TIG Insurance v. Deaton, Inc. ( 1998 )


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  • UNPUBLISHED
    UNITED STATES COURT OF APPEALS
    FOR THE FOURTH CIRCUIT
    TIG INSURANCE COMPANY,
    Plaintiff-Appellant,
    v.
    No. 97-2637
    DEATON, INC.; TRAVELERS INSURANCE
    COMPANY,
    Defendants-Appellees.
    Appeal from the United States District Court
    for the Western District of North Carolina, at Charlotte.
    Robert D. Potter, Senior District Judge.
    (CA-96-92-3-P)
    Argued: June 3, 1998
    Decided: December 18, 1998
    Before NIEMEYER and HAMILTON, Circuit Judges, and
    FABER, United States District Judge for the
    Southern District of West Virginia, sitting by designation.
    _________________________________________________________________
    Affirmed by unpublished opinion. Judge Faber wrote the opinion, in
    which Judge Niemeyer and Judge Hamilton joined.
    _________________________________________________________________
    COUNSEL
    ARGUED: Randel Eugene Phillips, MOORE & VAN ALLEN,
    P.L.L.C., Charlotte, North Carolina, for Appellant. F. Fincher Jarrell,
    KENNEDY, COVINGTON, LOBDELL & HICKMAN, L.L.P.,
    Charlotte, North Carolina; James Orr Cobb, Jr., RUFF, BOND,
    COBB, WADE & BETHUNE, L.L.P., Charlotte, North Carolina, for
    Appellees. ON BRIEF: M. James Grode, MOORE & VAN ALLEN,
    P.L.L.C., Charlotte, North Carolina, for Appellant.
    _________________________________________________________________
    Unpublished opinions are not binding precedent in this circuit. See
    Local Rule 36(c).
    _________________________________________________________________
    OPINION
    FABER, District Judge:
    TIG Insurance Company ("TIG") filed this action seeking a declar-
    atory judgment that a policy of insurance issued by it to Deaton, Inc.
    ("Deaton") does not provide indemnity coverage to Deaton for work-
    ers compensation benefits paid to Daniel Lee Coffman ("Coffman"),
    a Deaton employee. TIG maintained that Coffman's claim was cov-
    ered by a rival policy of insurance issued to Deaton by The Travelers
    Insurance Company ("Travelers"). The United States District Court
    for the Western District of North Carolina denied the relief requested
    by TIG and granted summary judgment in favor of Deaton and Trav-
    elers, after which TIG took this appeal. Finding no error in the deci-
    sion of the district court, we affirm.
    I.
    The relevant facts are not in dispute. Deaton is an interstate truck-
    ing company which operates throughout the United States. Its princi-
    pal place of business and home office are in Birmingham, Alabama.
    Deaton has no fixed system of routes; it hauls full trailer loads
    directly from shippers to ultimate destinations. Deaton's interstate
    drivers tend to reside near the company's local terminals, making it
    easier for them to get home after completing their runs.
    Coffman had lived in North Carolina for over three years before
    going to work for Deaton. He applied for a job at Deaton's Wilson,
    2
    North Carolina terminal, signing an application which contained the
    following language:
    All questions of law and fact which may arise regarding this
    application, or regarding any aspect of any employment
    relationship between me and the Company, will be inter-
    preted, determined, and resolved in accordance with the
    laws of the State of Alabama, regardless of where I or my
    residence may be located at the time of hire or at any time
    during the course of my employment. For purposes of the
    application of Worker's Compensation Laws and the pay-
    ment of Benefits thereunder, all driver employees of Deaton,
    Inc., regardless of their place of residence at the time of hire,
    enter into their employment relationship in the State of Ala-
    bama, and are domiciled, supervised, based, and have as
    their principal location of employment, the State of Ala-
    bama.
    Marion Poole, Deaton's manager at the Wilson terminal, discussed
    this provision with Coffman. When Coffman signed the application,
    he agreed to the provision and understood that it became one of the
    terms of his employment contract with Deaton. The final approval for
    Coffman to drive for Deaton took place in Birmingham, Alabama.
