Opinion ID: 6498271
Heading Depth: 3
Heading Rank: 2

Heading: Employer Exclusion

Text: Under an exclusion entitled “Employer’s Liability,” RLI’s policy next bars coverage for “‘[b]odily injury’ to: (1) An ‘employee’ of the insured arising out of and in the course of: (a) Employment by the insured; or (b) Performing duties related to the conduct of the insured’s business[.]” Ins. Pol’y, R.58-6, PageID 1112. The policy indicates that the word “employee” includes a “leased worker” and excludes a “temporary worker.” Id., PageID 1124. But it does not contain a general definition of the word “employee.” The parties begin by debating the proper meaning of this word. According to RLI, we should define “employee” in the policy to include “statutory” employees under a workers’ compensation scheme like Pennsylvania’s. The “statutory employer” concept expands the number of entities that qualify as “employers” beyond the traditional “common-law” definition. McDonald v. Levinson Steel Co., 153 A. 424, 425 (Pa. 1930); see Six L’s Packing Co. v. Workers’ Comp. Appeal Bd. (Williamson), 44 A.3d 1148, 1150 (Pa. 2012). It does so to ensure that an injured worker can receive benefits from a solvent party (typically, a general contractor) if the common-law employer (typically, a subcontractor) lacks workers’ compensation coverage. Peck, 814 A.2d at 187–88 (plurality opinion) (citation omitted); 77 Pa. Stat. & Cons. Stat. Ann. §§ 461–62. Because the relevant Pennsylvania agency found Motor Express to be Marshall’s “statutory employer,” RLI’s argument goes, Marshall was an employee under the policy. Cf. Amerisure Ins. Co. v. Orange & Blue Constr., Inc., 545 F. App’x 851, 854–55 (11th Cir. 2013). According to Motor Express, we should define the word “employee” in RLI’s policy to adopt the word’s narrower common-law definition—one that asks whether a purported employer has the right to “control” a purported employee’s work. Motor Express notes that the Ohio Supreme Court has already interpreted the undefined word “employee” in another policy to incorporate this common-law control test. See Guman, 652 N.E.2d at 686–87. And because the Pennsylvania agency found that Motor Express was Marshall’s statutory employer (not its regular employer), Motor Express reasons that the exclusion does not apply. Cf. Va. Elec. & Power Co. v. Northbrook Prop. & Cas. Ins. Co., 475 S.E.2d 264, 270–71 (Va. 1996). Indeed, in a separate cross-appeal, Motor Express suggests that it is entitled to judgment as a matter of law on this issue. Nos. 21-3412/3442 P.I. & I. Motor Express, Inc. v. RLI Ins. Co. Page 13 We need not resolve this debate because the jury found that Marshall did not qualify as an employee on a different ground. Even if Marshall might otherwise have been a Motor Express “employee” under the applicable definition, the policy specifically excludes “temporary worker[s]” from this definition. Ins. Pol’y, R.58-6, PageID 1124. It defines “temporary worker” to mean “a person who is furnished to you to substitute for a permanent ‘employee’ on leave or to meet seasonal or short-term workload conditions.” Id., PageID 1127. And Motor Express argued that Marshall had been “furnished to” it by Sam Russell Trucking to meet Dura-Bond’s “short-term workload” needs when Wallace Trucking could not handle them. Id. The jury agreed. Its temporary-worker finding took Marshall outside the employer exclusion. After the jury’s verdict, moreover, RLI failed to move for judgment as a matter of law under Federal Rule of Civil Procedure 50(b). That failure bars us from considering any challenge to the sufficiency of the evidence underlying the jury’s finding. See Unitherm Food Sys., Inc. v. Swift-Eckrich, Inc., 546 U.S. 394, 400–06 (2006); Ayers v. City of Cleveland, 773 F.3d 161, 168 (6th Cir. 2014). RLI responds that it raised two “purely legal” claims