equipment.6 In their post-trial briefs respondents challenged the WCC's jurisdiction over the cause7 and urged Shorter is not one who may invoke estoppel's protection because 1) he excluded himself from coverage and there is no employer-employee relationship between him and the insured and 2) Shorter's actions prevent application of estoppel here.8 ¶5 The trial judge ruled that: 1) the court has jurisdiction and 2) Shorter is within the compensation policy's coverage by the estoppel act. This is so because, according to the judge, NAIC breached the terms of its exclusion endorsement. II. STANDARD OF REVIEW ¶6 The issue presented calls for resolution of a question of law. Review of contested law is governed by a de novo standard.III. A. THE PARTIES' ARGUMENTS ¶7 Respondents urge COCA's analysis - Shorter, in essence, must first be found to be an employee in accordance with the Act before he may invoke the terms of §65.215 - is correct. Claimant, according to respondents, may not use the estoppel act as a means of "bootstrapping" jurisdiction. They urge an employer-employee relationship must first be established and the jurisdictional requirements met before the estoppel act is applicable.16 Shorter, on the other hand, continues to assert that because his wages were used in calculating the compensation premium, he stands eligible to invoke the estoppel act's protection. Both parties' lower-court briefs cite cases deemed to support their divergent view of the applicable law. ¶8 Respondents cite to the teachings of Rosamond Construction Co. v. Rosamond.17 There a sole proprietor obtained worker's compensation insurance for his business, paid the premium (calculation of the premium included the owner's wage), and, later the same day, sustained an on-the-job injury. The court ruled the terms of the Act then in force anticipated that the parties be two separate individuals and unless there is an employer-employee relationship, no liability can arise under the Act.18 Although claimant there sought the estoppel act's protections, the court maintained the enactment could not be invoked by the claimant unless an employer-employee relationship is first established.19 ¶9 Claimant, in his lower-court materials, cites Young v. the City of Holdenville20 and the court's decision in a series of Indian sovereignty cases.21 Young teaches that an insurance company is estopped to deny that an elected city official is an employee when the official's wages were used in calculating compensation premiums and the claimant's relationship with the city is in the nature of employer and employee. The court in Young plainly instructs that the enactment of the estoppel provisions disposes of the contention that the relation of master and servant or employer and employee must be shown to exist as a prerequisite to recovery in those causes where the estoppel act is invoked.22 Young further distinguished Rosamond by noting that there was no representation of an employer-employee relationship in favor of which an estoppel could be asserted.23 Dominic24 and its progeny (the Indian sovereignty causes) dealt with the WCC's jurisdiction where an employer's status as a covered entity under the Act was challenged.25 These cases teach that a compensation insurer who collects insurance premiums that are based on claimant's monetary compensation is estopped to deny insured's status as a covered employer.26 In these latter cases the court held that once the existence of a workers' compensation insurance policy that covers the claimant is established, jurisdictional requirements for proceeding before the trial tribunal are deemed met. B. DOMINIC CONCRETIZED THE APPLICATION AND OUTER REACHES OF THE ESTOPPEL ACT, ¶10 Claimant's status is of no consequence in determining here whether the estoppel act may be invoked. The sole legal question presented is whether the insurance carrier is statutorily estopped from denying workers' compensation coverage. When denying an award to this claimant, the three-judge panel clearly relied on, and gave paramount importance to, Shorter's express exclusion from the compensation protection to be provided by the carrier. This analysis was clearly in error. The terms of §§ 65.2 and 65.3 are utterly devoid of requirements that either contractual or consensual elements of claimant's relationship to the insured be established.27 The focus is, rather, on the rights of an injured claimant against the insurance carrier of the entity for whom claimant was acting when injured. These rights are purely statutory.28 ¶11 Respondents' interpretation of and reliance on the court's pre-Dominic jurisprudence (dealing with the estoppel act) is in error. Indeed, a review of this body of law reveals the cacophony of voices entangling application of the estoppel provisions.29 The discord stands clearly resolved by Dominic30 and its progeny. ¶12 An insured's compensation policy is treated as a guarantee that its workers are protected by the Act.31 Once the existence of workers' compensation insurance covering claimant is established, jurisdictional requirements for proceeding in the compensation court are deemed met.32 The tribunal then acquires power to entertain the claim. Although the Indian sovereignty causes used terms that addressed themselves to an employer's status under the Act, Dominic concretizes33 the doctrine of estoppel by imposing on a claimant who invokes the doctrine the duty to