    Deaton required Coffman, as a condition of his employment, to travel
    in Alabama and other states.
    Coffman made his first trip as an interstate truck driver for Deaton
    on March 3, 1992; he drove for approximately two weeks before his
    injury. During those two weeks, he made seven trips, which included
    pickups and deliveries in six different states, including a pickup in
    Alabama. He was on the road continuously from March 3, 1992, until
    the time of his accident, and never returned to the Wilson terminal.
    Coffman parked his tractor in North Carolina only once -- when he
    stopped at his home overnight while traveling from Maryland to
    Georgia. The load Coffman was carrying at the time of his injury was
    picked up by him at Deaton's terminal in Birmingham, Alabama, and
    delivered to Charlotte, North Carolina.
    On the other hand, Coffman has been a North Carolina resident at
    all relevant times; he was recruited, tested, and informed that he had
    3
    been hired through the Wilson, North Carolina terminal; he completed
    his training with a North Carolina driver, beginning or ending all
    training trips in North Carolina; he was supervised and received dis-
    patching instruction from the Wilson terminal; he began or ended all
    of his solo trips for Deaton except one in North Carolina and on that
    one, he spent the night in North Carolina; and, he paid state income
    taxes only to North Carolina.
    Coffman's injury occurred on March 17, 1992, while delivering a
    load of steel pipe to a destination in Charlotte, North Carolina. A pipe
    fell on his head, paralyzing him from the neck down and leading to
    amputation of his left foot. Coffman personally decided to file a
    workers compensation claim in North Carolina, believing himself to
    be employed there.
    At the time of Coffman's accident, Deaton's policies with both
    TIG and Travelers were in effect. Deaton's plan for insuring workers
    compensation claims was to have all of its interstate drivers treated
    as Alabama employees and covered by the TIG policy. To this end,
    Deaton included in its employment application the provision quoted
    above to which Coffman acceded. Deaton paid premiums to TIG for
    all of its interstate drivers, including Coffman.
    The TIG policy was supplemented by state specific policies cover-
    ing Deaton's workers compensation exposure for intrastate workers
    not included in the TIG policy. The Travelers policy provided pri-
    mary workers compensation coverage in several states in which Dea-
    ton maintained terminals, including North Carolina. Consistent with
    Deaton's general plan, the Travelers policy was designed to cover
    only local drivers and employees who worked at terminals. Deaton
    submitted to the North Carolina Rate Bureau a request for assigned
    risk compensation insurance representing that such insurance would
    cover only clerical employees, sales employees, terminal workers and
    city or local drivers. Travelers issued its policy based upon the sub-
    mission to, and direction from, the North Carolina Rate Bureau. The
    required premium was based upon Deaton's payroll for its shop facil-
    ity, its city or local drivers, and its clerical employees. As an interstate
    driver, Coffman was not included in this calculation. Travelers
    received no premium for Coffman or any other Deaton interstate driv-
    ers.
    4
    On March 23, 1992, Deaton reported Coffman's injury to the
    Workers Compensation Division of the Alabama Department of
    Industrial Relations. By December 30, 1992, Deaton had exceeded its
    $250,000 self-insured retention ("SIR") with respect to Coffman's
    claim, and requested reimbursement from TIG under the TIG policy.
    TIG initially accepted coverage, since the claim was being processed
    under Alabama's workers compensation law. TIG began reimbursing
    Deaton for payments Deaton had made in excess of the $250,000 SIR.
    On January 3, 1995, more than two years after beginning to reim-
    burse Deaton for Coffman's claims, TIG informed Deaton that it had
    come to TIG's attention the proper jurisdiction may be North Caro-
    lina, not Alabama, and that TIG reserved its right to seek reimburse-
    ment of all payments made to, or on behalf of, Deaton for Coffman's
    injuries.