against the use of this temporaryworker provision at the summary-judgment stage. In re AmTrust Fin. Corp., 694 F.3d 741, 750 (6th Cir. 2012). And our cases permit us to consider these legal claims even though RLI did not renew them in a Rule 50(b) motion. See id. at 750–51 (distinguishing Ortiz v. Jordan, 562 U.S. 180, 188–92 (2011)); cf. Hanover Am. Ins. Co. v. Tattooed Millionaire Ent., LLC, 974 F.3d 767, 785 & n.10 (6th Cir. 2020). RLI makes a preclusion argument (about the effect of the Pennsylvania agency’s decision) and a purpose argument (about the reason for the temporaryworker provision). Preclusion Argument. RLI first says that the Pennsylvania agency’s finding that Marshall was a “statutory employee” under the Pennsylvania workers’ compensation statute legally precludes a finding that he was a “temporary worker” under its policy. This argument implicates a “bewildering” choice-of-law issue. 18B Charles A. Wright et al., Federal Practice and Procedure § 4472, at 349 (3d ed. 2019). Because this case arises under our diversity jurisdiction, should we look to the choice-of-law rules of Ohio (the state in which the district court sits) to identify the specific state’s preclusion law that applies? Cf. Taveras v. Taveraz, 477 F.3d 767, 783 (6th Cir. 2007); 18B Wright, supra, § 4472, at 354. Or should we instead rely on Nos. 21-3412/3442 P.I. & I. Motor Express, Inc. v. RLI Ins. Co. Page 14 federal choice-of-law rules to identify the governing preclusion law? Cf. Univ. of Tenn. v. Elliott, 478 U.S. 788, 794–99 (1986); 18B Wright, supra, § 4472, at 354. Thankfully, the parties do not dispute that both choice-of-law sources (Ohio and federal law) point us to the preclusion law of the same jurisdiction: Pennsylvania. Compare Elliott, 478 U.S. at 799; 28 U.S.C. § 1738, with Holzemer v. Urbanski, 712 N.E.2d 713, 715–16 (Ohio 1999); U.S. Const. art. IV, § 1. So we will apply that law here. The parties also do not dispute that Pennsylvania courts would apply the commonwealth’s preclusion rules to a judgment from this workers’ compensation agency even where (as here) no court has reviewed this judgment. We thus may assume that the agency’s decisions are eligible for preclusive effect. Cf. Grant v. GAF Corp., 608 A.2d 1047, 1054–55 (Pa. Super. Ct. 1992); 18B Wright, supra, § 4471.3, at 319. Still, RLI cannot meet Pennsylvania’s test for issue preclusion. Issue preclusion generally bars a party from relitigating an issue in a second case that the party has already litigated to a final judgment in an earlier one. See, e.g., McNeil v. Owens-Corning Fiberglas Corp., 680 A.2d 1145, 1147–48 (Pa. 1996). But Pennsylvania courts would not allow a first case to preclude an issue in a second one unless both cases involved the same issue and the issue was “actually litigated” in the first case. Clark v. Troutman, 502 A.2d 137, 139 (Pa. 1985); see also Muhammad v. Strassburger, McKenna, Messer, Shilobod & Gutnick, 587 A.2d 1346, 1348 (Pa. 1991); Odgers v. Commonwealth, 525 A.2d 359, 364–65 (Pa. 1987); Restatement (Second) of Judgments § 27 cmt. e (Am. L. Inst. 1982). Here, the Pennsylvania agency concluded that Marshall was a statutory employee under the commonwealth’s workers’ compensation statute. But the jury found that Marshall was a temporary worker under RLI’s insurance policy. These two issues are not “identical.” See Odgers, 525 A.2d at 364. The former (workers’ compensation) question required the agency to find that Motor Express was a “contractor” and that Sam Russell Trucking was a “subcontractor” within the statutory definition of those words. See 77 Pa. Stat. & Cons. Stat. Ann. § 461; cf. Six L’s, 44 A.3d at 1159. The latter (contract-law) question required the jury to find that Russell “furnished” Marshall to Motor Express to meet “short-term workload conditions.” Ins. Pol’y, R.58-6, PageID 1127. These