Oregon Farm Bureau v. Thompson

ROSSMAN, J.

This is an appeal by the plaintiff, Oregon Farm Bureau, an Oregon insurance corporation, from a decree which the circuit court entered in favor of the defendants Frank Thompson and Dean Kellar. The suit which ended in the challenged decree was instituted by the plaintiff under ORS 28.010 through 28.160 to secure a declaration of the rights of the parties under a policy of liability insurance issued by it July 5,1960, to the defendant Thompson. Thompson, who identified himself (1) in his 1960 federal income tax return as a “logger” and (2) in his testimony as “a tree farmer,” owned a tract of land in Columbia County upon which the defendant Dean Kellar sustained an injury. In March 1960 Kellar entered the employ of Thompson and on September 21, 1960, while working for the latter, sustained the injury. This suit was filed after he instituted an action for damages based upon the injury. Thompson claims that Kellar was working as “a farm employee” at the time of his injury; the plaintiff contends that at that time Kellar was working as a logger. Kellar’s testimony was in accord with the latter view. The issue thus developed is important due to provisions of the policy of insurance which we will presently quote.

The suit for declaratory relief prayed for a decree determining whether the plaintiff is required to defend Thompson in the personal injury action just mentioned, and, if so, whether it is required to pay a judgment which Kellar may recover against Thompson. The decree that was entered and which is challenged by this appeal ruled that the policy just mentioned

“* * # insures and provides coverage to the defendant Thompson for the claim of the defendant Kellar and that the plaintiff is required to defend the defendant Thompson in the action filed against him by the defendant Kellar and is required to pay any judgment rendered in favor of the defendant Kellar against the defendant Thompson.”

The briefs mention the following provisions of the policy:

“Insuring Agreements

“I. Coverages

“Coverage A — Bodily Injury Liability. To pay on the behalf of the insured all sums which the insured shall become legally obligated to pay by reason of the liability imposed upon him by law for damages, because of bodily injury, including death at any time resulting therefrom, sustained by any person or persons.

* # *

“Exclusions

“This policy does not apply:

“(B) Under Coverages A and C:

“(1) to bodily injury to, or sickness, disease or death of any employee of the insured, if benefits therefor are payable or required to be provided, under any Workmen’s Compensation Law;

* # #

“Farm Employers Protective Endorsement

# # #

“Insuring Agreements

“1. Farm Employers Protective Coverage. To pay on behalf of the insured all sums which the insured shall become obligated to pay by reason of the liability imposed upon him by law for damages because of bodily injury by accident or occupational disease, including death at any time resulting therefrom, sustained by any farm employee while engaged as such in the employment of the Insured.

# # #

“Exclusions

“This endorsement and the insurance provided herein does not apply:

* * *

“(c) to bodily injury to, or sickness, disease or death of any employee of the insured, if benefits therefore are payable or required to be provided under any Workmen’s Compensation Law.”

According to OBS 656.090, “farming is a non-hazardous occupation” and is not subject to the Workmen’s Compensation Act unless the employer files the notice prescribed in ORS 656.034. No notice of that kind was filed. Logging is classified by ORS 656.084 (3) as a hazardous occupation. Thompson had not given the notice of rejection required by ORS 656.022 to 656.028 and 656.034 to remove him from the application of the Workmen’s Compensation Act. Following the injury, the Industrial Accident Commission held a hearing upon the issue as to whether Kellar, at the time of his injury, was working as a farm employee or as a logger. Thompson testified as a witness in the course of the hearing. At its close the commission entered an order which awarded workmen’s compensation to Kellar. The insurance company contends that the ruling is res judicata of the issue logger versus farm laborer. We do not pass upon that contention; but see Holmes v. State Industrial Accident Commission, 227 Or 562, 362 P2d 371, 363 P2d 563.

