State Ins. Fund v. Asarco Inc.

State Ins. Fund v. Asarco Inc.
1989 OK 135
782 P.2d 113
60 OBJ 2548
Case Number: 73450
Decided: 10/17/1989
Supreme Court of Oklahoma

THE STATE INSURANCE FUND OF THE STATE OF OKLAHOMA, PLAINTIFF,
v.
ASARCO INCORPORATED, D/B/A FEDERATED METALS CORPORATION, DEFENDANT.

Dale F. McDaniel, Tulsa, for plaintiff.

James L. Kincaid, Grace F. Renbarger, David E. Strecker, Tulsa, for defendant.

KAUGER, Justice.

¶1 The State Insurance Fund of the State of Oklahoma (Insurance Fund) filed suit in federal district court seeking recission and reimbursement under a workers' compensation insurance policy issued to the defendant, Asarco Incorporated, d/b/a Federated Metals Corporation (Federated Metals). The Fund asserted that there had been fraud in the inducement of the policy, or, in the alternative, a mutual mistake of fact.

I

THE WORKERS' COMPENSATION COURT DOES NOT HAVE JURISDICTION TO DETERMINE WHETHER AN INSURANCE CONTRACT IS VOID AB INITIO FOR FRAUD IN THE EXECUTION WHERE THE INVALIDITY DOES NOT APPEAR ON THE FACE OF THE POLICY.

¶2 The Workers' Compensation Court is vested with exclusive jurisdiction to determine the liability of employers and insurance carriers to claimants under the Workers' Compensation Act, 85 O.S. 1981 § 1 et seq.

¶3 Apparently, the issue of whether the Workers' Compensation Court has jurisdiction to determine if an insurance contract is void ab initio for fraud in the execution, where the invalidity does not appear on the face of the policy, is one of first impression. Our research has not uncovered precedent concerning the authority of compensation courts to determine whether an insurance contract is void ab initio for fraud in the execution. However, the issues of fraud in the inducement and mutual mistake in the formation of contracts have been considered.

¶4 Some jurisdictions hold that the adjudication of contract rights belongs in a court of general jurisdiction because compensation courts have specific and limited jurisdiction,

¶5 In State Ins. Fund v. Brooks, 755 P.2d 653, 657 (Okla. 1988), we aligned ourselves with those courts which have held that if [782 P.2d 115] fraud or mutual mistake is an issue, insurers and insureds must resort to courts of general jurisdiction for a determination of contractual rights.

¶6 However, we determined in Brooks that until an insurer is relieved either by a decree of recission, a statutory termination, or the expiration of the coverage period, the Workers' Compensation Court continues to have the power to determine an injured employees' right to recover between the employer and insurer. If compensation policies are valid on their face, the Workers' Compensation Court, a court of limited jurisdiction,

¶7 Because the Workers' Compensation Court has no authority to reform insurance contracts,

II

THE WORKERS' COMPENSATION COURT LACKS AUTHORITY TO GRANT RECISSION, TO RELIEVE THE INSURER OF LIABILITY, OR TO AWARD DAMAGES.

¶8 The second question certified by the District Court is also answered in the negative. Because the Workers' Compensation Court cannot determine if an insurance policy is void ab initio, it cannot grant recission, relieve the insurer of liability, or award damages.

¶9 QUESTIONS ANSWERED.

¶10 All Justices concur.

Footnotes:

1 Over seventy claims were filed by Federated Metals' employees in the Workers' Compensation Court. A number of these claims were resolved in State Ins. Fund v. Brooks, 755 P.2d 653, 656 (Okla. 1988), finding that although the Insurance Fund might have grounds for recission or damages, it continued to be liable to third-party claimants until it was relieved from the obligation by a decree of recission, a statutory termination, or the expiration of the coverage period.

2 Atlas Rock Bit Serv. Co. v. Henshaw, 591 P.2d 294-95 (Okla. 1979); State v. Breckinridge, 442 P.2d 506, 509 (Okla. 1968); Southern Sur. Co. v. Maney, 190 Okl. 129, 121 P.2d 295, 297 (1942). See also, Title 85 O.S. 1981 § 122 providing:

"The right of action to recover damages for personal injuries or death arising and occurring in employment as herein defined, except the right of action reserved to an injured employee or his dependents or other legal representatives in Sections 12 and 44 of this title is hereby abrogated and all jurisdiction of the courts of this state over such causes, except as to the cause reserved to such injured employees or their dependents or other legal representatives in Sections 12 and 44 of this title is hereby abolished."

and Title 85 O.S.Supp. 1986 § 26 (B) providing in pertinent part:

". . . The Court shall have full power and authority to determine all questions in relation to payment of claims for compensation under the provisions of the Workers' Compensation Act . . ."

3 Mid-Continent Casualty Co. v. Miller, 451 P.2d 932, 935 (Okla. 1968).

4 State Ins. Fund v. Brooks, see note 1 at 657, supra.

5 See, Farmers' Gin Co. v. Jones, 146 Okl. 79, 293 P. 527-28 (1930).

6 See, Continental Casualty Co. v. Indus. Comm'n, 61 Utah 16, 210 P. 127-28 (1922); State v. Martin, 235 Mo. App. 406, 141 S.W.2d 186, 189 (1940).

7 See, Commercial Casualty Ins. Co. v. Hilton, 126 Tex. 497, 87 S.W.2d 1081, 1083 (1935), modified, 126 Tex. 497, 89 S.W.2d 1116 (1936) (Modification was factual only and did not affect the court's findings.)

8 Royal Indem. Co. v. Heller, 256 N.Y. 322, 176 N.E. 410-11 (1931).

9 The following courts found that Workers' Compensation Courts or the equivalent thereof could not determine whether a contract was void because of fraud or mutual mistake. State Compensation Ins. Fund v. Indus. Comm'n, 657 P.2d 761, 763 (Utah 1983); Provenzano v. Long, 64 Nev. 412, 183 P.2d 639, 646 (1947); Ohio v. Eubank, 295 Mich. 230, 294 N.W. 166, 170 (1940); Liechty v. Kansas City Bridge, 155 S.W.2d 297, 300 (Mo. App. 1941), aff'd 162 S.W.2d 275 (1942); Commercial Casualty Ins. Co. v. Hilton, see note 7, supra. The power to consider these defenses was found to rest with an industrial board in Royal Indem. Co. v. Heller, see note 8, supra. See, Bankers Indem. Ins. Co. v. Indus. Accident Comm'n, 4 Cal. 2d 89, 47 P.2d 719, 723 (1935) and General Accident, Fire & Life Assurance Corp. v. Indus. Accident Comm'n. 196 Cal. 179, 237 P. 33, 37 (1925). See also, Annot., "Proper Tribunal for Determination of Questions Relating to Insurance under Workmen's Compensation Acts," 127 A.L.R. 473 (1940).

10 Apache Motor Co. v. Elliott, 405 P.2d 705, 710 (Okla. 1965).

11 Allen v. Raftery, 237 Mo. App. 542, 174 S.W.2d 345, 350 (1943); Brollier v. Van Alstine, 236 Mo. App. 1233, 163 S.W.2d 109, 114 (1942).

12 McDonald v. Time-DC, Inc., 773 P.2d 1252, 1254 (Okla. 1989).

13 Tri-State Casualty Ins. Co. v. La Fon, 205 Okl. 293, 237 P.2d 124, 128 (1951).