Wausau General Insurance Co. v. Kim's Trucking

                                                                SIXTH DIVISION
                                                                 June 20, 1997











No. 1-96-2070


WAUSAU GENERAL INSURANCE COMPANY,       )         Appeal from
a Corporation,                          )      the Circuit Court
                                        )       of Cook County.
          Plaintiff-Appellee,           )
                                        )       No.  94-L-13758
     v.                                 )       
                                        )
KIM'S TRUCKING, INC., a Corporation,    )          Honorable
                                        )    David G. Lichtenstein,
          Defendant-Appellant.          )       Judge Presiding.



     JUSTICE THEIS delivered the opinion of the court:

     Defendant, Kim's Trucking, Inc. (Kim's), appeals from the trial
court's order granting summary judgment in favor of plaintiff, Wausau
General Insurance Company (Wausau), and denying Kim's cross-motion for
summary judgment.  Wausau sued Kim's to collect premiums allegedly due
under two workers' compensation insurance policies issued to Kim's. 
Wausau successfully argued to the trial court that the insurance
policies required Kim's to pay premiums for its own employees as well
as for outside truck haulers hired by Kim's.  On appeal, Kim's asserts
that it is not liable for the premiums because the haulers were
independent contractors.  For the following reasons, we affirm.
     Kim's Trucking, Inc., is an Illinois corporation.  Kimberly Keyl-
Bulmann is the president and sole officer.  Kim's is in the business
of "road construction trucking," that is "road construction which
revolves around the hauling of asphalt, broken asphalt, excavated
materials, sand and stone."  According to the deposition testimony of
Keyl-Bulmann, Kim's hauls construction materials and is not involved
in the loading or unloading of those materials.  When Kim's has more
work than its own employees can handle, it will hire outside haulers
on a job specific basis. 
     In April 1991, Kim's obtained a workers' compensation and
employer liability insurance policy from Wausau General Insurance
Company, a Wisconsin corporation.  The policy was to insure all
employees and drivers for an estimated annual premium of $6,262.  The
policy period was from April 1991 to April 1992 (1991-92 policy year). 
Kim's obtained a second policy in April 1992 to run from April 1992 to
April 1993 (1992-93 policy year).  During the 1991-92 policy year,
Kim's retained three employees and contracted out for 13 additional
haulers on an as-needed basis.  During the 1992-93 policy year, Kim's
retained three employees and contracted out for two additional outside
haulers.  During both policy years, Kim's paid the premiums for its
retained employees.
     Nevertheless, Wausau claimed that under the terms of the
insurance policies, Wausau was also entitled to premiums for the
outside haulers unless Kim's could provide proof that they were
insured elsewhere.  Kim's produced certificates of insurance for a few
of the outside haulers, but argued that the remaining entities were
independent contractors, and, therefore, Kim's was not liable for
their workers' compensation insurance.  Wausau then filed suit to
collect the additional premiums alleging that Kim's owed $27,857 for
the 1991-92 policy year and $5,553 for the 1992-93 policy year.
     Wausau and Kim's filed cross-motions for summary judgment.  In
its summary judgment motion, Wausau argued that Kim's was engaged in
excavation, an extrahazardous activity under the Workers' Compensation
Act (the Act), which requires employers to provide automatic insurance
coverage for their own employees as well as for the employees of any
independent or subcontractors.  Ill. Rev. Stat. 1991, ch. 48, par.
138.1(a)(3).  As such, Wausau could be potentially liable for Kim's
outside haulers and, thus, was entitled to recover insurance premiums
from Kim's for the outside haulers.
     In its response and cross-motion for summary judgment, Kim's
argued that it was not engaged in excavation so as to require Kim's to
provide automatic insurance coverage for employees of its independent
contractors under the Workers' Compensation Act.  In addition, Kim's
claimed that Wausau had the burden of proving that the money was due
and that Wausau had improperly tried to shift this burden.  The trial
court granted summary judgment in favor of Wausau in the amount of
$32,437, plus court costs.  On appeal, Kim's argues that the trial
court erred by granting summary judgment in favor of Wausau and
reasserts the arguments made to the trial court.   
     In reviewing a trial court's order granting summary judgment, we