Possibly the foregoing mil be clarified if we gather into one paragraph some of its facts. Since farming is not listed by the Workmen’s Compensation Act as hazardous, and since Thompson had not elected to bring his farming operations, if any, under the act, Kellar was not entitled to receive workmen’s compensation benefits if his injury befell him while he was engaged as a farm worker. Upon the other hand, if Thompson was engaged in whole or in part in logging operations, and if Kellar was performing that type of work at the time of his injury, he was entitled to receive workmen’s compensation benefits even though Thompson had not affirmatively accepted the act; work of that kind is classified by the Workmen’s Compensation Act as hazardous. If Kellar’s action for damages alleges that he was injured while performing farm labor, then plaintiff, as Thompson’s insurer, is required to defend Thompson in the action because of the provision of the policy that we have quoted; it requires the plaintiff to defend “even if such suit is groundless.” However, the provision does not require the plaintiff to defend Thompson if the injury occurred while Kellar was performing logging work. We noticed that Kellar is now receiving benefits under the Workmen’s Compensation Act upon a finding by the commission that his injury occurred in logging operations. Thompson, as we have said, was not a contributor to the Industrial Accident Fund, but he had not rejected the act. ORS 656.312 enables a workman who is engaged in a hazardous occupation to receive compensation benefits and at the same time maintain an action for damages against an employer who (1) operates in violation of ORS 656.052 or (2) is in default. In the event that a workman of that kind of an employer recovers a judgment and receives its payment he must repay the commission all sums it paid to him if the amount he was paid upon his judgment is sufficient in amount to enable him to do so. ORS 656.314.

The circuit court found that Kellar was performing farm labor when the injury was sustained September 21, 1960.

Thompson’s defense in this suit was conducted upon the basis that he was a farmer and that Kellar was injured while performing farm work. Contending as he does that he (Thompson) was a farmer and that Kellar was performing farm work, Thompson argues that the insurance policy renders it the duty of the plaintiff to defend him in Kellar’s action for damages. Thompson, however, conceded that in the six months period that passed after Kellar had entered his employ and until Kellar was injured he (Thompson) did much logging and used Kellar in conducting it. In fact, he testified that the two were partners. The trial judge ruled against that contention, and the latter has not been renewed upon appeal. We will give it no further mention.

The first assignment of error follows:

“The court erred in finding, concluding and decreeing (and overruling plaintiff’s objections to the same):

“1. That plaintiff’s policy, No. T-2950-70, covered the claim of Kellar against Thompson for injuries alleged to have resulted to Kellar on or about September 21, 1960 (Finding XII).

“2. That plaintiff was under an obligation to defend and/or pay any judgment that might arise from the action brought by Kellar against Thompson (Finding XII).

“3. That Exclusion (c) of the endorsement was not applicable to the claim of Kellar against Thompson (Finding X).

“The court likewise erred in rejecting plaintiff’s proposed Findings of Fact, Conclusions of Law and Decree holding that:

“1. Plaintiff’s policy was not applicable to the claim of Kellar against Thompson.

“2. Plaintiff was under no obligation to defend against or pay any judgment arising out of this claim. ”

The second assignment of error reads:

“The court erred in determining, finding, concluding and decreeing that Frank Thompson was entitled to recover attorney’s fees against the plaintiff.”

We will now consider the first assignment of error.

Kellar entered Thompson’s employ in March 1960. Thompson described him as “a farm laborer.” We have mentioned that in his 1960 federal income tax return Thompson identified himself as a logger and that in his testimony he declared that he was “a tree farmer.” He owned and used in the logging operations that were conducted in the six months period that Kellar was in his employ the following logging equipment: a loader with a power winch which was operated on a vehicle; a Continental motor generating 15 or 20 horsepower which seemingly operated the loader; a swinging crane 16 feet long; a drum attached to the crane which was equipped with 175 feet of half-inch cable; an International logging truck with a bunk bed; a flatbed Ford truck which was equipped with drop tongs; chain saws; a caterpillar tractor; and various items of small tools such as wedges and axes.

Thompson also owned a small sawmill which stood upon a tract of land in Columbia County to which he, as a witness, occasionally referred as the home place and at other times as the farm. The tract was 380 acres in extent and contained a stand of timber. Thompson operated the mill only occasionally.

If Thompson was a farmer, the 380 acre tract just mentioned was the scene of his operations. Neither he nor anyone else mentioned any crop such as grain, fruit or vegetables which was grown upon it. At one time a little hay was produced on the place, but none recently. The only witness who mentioned any production upon the tract other than logs and pulp wood was the wife of the defendant Thompson. She testified as follows:

“Q There is no land under cultivation, actually, is there, except a garden?

“A No, just the garden.

“Q Just the garden?

“A We did raise hay but we got too many cows that needed the pasture.”