    On March 12, 1996, TIG filed this declaratory judgment action in
    the Western District of North Carolina. Federal jurisdiction is based
    on diversity of citizenship under 
    28 U.S.C. § 1332
    . TIG sought: (1)
    a declaration that Travelers, and not TIG, is liable for the benefits
    paid to Coffman because Coffman's workers compensation claims
    arise under the North Carolina Workers' Compensation Act; and (2)
    reimbursement from Deaton of all benefits paid by TIG to Deaton
    regarding Coffman's claims. By Order entered October 6, 1997, the
    district court, applying Alabama law, granted summary judgment for
    Deaton, holding that the TIG policy, not the Travelers policy, covered
    the Coffman claims as a matter of law. Relying on the court's deci-
    sion, Travelers then filed its own motion for summary judgment. By
    Order entered on October 15, 1997, the court likewise granted Travel-
    ers' motion for summary judgment. This appeal by TIG ensued.
    II.
    The standard for appellate review involving the grant or denial of
    a summary judgment motion is de novo. Thus, the Court of Appeals
    uses the same standard as the district court. Shaw v. Stroud, 
    13 F.3d 791
    , 798 (4th Cir. 1994). A moving party is entitled to summary judg-
    ment "if the pleadings, depositions, answers to interrogatories, and
    admissions on file, together with the affidavits, if any, show that there
    5
    is no genuine issue as to material fact and that the moving party is
    entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c).
    A genuine issue of material fact exists only "if the evidence is such
    that a reasonable jury could return a verdict for the non-moving
    party." Anderson v. Liberty Lobby, Inc., 
    477 U.S. 242
    , 248 (1986).
    The court must view the facts in the light most favorable to the non-
    moving party with all reasonable inferences drawn in favor of such
    party. 
    Id. at 255
    . The non-moving party is entitled to the presumption
    that all his evidence is credible. Miller v. Leathers, 
    913 F.2d 1085
    ,
    1987 (4th Cir. 1990). The party seeking summary judgment has the
    initial burden to show the absence of evidence to support the non-
    moving party's case. Celotex Corp. v. Catrett , 
    477 U.S. 317
     (1986).
    The opposing party must then demonstrate that a triable issue of fact
    exists; he may not rest upon mere allegations or denials. Anderson,
    
    477 U.S. at 248
    . A scintilla of evidence supporting the non-moving
    party's case is insufficient to defeat a motion for summary judgment.
    
    Id.
    III.
    A.
    Deaton's intent in acquiring these two policies of insurance is
    clear. Deaton's purpose was to insure its interstate drivers under the
    law of the company's home state, Alabama, for job-related injuries
    wherever occurring. The TIG policy was designed to do this. Deaton
    then supplemented this coverage with state specific policies covering
    its various intrastate risks. The Travelers policy was one such policy;
    it was designed to cover claims of Deaton employees who worked
    solely within North Carolina.
    Premiums paid by Deaton to TIG were based on the risk to Dea-
    ton's interstate drivers, specifically including Coffman. Premiums
    paid to Travelers were based on Deaton's payroll for sales, clerical
    and terminal workers, and local drivers, all of whom worked exclu-
    sively in North Carolina. There were seven such employees specifi-
    cally covered by Travelers -- Coffman was not one of them. The
    express terms of the two policies, and the way premiums were calcu-
    lated under them, shows that Deaton, TIG and Travelers all under-
    6
    stood that Coffman would be covered by TIG and not Travelers.
    Under the terms of his employment application and contract, Coffman
    accepted this arrangement and agreed to be treated as an Alabama
    employee covered by the TIG policy. Accordingly, everyone -- Dea-
    ton, TIG, Travelers and Coffman -- intended for Coffman to be cov-
    ered by TIG and not Travelers.
    A policy of insurance is a contract.1 There are few principles more
    fundamental to the law than the proposition that a contract must be
    construed to give effect to the intentions of the parties. Accordingly,
    the parties' intent should be implemented here unless the laws of Ala-
    bama or of North Carolina compel a different result.
    Alabama law specifically provides for the type of arrangement
    Deaton made to cover its workers compensation risk across the sev-
    eral states in which it operates. Alabama Code § 25-5-35(c) provides:
    "An employee whose duties require him to travel regularly in the ser-
    vice of his employer in this and one or more other states may, by writ-
    ten agreement with his employer, provide that his employment is
    principally localized in this or another such state.. . ."