examine the evidence and issues de novo.  We consider all of the facts
in the light most favorable to the nonmovant, in this case, Kim's
Trucking.  Koehler v. Scandinavian Airlines Systems, 285 Ill. App. 3d
520, 524, 674 N.E.2d 112, 116 (1996).  Summary judgment is appropriate
when the pleadings, depositions, and admissions on file demonstrate
that there is no genuine issue of fact such that the moving party is
entitled to judgment as a matter of law.  735 ILCS 5/2-1005 (West
1992).
     Resolution of this case turns on interpretation of the insurance
policies issued by Wausau to Kim's.  The policy terms contained in
Part 5 relating to premiums explain that premiums are calculated based
on payroll:
          "[A]nd all other remuneration paid or payable
          during the policy period for the services of:  
          1.   all your officers and employees engaged in
               work covered by this policy; and
          2.   all other persons engaged in work that could
               make us liable under Part One (Workers
               Compensation Insurance) of this policy.  If
               you do not have payroll records for these
               persons, the contract price for their services
               and materials may be used as the premium
               basis.  This paragraph 2 will not apply if you
               give us proof that the employers of these
               persons lawfully secured their workers
               compensation obligations."
According to this language, Kim's must pay premiums for its employees
as well as for "all other persons engaged in work that could make
[Wausau] liable" to pay workers' compensation, unless Kim's can
demonstrate those persons' workers' compensation obligations were
otherwise "lawfully secured."
     Thus, our first task is to determine the scope of the phrase
contained in the policy, "all other persons engaged in work that could
make [Wausau] liable."  As used in this manner, "could" indicates less
than certainty as to Wausau's liability.  See Webster's Third New
International Dictionary 517 (1981).  By its broad terms, the policy
does not require dispositive proof of liability, but, rather, merely
the possibility of liability on the part of Wausau.
     Wausau claims that Kim's, which conducts "road construction
trucking," is engaged in the business of either "excavating" or
"construction" as contemplated by the Workers' Compensation Act.  Ill.
Rev. Stat. 1991, ch. 48, par. 138.3(1), (2).  Under the Act, either
activity triggers the automatic insurance coverage provision of
section 1(a)(3) requiring employers engaged in those activities to
provide workers' compensation coverage for their own employees, as
well as for employees of independent contractors and subcontractors. 
Ill. Rev. Stat. 1991, ch. 48, par. 138.1(a)(3).
     Kim's argues that "road construction trucking" is not an
extrahazardous activity as defined by the Act.  Kim's contends that it
hauls construction materials and is not engaged in the loading or
unloading of those materials.  Accordingly, Kim's contends that it is
not engaged in construction or excavation.  While we agree with Kim's
that "road construction trucking" does not constitute "excavating" or
"construction," we do find that such a pursuit constitutes the
extrahazardous activity of "[c]arriage by land" under section 3(3) of
the Act.  Ill. Rev. Stat. 1991, ch. 48, par. 138.3(3).
     In 1916, in Parker-Washington Co. v. Industrial Board, 274 Ill. 498, 113 N.E. 976, our supreme court affirmed a decision by the
Industrial Board awarding a worker's compensation claim for an
employee killed in the course of hauling crushed stone from a tunnel
excavation to a nearby road paving site.  Parker-Washington Co., 274 Ill.  at 500, 113 N.E.  at 977.  While the case was decided on different
grounds, the court, in dicta, made the following observation:
               "We are of the opinion, also, that the
          occupation, enterprise[,] or business in which
          plaintiff in error was engaged at the time of the
          accident[,] if it was not engaged in construction
          work but only in the hauling of this crushed stone,
          can fairly be held to come within the provisions of
          clause 3 of said paragraph (b), -- that is, that it
          was engaged in a business or enterprise of carriage
          by land."  (Emphasis added.)  Parker-Washington
          Co., 274 Ill.  at 502, 113 N.E.  at 978 (referring to
          provisions of the 1913 Workmen's Compensation Act).
We find no reason to depart from the court's almost century-old logic. 
Based on Parker-Washington, we hold that a business engaged solely in
hauling is a business engaged in "carriage by land" pursuant to
