Opinion ID: 1350624
Heading Depth: 1
Heading Rank: 4

Heading: the breadth of pepsico's guaranty as a statutory undertaking

Text: After giving the PepsiCo guaranty a private-law assessment, we now pass to discuss its legal effect as a statutory undertaking. The provisions of an Act must be read into the terms of the liability assumed thereunder. [21] Thus the provisions of the Workers' Compensation Act become part of the guaranty and are to be considered even in the absence of ambiguity in its terms. The scope of the guarantor's liability is affected by the text of the Act. One who chooses to stand as a guarantor of an obligation defined by law may not be allowed to guarantee less than the full extent of the statutorily-imposed liability. [22] The guaranty under review clearly was not a purely private-law obligation. It was given to satisfy a statutory liability and to assist Lee Way in recapturing and maintaining its public-law status as an own-risk carrier. The purpose of the guaranty, as stated on its face, was [t]o enable the continuing compliance by Lee Way Motor Freight, Inc., ... with the terms and conditions of Own Risk Permit No. 12176 issued Lee Way by the Workers' Compensation Court of Oklahoma, and to induce the Workers' Compensation Court of Oklahoma to withdraw and annul its Order dated July 9, 1984, revoking Own Risk Permit No. 12176... . By the unmistakably statutory terms of the guaranty, plainly reflected from its four corners, PepsiCo did, without a doubt, step into the shoes of its subsidiary and thus, in contemplation of the Act, became a co-obligor for benefits awarded before the instrument was filed. Under Rule 35, an employer's [f]ailure to comply with any provision of the Workers' Compensation Act or any of these rules shall be grounds for revocation of the own-risk permit. [23] Where the purpose of the guaranty is to extend the permit and where continued compliance with all provisions of the Act constitutes a conditio sine qua non of retaining the permit, compliance with the Act's provisions is a necessary ingredient of the guarantor's intended promise. There is no express language in Rule 35 [24] stating that the guaranty is required to be retrospective in operation. Though the terms of the guaranty itself are broad, it guarantees the payment of any and all awards ... arising out of any Workers' Compensation claim made by any such Lee Way Employee... . [emphasis added]. There are no express words which specifically indicate that the guaranty is intended to be retrospective in operation. As for the guaranty's duration, the document stipulates only that it will remain in full force and effect from the date hereof until such time as PepsiCo, Inc. shall provide written notice to the Oklahoma Workers' Compensation Court that said guarantee [sic] is no longer in force and effect. It is well settled that a guaranty will not be construed to have a retrospective effect unless such purpose appears by express words or necessary implication to have been the intention of the promisor. [25] While the express words of the PepsiCo guaranty do not indicate that the obligation was to operate retrospectively, such intent is necessarily implied given the statutory scheme and public policy underlying the Act. The Act's purpose is to provide protection to workers within the limits established by law. [26] When determining doubtful issues that arise under the Act, the necessity of carrying out the underlying public policy must be given great weight. Employers, within the limits of the Act, are made liable to employees in compensation for personal injuries suffered during the course of their employment. Employers are required by the terms of 85 O.S. 1981 § 61 either to secure the legally-prescribed compensation by insuring its payment with an authorized insurance carrier or to furnish satisfactory proof of their ability to pay compensation and to secure the trial tribunal's authorization to operate as a self-insurer or own-risk carrier. [27] The Act provides remedies available to employees when their employers or insurance companies violate certain of its provisions. For example, 85 O.S.Supp. 1983 § 42 sets forth the sole remedy available when there is a failure to pay compensation due under the terms of an award. [28] The statute provides that, if compensation awarded is not paid within ten days after it is due, the court may order the entire unpaid amount commuted to a lump sum award and certify it to the district court. The Act also affords safeguards to protect workers covered by authorized insurance carriers from losing awarded compensation in the event their employer becomes insolvent or files for bankruptcy. Section 64(c) of the Act provides that ... insolvency or bankruptcy of the employer shall not relieve the insurance carrier from the payment of compensation for injuries sustained by an employee during the life of such policy and every policy of an insurer authorized to transact workers' compensation insurance shall contain a provision to that effect. [29] Though they are not included in the statutory language of 85 O.S. 1981 § 64, own-risk insurers are, by virtue of their permit, authorized to transact workers' compensation insurance in Oklahoma much the same as stock companies or mutual associations issuing insurance covering the liability of employers. Their liability for injuries sustained during the life of the own-risk permit is analogous to that of insurance carriers. The insolvency or bankruptcy of the self-insurer does not suspend his liability for awards granted during the life of the permit. [30] If the guaranty's effect is to place the guarantor in the shoes of the primary obligor upon the latter's default and if the primary obligor defaults on his continuing obligation to pay compensation, then PepsiCo, who sought to extend the life of the permit by guaranteeing payment of all awards and judgments, must step into Lee Way's shoes and assume the continuing obligation to pay awards granted during the life of the permit. This is the only construction that gives employees of own-risk employers protection equivalent to that afforded employees covered by workers' compensation insurance issued by independent insurance carriers. The effect of requiring a guarantor to extend the permit of a financially unstable own-risk insurer [31] is to provide a protective measure similar to that required of independent insurance carriers. [32]