    Coffman agreed in his application with Deaton that the principal
    location of his employment for the purpose of workers compensation
    benefits was Alabama. Thus, if Coffman's employment meets the
    requirements of § 25-5-35(c), his employment is "principally local-
    ized" in Alabama, and he would then be entitled to workers compen-
    sation benefits under Alabama law for injuries sustained outside
    Alabama. The district court's analysis, in terms of Coffman's eligibil-
    ity for benefits under Alabama law, is sound. As that court noted, the
    issue is whether "travel regularly . . . in this and one or more other
    states" means the employee must simply travel regularly in more than
    one state so long as one of those states is Alabama, or whether it
    requires that the employee travel regularly in Alabama and regularly
    in one or more other states. Relying on Heater v. Tri-State Motor
    Transit Co., 
    644 So.2d 25
     (Ala. Civ. App. 1994), the district court fol-
    _________________________________________________________________
    1 Black's Law Dictionary p. 802 (6th ed. 1990), defines insurance as
    "[a] contract whereby, for a stipulated consideration, one party under-
    takes to compensate the other for loss on a specified subject by specified
    perils."
    7
    lowed the plain meaning of the statute in adopting the first of these
    competing constructions. This reasoning is sound, and there is no
    question that, in his brief employment with Deaton, Coffman traveled
    in Alabama and in other states. Coffman's employment is therefore
    "principally localized" in Alabama under the Alabama statute, and he
    is eligible for benefits under Alabama law for job-related injuries
    wherever they occur. This is precisely the risk Deaton sought to
    insure against with TIG and which TIG agreed to cover.
    Early cases considered workers compensation to be a substitute for
    tort liability and allowed recovery of benefits only in the state in
    which the injury occurred. See In re American Mut. Liability Ins. Co.,
    
    215 Mass. 480
    , 
    102 N.E. 693
    , 695-96 (1913); Continental Oil Co. v.
    Pitts, 
    158 Okla. 200
    , 
    13 P.2d 180
    , 182 (1932). A leading authority on
    conflict of laws has criticized this rule as follows: "This rule was
    overly simple, and excluded from consideration the laws of too many
    states in which, though injury occurred elsewhere, the relationship out
    of which it arose had sufficient connection with the forum state to jus-
    tify application of its law." Robert A. Leflar, Luther F. McDougal III,
    and Robert L. Felix, American Conflicts Law§ 160, at 450 (4th ed.
    1986). Other cases adopted a straight contract theory. Under such an
    approach, the compensation act of the state where the contract of
    employment was made was held to govern, regardless of where the
    injury occurred. Id. § 160, at 451 (citing Kennerson v. Thomas Tow-
    boat Co., 
    89 Conn. 367
    , 
    4 A. 372
     (1915); Pierce v. Bekins Van &
    Storage Co., 
    185 Iowa 1346
    , 
    172 N.W. 191
     (1919); Hartigan v. Bab-
    cock & Wilcox Co., 
    191 Kan. 331
    , 
    380 P.2d 383
     (1963); Houle v.
    Sleams-Rogers Mfg. Co., 
    279 Minn. 345
    , 
    157 N.W.2d 362
     (1968)).
    Both the tort and contract approaches proved unsatisfactory in
    practice. The theory most frequently followed today allows the parties
    to agree that the situs of the employment relationship is the state in
    which that relationship is principally localized or the employer's busi-
    ness is localized. 
    Id.
     § 160, at 452 (citing Hale v. Texas Employers'
    Ins. Ass'n, 
    150 Tex. 215
    , 
    239 S.W.2d 608
     (1951); Simonton v.
    Department of Indus., Labor & Human Relations, 
    62 Wis.2d 112
    , 
    214 N.W.2d 302
     (1974); Hagberg v. Colonial & Pac. Frigidways, Ins.,
    
    279 Minn. 396
    , 
    157 N.W.2d 33
     (1968)). The rationale underlying this
    principle is sound. As stated in American Conflicts Law, supra, § 160,
    at 454: "It is understandable that at the inception of their contract the
    8
    parties, particularly the employer, may wish to fix the governing law
    conclusively so that they can know what their rights or duties are, and
    so that compensation liability insurance can be taken out under the
    controlling state's system."