section 3(3) of the Act.
     "Carriage by land" does not trigger the automatic insurance
coverage provisions under section 1(a)(3) of the Act.  Thus, Kim's is
not automatically required to provide insurance coverage for
independent and subcontractor employees.  Our inquiry, however, is
guided by the terms of the Wausau insurance policy, which are broader
than the automatic insurance liability provisions of the Workers'
Compensation Act.  As framed, the question is for whom could Wausau be
liable, not for whom is Wausau automatically liable.  
     Section 3 of the Act sets forth a list of business pursuits
designated as extrahazardous, including "[c]arriage by land".  Ill.
Rev. Stat. 1991, ch. 48, par. 138.3.  Under this section, employers
are required to provide workers' compensation insurance for their own
employees engaged in any of the enumerated extrahazardous enterprises. 
Ill. Rev. Stat. 1991, ch. 48, par. 138.3.  The Act defines both
"employer" and "employee."  Ill. Rev. Stat. 1991, ch. 48, par.
138.1(a), (b).  The definition of "employee" is to be broadly
construed and whether a worker is an employee or an independent
contractor is a question of fact dependent on the particular
circumstances.  Chicago Housing Authority v. Industrial Comm'n, 240
Ill. App. 3d 820, 822, 608 N.E.2d 385, 387 (1992).
     These provisions indicate that Wausau "could" be liable for
workers' compensation for Kim's outside haulers.  Kim's is engaged in
"[c]arriage by land," an extrahazardous pursuit which requires Kim's,
as an employer, to provide automatic coverage for its employees.  Ill.
Rev. Stat. 1991, ch. 48, par. 138.3.  If the outside haulers hired by
Kim's were found to be employees, which is a factual inquiry, then
Wausau could be liable for their workers' compensation coverage. 
Given the broad language of the Wausau insurance policy and the broad
coverage by the Act of extrahazardous enterprises, we find that Wausau
has shown that Kim's outside haulers are "other persons engaged in
work that could make [Wausau] liable."  (Emphasis added.)
     Accordingly, returning to the terms of the insurance policy,
Kim's must provide proof to Wausau that "the employers of these
persons lawfully secured their workers compensation obligations." 
Wausau argues that Kim's has not provided sufficient proof that the
outside haulers' workers' compensation obligations were otherwise
"lawfully secured."  Kim's contends that it has satisfied this burden
by explaining that the outside haulers are independent contractors. 
Kim's claims it can provide no other proof because, "[i]n the State of
Illinois, an independent contractor is not entitled to compensation
under the Workers' Compensation Act. ***  As such, the owner/operator
of the vehicle is not able to obtain a certificate of insurance for
workers['] compensation.  Thus, how can [Kim's] produce what the
independent contractor cannot obtain."
     Kim's argument misses the mark.  The result in this case turns,
not on the status of the outside haulers but, rather, on the
extrahazardous nature of the activity.  As an extrahazardous
enterprise under the Act, "[c]arriage by land" requires automatic
workers' compensation coverage of all persons engaged in that
activity.  Employers must cover all employees and sole proprietors
must obtain coverage as well.  Any sole proprietor who does not want
coverage must affirmatively opt out of coverage.  Ill. Rev. Stat.
1991, ch. 48, par. 138.3; Country Mutual Insurance Co. v. Wagner's
Bulldozing, 179 Ill. App. 3d 710, 713-14, 534 N.E.2d 1040, 1043
(1989).  
     Consequently, contrary to Kim's position, the issue is not
confined to whether Kim's outside haulers were independent
contractors.  Because the outside haulers could be found to be either
employees or independent contractors, the insurance policy terms
require Kim's to demonstrate that their workers' compensation
obligations were secured in one form or another.  Kim's could show
this in one of three ways.  First, Kim's could pay the premiums for
the outside haulers.  Second, Kim's could provide Wausau with
certificates of insurance indicating the outside haulers obtained
insurance coverage elsewhere.  Or third, Kim's could provide Wausau
with documentation that the outside haulers had affirmatively opted
out of coverage pursuant to the Act.
     After reviewing the record, we find that the trial court did not
err in determining that Kim's did not provide sufficient proof to
Wausau that the outside haulers' workers' compensation obligations
were otherwise "lawfully secured."  Accordingly, the trial court
properly granted summary judgment in favor of Wausau and properly
denied summary judgment in favor of Kim's.
     Affirmed.
     GREIMAN, P.J., and QUINN, J., concur.