prove but three elements: 1) the claimed injury occurred during the time the premium-paying insured maintained a compensation liability policy (2) claimant's earnings were used in the calculation of the premium that was paid by the insured and 3) claimant's injury occurred while he was acting for the insured.34 Once this proof is met, coverage is effected under the estoppel act through the law's conclusive presumption in claimant's favor. The presumption is created by premiums on the policy having been collected or a worker's employment having been considered or used in determining the amount of premium collected upon the policy regardless of the type of business in which an employer is engaged or the nature of the employee's work.35 ¶13 Respondents' analysis of today's cause would make utterly immaterial the consideration of a worker's remuneration in setting and accepting compensation premiums.36 The terms of the estoppel act are plainly contemplated to apply to all those situations where a worker's employment is not covered by the specific provisions of the insured's policy but whose wages were used in premium calculations.37 Any other interpretation of the estoppel act would be contrary to its terms.38 To limit the benefits of the Act only to those whose status as "employer" or "employee" or whose "employment" is beyond legal question would eliminate all need for the enactment itself and stand inapposite to Dominic's teachings.39 Those who are in need of estoppel's protection are not those who may gain legal standing by meeting the Act's jurisdictional requirements. ¶14 The court's decision in Rosamond,40 likewise, cannot be read to support respondents' assertions here. Its teachings belong to the body of pre-Dominic jurisprudence and are inapplicable to today's dispute.41 Any doubts that may have existed concerning estoppel's application were silenced by Dominic42 and its progeny. ¶15 Estoppel's reach is broad. While the text of § 65.243 appears to bar only an insurer's initiated challenge to the "hazardous" nature of the insured's business, the intended purpose of the quoted word in the enactment has been construed to extend the estoppel act's benefit to all disputes spawned by the insurer's denial of its insured's status as an employer covered by workers' compensation liability.44 The provisions, likewise, have been held to estop a carrier from denying liability to an insured employer who had fewer employees than the minimum number required by the Act.45 Estoppel's purpose is to prevent an insurer who accepts premiums from evading liability for benefits due under the law.46 Today's controversy falls into the ambit of those with scenarios the statute was enacted to cover. ¶16 Shorter has met his burden. Evidence shows that insurance carrier used claimant's wages to compute the premium due. The premiums that included Shorter's salary were in fact collected, but after claimant's accident that gave rise to the injury here in suit, the insurance carrier refunded the excess premiums after a routine end-of-term policy audit.47 An unrequested post-accident refund does not defeat the employer's or insurer's already incurred liability.48 This legal maxim applies with even greater vigor to a public-policy statute that is bottomed on the principle that it would be inequitable to allow a workers' compensation insurer to accept premiums and then contest coverage.49 An insurer who accepts a premium must likewise accept that it affords protection for all those upon whose earnings the premium is based. This protection extends from the time of premium payment through the policy's maturity, absent a pre-accident refund and notice to the insured of the disclaimed individual. If a premium is in fact overpaid and no refund is effected before the accident, the status of the worker stands fixed as that of one covered by the compensation policy. The duty to establish proper procedures to monitor premium payments computed on the basis of an insured's personnel expenditures and guard against overpayment rests solely on the insurer. An end-of-policy audit and accompanying refund will not protect an insurer from liability for an accident that occurs during the period the policy is in effect. In sum, Shorter's status as one who may invoke the estoppel act stands undenied.50 This holding comports with the well-established rule that the Workers' Compensation law should be liberally construed in favor of those entitled to its benefits.51 ¶17 There is an additional basis for today's conclusion that we raise sua sponte.IV.s SUMMARY ¶18 Once the existence of a workers' compensation insurance policy is established in a worker's favor, that worker is free to invoke the jurisdiction of the Workers' Compensation Court. A claimant who relies upon the estoppel act, 85 O.S. 2001 §§ 65.2 and 65.3, must show that the claimed injury occurred when claimant was acting for the insured and premiums computed on his/her earnings were accepted under a policy insuring the insured against the liability risk under the Workers' Compensation Act. Once this is shown, the insurance contract is conclusively presumed to be for the benefit of the injured claimant. Claimant has the burden of proving the facts necessary to raise the Act's conclusive presumption in his favor. Here, claimant has met that burden. ¶19 WATT, C.J., WINCHESTER, V.C.J., HARGRAVE, OPALA, KAUGER, EDMONDSON and COLBERT, JJ., concur. ¶ FOOT