questions have little in common. Indeed, the agency’s factual Nos. 21-3412/3442 P.I. & I. Motor Express, Inc. v. RLI Ins. Co. Page 15 findings might support the conclusion that Marshall was a temporary worker. After all, its appeal board recognized that Dura-Bond used Russell’s services only when Wallace could not meet Dura-Bond’s needs—that is, only on a short-term basis. Bd. Op., R.58-3, PageID 1007. RLI responds that Motor Express could qualify as a “contractor” (and so a statutory employer) under Pennsylvania law only if it contracted with Sam Russell Trucking “to have work performed of a kind which is a regular or recurrent part of the business[.]” 77 Pa. Stat. & Cons. Stat. Ann. § 461 (emphasis added). The agency’s conclusion that this element was met, RLI’s argument goes, conflicts with the temporary-worker requirement that a worker be furnished to meet only “short-term workload conditions.” Ins. Pol’y, R.58-6, PageID 1127 (emphasis added). But we can easily harmonize the two definitions. The work that Sam Russell Trucking performed—trucking operations—was of a “kind” that was a “regular” (indeed, the main) part of Motor Express’s business. But nothing in this conclusion required that Marshall himself be regularly engaged in business for Dura-Bond. The mere fact that Motor Express was in the trucking business says nothing about the possibility that it used temporary workers to drive trucks when its primary subcontractor (Wallace Trucking) could not meet Dura-Bond’s needs. Purpose Argument. RLI next argues that Marshall should not qualify as a temporary worker because that finding would undercut the purpose behind this provision. The workers’ compensation laws in some states distinguish between leased workers (who become employees of the entities to whom they are leased) and temporary workers (who remain the employees of temporary staffing agencies). See Gen. Agents Ins. Co. of Am., Inc. v. Mandrill Corp., 243 F. App’x 961, 967 (6th Cir. 2007) (opinion of Kennedy, J.); Brown, 184 S.W.3d at 537–38. Because temporary workers do not become the employees of the entities to whom they are assigned, the workers’ compensation laws do not immunize the entities from a worker’s tort suit. Given that the workers’ compensation laws do not apply, the temporary-worker provision allows the liability insurance to kick in. See Mandrill, 243 F. App’x at 967 (opinion of Kennedy, J.). This “coverage gap” purpose has no application here. Pennsylvania’s scheme does not distinguish between leased employees and temporary workers. And Motor Express was Marshall’s “statutory employer,” so Pennsylvania would have granted it tort immunity had it obtained the required insurance. See 77 Pa. Stat. & Cons. Stat. Ann. § 481(a). Because the facts Nos. 21-3412/3442 P.I. & I. Motor Express, Inc. v. RLI Ins. Co. Page 16 of this case do not implicate any “gap” in coverage, RLI asks us to set aside the temporaryworker provision. Its purpose argument flouts Ohio contract law. Under well-settled rules, a contract’s meaning hinges on the words that the parties put into the contract. See Galatis, 797 N.E.2d at 1261; see also Sunoco, 953 N.E.2d at 292; Shifrin v. Forest City Enters., Inc., 597 N.E.2d 499, 501 (Ohio 1992). And RLI opted to put the temporary-worker definition into this policy—a definition that does not turn on whether a particular state’s laws draw a distinction between leased employees and temporary workers. We have no power to jettison the contract’s expressed definition by looking to RLI’s unexpressed hopes behind it. As with the workers’ compensation exclusion, RLI may change this definition if the provision does not meet RLI’s subjective expectations. See Ward, 951 N.E.2d at 774–75. Until the insurer does so, however, courts must apply the policy language as written. They cannot simply ignore it, as RLI would have us do.