She also testified:

“Q How many livestock and what type of livestock, do you have, or did you at that time, if you can remember approximately?

“A About a week before, in September, we had sold a bunch of young stock.

“Q Approximately, if you recall, how many had you sold and how many did you then have left?

“A We sold, I don’t remember how many. It come to fifteen hundred dollars, the young stock— the young bull stock.

“Q How many animals did you have on the farm, generally?

“A We had about ten or twelve white-faced cows. These were their calves that we sold.

“Q Do you have any other kind of animals?

“A Yes, we have others.

“Q What?

“A We have aloghorse.

“Q At the time did you have any other types of animals?

“A Chickens and rabbits, and some burros.

“Q Now in the area where this injury occurred, you indicated that you are familiar with this area, did you ever graze any of your animals in that area?

“A We had three goats we'grazed in there.”

The foregoing is the only indication as to what the 380 acre tract was used for except the testimony which shows that timber was removed from it. No one testified that the trees were felled so as to increase the area devoted to pasture or to secure space for farming. Evidently the trees were cut as a logging operation. Apart from Mrs. Thompson’s statement that she received $1,500 from the “young stock” there is no other evidence that indicates the tract produced revenue as a farm. Her testimony'is virtually the only evidence that the tract produced anything except logs and pulp wood. The evidence indicates that Thompson owned about 600 acres of other timber land. It will be recalled that he stated in his federal income tax return that he was a logger and that as a witness in this case he described himself as a tree farmer. In short, he did not claim that he was a farmer within the traditional meaning of that word.

Kellar, as we have said, entered Thompson’s employ about April 1, 1960. At that time Thompson was engaged in logging and intended to use Kellar in it. He agreed to pay Kellar $2 a cord for cord wood that Kellar would produce and $4 a thousand for logs. Kellar agreed to give some attention to the 380 acre tract and for farm work upon it Thompson agreed to pay him $1 per hour. According to his testimony, Kellar worked a total of 50 hours in farm work upon the 380 acre tract in the six months of his employment that transpired before his injury; and “just under a hundred hours” according to Thompson’s testimony. When he entered Thompson’s employ Kellar was given the occupancy of a house upon the 380 acre tract and agreed to pay $25 per month rental for it. But he also agreed to perform chores for which he was to be paid $25 per month, thus canceling out the house rental charge. Farm chores, according to the testimony, consisted of such tasks as returning to the property a cow that had strayed away. The chores were performed, according to agreement, after Kellar had completed his day’s logging work.

It is possible to determine quite closely the total of wages paid by Thompson to Kellar for (1) logging work, (2) farm work, and (3) chores. The source of the information consists of (1) wage checks issued by Thompson to Kellar and cashed by the latter, (2) receipts signed by Kellar for cash wages paid to him by Thompson, and (3) bookkeeping entries made by Thompson. In the period of April 23, 1960, to September 9, 1960, Thompson, according to the pay cheeks and receipts (all of which Thompson produced) was paid $1,102.34 as logging wages. According to the above mentioned bookkeeping entries made by Thompson and produced by him, he paid Kellar down to the day of the injury (September 21, 1960) a total of $221 farm wages which included $125 for chores and $96 for 96 hours of farm work at $1 per hour. It will be noticed that although Kellar entered Thompson’s employ not later than April 1 and remained in it until September 21, 1960, no record of logging wages was shown prior to April 23 and the submission of figures ended with September 9. But if we ignore that deficiency in the record and add $1,102.34 (logging wages) to $221.00 (farm wages) we have $1,323.34 as the total wages that were paid to Kellar in the period of approximately six months. Kellar, therefore, received 83.3 per cent of his wages for logging and 16.7 per cent for chores and farm work.

Before Kellar entered the employ of Thompson, the latter had purchased the stumpage upon a 20 acre tract of land near Deer Island. Only a part of that land contained timber. After Kellar entered Thompson’s employ the two proceeded to fell the trees upon the tract. They were joined by a third individual who worked with them and was paid by Thompson upon the same basis as Kellar. Trees that were suitable for the production of logs were cut into logs. Other parts of the trees and other timber were cut into cord wood. Thompson sold the logs to Pope & Talbot. Cord wood was sold to Crown-Zellerbach and to Weyerhaeuser Timber Co. Deer Island is located many miles from Clatskanie, the scene of Thompson’s purported logging operations.