    Under the current weight of authority, therefore, what Deaton did
    here was permissible and proper. Alabama law specifically authorizes
    such an arrangement; it remains to consider whether North Carolina
    law prohibits it.
    B.
    North Carolina General Statute § 97-93 requires every employer
    subject to the North Carolina Workers Compensation Act to insure its
    entire liability under the Act or qualify as a self-insurer. From this
    TIG reasons that since Deaton was not a qualified self-insurer in
    North Carolina and the Travelers policy was its only policy covering
    North Carolina risks, the Travelers policy must, under the statute,
    cover all such risks.
    The public policy of North Carolina embodied in section 97-93 is
    to insure that anyone injured on the job will receive compensation. A
    contract will be deemed unenforceable because of public policy
    where the "public interest is injuriously affected in such a substantial
    manner that private rights and interests should yield . . . ." Goodwin
    v. George Fischer Foundry Sys., Inc., 
    769 F.2d 708
    , 713 (11th Cir.
    1985). The rule that "contracts contravening public policy are unen-
    forceable should be applied cautiously and only in cases plainly
    within the reason for it." 
    Id.
     The state in which an injured employee
    resides certainly has an interest in his compensation, since that state
    would likely have to support him if he did not receive benefits. See
    Cardillo v. Liberty Mutual Ins. Co., 
    330 U.S. 469
     (1947) (sustaining
    an award of compensation in the District of Columbia where the
    claimant lived, even though he was continuously employed and
    injured in Virginia). This interest is satisfied, however, when the
    injured worker receives adequate benefits under the law of any state,
    whether or not the state paying benefits is the state where he lives.
    North Carolina public policy is, therefore, not violated if Coffman,
    injured in North Carolina, receives benefits under the Alabama com-
    9
    pensation system. The parties all agree that Coffman is entitled to
    benefits. So long as Deaton maintains insurance to pay such benefits,
    the public policy of North Carolina is satisfied. The express language
    of the North Carolina statute does not dictate a different result; it
    merely requires that an employer self-insure or"insure and keep
    insured his liability under this Article in any authorized corporation,
    association, organization or in any mutual insurance association . . . ."
    
    N.C. Gen. Stat. § 97-93
    (a)(1).
    We therefore conclude that to give effect to the intentions of the
    parties in this case will do no violence to the law or public policy of
    either state.2 What Deaton did to insure its workers compensation risk
    is specifically sanctioned by Alabama statutes. The intent of North
    Carolina is likewise protected. The public policy of the latter state,
    expressed in its statute, is simply to insure that workers injured in job-
    related accidents in North Carolina receive benefits; this policy is
    served regardless of which insurance company pays. 3 Accordingly,
    the decision of the district court is
    AFFIRMED.
    _________________________________________________________________
    2 The record does not reflect whether Coffman's North Carolina claim
    was fully processed. Had his claim been processed to completion under
    North Carolina law and North Carolina opted to prefer its own law over
    Alabama's, a different result might be indicated. Supreme Court cases
    give the state of injury the option to apply its own law or to adopt the
    law of a sister state "insofar as remedies for acts occurring within her
    boundaries are concerned." Carroll v. Lanza , 
    349 U.S. 408
    , 414 (1955).
    Here, there is no indication that North Carolina has made such an elec-
    tion; in the absence of such an election, we are free to give effect to the
    intentions of the parties as expressed in their contracts. The Supreme
    Court cases are discussed at Eugene F. Scales and Peter Hay, Conflict of
    Laws §§ 17.45 and 17.46 (2d ed. 1992).
    3 The court does not have before it a comparison of the levels of bene-
    fits payable under the laws of the two states. We do not believe, how-
    ever, that a disparity in the level of benefits would lead us to a different
    result. Ordinarily, differences in the laws of two states should not lead
    to the conclusion that application of the law of one of them violates the
    public policy of the other. Eugene F. Scales and Peter Hay, Conflict of
    Laws § 17.46, at 648 n.4 (2d ed. 1992).
    10