After Thompson had completed his operations upon the Deer Island tract, which consumed about one month, he transferred his work to a place known as Fern Hill. He owned that tract of land, and the work upon it, according to him, was “salvage operations.” It consisted of the removal of logs and pulp wood that had been previously cut.

When Thompson had completed the removal of everything marketable from the Fern Hill tract he took Kellar with him to the home place, or rather to a 70 acre fraction of it, where they felled trees, produced logs and pulp wood as they had on the Deer Island place. September 21, 1960, while he and Thompson were bringing a log to the landing so that it could be placed upon the logging truck, it made an unexpected movement and injured Kellar. We did not refer to the item of timber with which the two men were working as “a log” for the purpose of classifying it as merchantable timber, but merely because the word “log” is readily available. Thompson said that that stick was not merchantable. He swore that it was a tree top. He and Kellar had spent many days before the injury in that area felling trees and producing logs. According to Thompson, the work that was under way at the time of Kellar’s injury was a cleaning up of the property after the logging. As a witness he recognized the duty imposed by our laws upon loggers to keep forests clean of logging debris. He said that the material with which they were concerned was “tops” and that it was suitable only for firewood. The piece that injured Kellar was, according to Thompson, 12 or 14 feet long, 8 or 9 inches in diameter at its larger end and 5 or 6 inches in diameter at its smaller end.

On the day of Kellar’s injury, but before the latter occurred, Thompson had delivered, from another property, two loads of logs to a mill. While he was so engaged Kellar was building fence for Thompson. About three o’clock in the afternoon of that day Thompson summoned Kellar to the place where he shortly sustained his injury and ordered him to help load the truck. Kellar testified that there lay on the ground “a load of large logs” that were cut in the preceding days by Thompson, Thompson’s brother, and himself. Kellar described the log that injured him as 16 feet long, 14 inches in diameter at its big end and 8 inches at its small end.

Thompson testified that the log in question and other material of like kind which he termed tree tops were to be taken to his home as firewood. Kellar, upon the other hand, swore that they were putting the “logs on the truck to take to the mill.”

It is clear from the above facts that in the six months period in which Kellar was in Thompson’s employ Kellar devoted the principal part of his time to logging. Including a monthly allowance for chores, the total farm wages that were paid to him in the six months aggregated only $221. In fact, the amount that was paid to Kellar for farm labor under the agreement calling for $1 per hour was only $96. Kellar thought that it was less than that amount. The extensive logging equipment which Thompson owned and the fact that he conducted his operations at times many miles from his so-called farm indicated that logging, and not farming, was the pursuit that engaged his attention.

At the moment of injury Kellar was performing a type of work which is generally deemed logging. He had set tongs upon the log that was to be dragged in by the cable and the power driven machinery. Noticing that the log moved very slowly, he approached it to determine the reason for the slow movement and was injured when the log made an unexpected lunge. His activity at that moment was definitely logging labor.

Thompson testified that he intended that the logging truck should haul this stick of timber and some others to his home for firewood. Kellar did not agree with that testimony, and said that the logs with which they were working were to be taken to a mill. It is agreed that logging debris lay upon the ground and that a duty was owed to remove the debris. Thompson testified that the operation that was going on when the injury occurred was the clearing of debris from the land. If that is so, the operation was logging and not farming.

We sustain the assignment of error under consideration.

The second assignment of error is based upon an award to Thompson, the insured, of an attorney fee. The award was made by the circuit court under ORS 736.325 which says in part: “If * * * suit or action is brought * * * and plaintiff’s recovery exceeds * * Thus, an award is authorized only in the event that recovery is won against the insurance company. In the present instance, as we have just ruled, the activity that was under way when Kellar was injured was not within the purview of the policy. Hence, the latter did not impose upon the plaintiff a duty to defend Thompson or pay any judgment that Kellar may recover. Those being the circumstances, ORS 736.325 does not authorize the award of an attorney fee in this suit. We deem it unnecessary to determine the merits of several ancillary contentions presented by the plaintiff such as its argument that ORS 736.325 has no application to a suit for declaratory relief. We sustain the second assignment of error.

The decree of the circuit court is vacated. The cause is remanded with instructions to enter a decree in accordance with the foregoing.