RLI Insurance Co. v. Agency of Transportation

RLI Insurance Co. v. Agency of Transportation (99-278); 171 Vt. 553; 
762 A.2d 475 

[Filed 23-Aug-2000]


                                 ENTRY ORDER

                       SUPREME COURT DOCKET NO. 99-278

                               JUNE TERM, 2000


RLI Insurance Company	               }	APPEALED FROM:
                                       }
                                       }
     v.	                               }	Chittenden Superior Court
                                       }	
                                       }
Vermont Agency of Transportation,      }
et.al				       }	DOCKET NO. S1609-97CnC

                                                Trial Judge: Matthew I. Katz

             In the above-entitled cause, the Clerk will enter:


       Plaintiff RLI Insurance Company appeals a Chittenden Superior Court
  order granting defendant's  motion for summary judgment.  RLI commenced
  this action  requesting, in part, that the court enter a  declaratory
  judgment that it had no duty to defend or to provide coverage for defendant
  Wayne Eells in a  wrongful death suit.  RLI argues that Eells was not an
  employee of the named insured, Champlain Valley  Aviation, Inc., (CVA)
  within the meaning of the applicable insurance policy and hence was not
  covered.   The superior court granted summary judgment to Eells.  We
  affirm. 
 
       This case arises out of a mid-air collision at the Franklin County
  State Airport in Swanton,  Vermont, between two planes owned by CVA.  One
  plane was rented and operated by Charles Boyer, a  student pilot. The other
  plane was rented and operated by Todd Taylor. Taylor's passengers were
  Sandra  Irving and her ten-year-old son Andrew.  Taylor, Irving, and her
  son died as a result of the collision.   Irving's husband and surviving son
  filed a wrongful death claim against Boyer and others, including Eells, 
  who was Boyer's flight instructor. 

       Eells demanded that RLI provide him with a defense and indemnification
  pursuant to a commercial  operator's insurance policy issued to CVA.  The
  policy provides liability coverage to CVA as the named  insured and insures
  CVA's employees for acts within the scope of their employment.  The issue
  before us  is whether the superior court erred in its determination on
  summary judgment that Eells was an employee  of CVA.  RLI contends that he
  was an independent contractor. 

 

       Our review of the court's decision is de novo.  We use the same
  standard as the trial court and will  therefore affirm a summary judgment
  "if there are no genuine issues of material fact and the moving party  is
  entitled to judgment as a matter of law."  Granger v. Town of Woodford, 167
  Vt. 610, 611, 708 A.2d 1345, 1346 (1998) (mem.); see also, V.R.C.P. 56(c). 
  In this case, the material facts are not in dispute.  RLI conceded at oral
  argument that if Eells was an employee of CVA, he is entitled to coverage
  under the  policy.  Therefore, the case turns entirely on the legal
  determination of Eells' employment status with  CVA. 

       We construe insurance contracts according to their terms and the
  parties' intent as implied by those  terms.  See Utica Mut. Ins. Co. v.
  Central Vt. Ry., 133 Vt. 292, 295, 336 A.2d 200, 203 (1975). Because  the
  policy does not define "employee," we assume the parties intended the
  word's ordinary meaning.   See  Landry v. Dairyland Ins. Co.,166 Vt. 634,
  635, 701 A.2d 1035, 1036 (1997) (mem.).  In this context, an  "employee" is
  defined in contrast to an "independent contractor." 

       When determining whether a worker is an employee or an independent
  contractor, we have relied  on the "right to control" test. See Reed v.
  Glynn, 168 Vt. 504, 506, 724 A.2d 464, 466 (1998).  If the  party for whom
  the work is being done may prescribe the result, means and the methods by
  which the  other shall do the work, an employee/employer relationship is
  established.  See id.  In this case, CVA was  a full-service operation
  offering refueling, aircraft maintenance, tie downs, storage, airplane
  rental and   flight instruction.  CVA's president, Stewart Boyd, was not a
  licensed flight instructor; consequently, he  retained Eells to offer
  flight instruction.  Eells was responsible for certain aspects of
  instruction without  control by CVA.  Because Boyd was not a licensed
  flight instructor, he could not legally control the  method of the
  instructional work performed by Eells.  See 14 C.F.R. § 61.3 (2000) (only a
  certified flight  instructor may give flight training or endorse an
  applicant for a pilot certificate).  It is, of course, not  unusual for an
  employer to hire an employee for unique skills that the employer lacks. 
  For instance, a  restaurant owner may employ a chef with the understanding
  that the owner will not control the method or  means of cooking.  CVA did,
  however, exercise control over Eells by scheduling his appointments with 
  students and arranging for the airplane in which to conduct the
  instruction.  This intermediate level of  control does not clearly
  determine whether Eells was an employee or independent contractor. 

       Because our established "right to control" test does not clearly
  answer the question, we look to  other factors to help analyze the nature
  of the employment relationship.  The Restatement (Second) of  Agency § 220
  suggests several factors for determining employment status.  Among those
  useful here are:  whether the worker supplies his own tools and place of
  work, whether the method of payment is by time  or by job, whether the work
  is part of the regular business of the employer, and what is the length of 
  employment.  See Restatement (Second) of Agency, § 220 (1958). 
  Consideration of these factors  confirms the conclusion that Eells was an
  employee.  

       Where an employer provides a tool sufficiently valuable to create an
  incentive for control and  efficient use of capital, this factor weighs
  heavily in favor of employment status.  See West v. C.A.M.  Logging, 670 A.2d 934, 938 (Me. 1996) (where company provided logging truck to driver,
  truck's value  suggested employment status).  The most important tool for
  flight instruction is the 

 

  airplane itself, a very expensive tool.  CVA, not Eells, supplied the
  airplane and the fuel and oil used.  There is no evidence that Eells ever
  used any plane for instruction but those owned and provided by CVA.  CVA
  exercised its control over these valuable tools by handling the scheduling
  of their time for use in  flight instruction.  The structure of CVA's
  flight lessons strongly suggests Eells was an employee.

       If the work is neither ancillary nor independent of the employer's
  business, it is likely that the  worker is an employee. See North East Ins.
  Co. v. Soucy, 693 A.2d 1141, 1145 (Me. 1997)(experienced  roofer hired to
  help roofing contractor on large job was employee).  CVA was a full-service
  operation that  included flight instruction and aircraft rental.  All
  flight instruction took place at CVA's place of business.  CVA employed
  Eells and others to provide these integral services.  Additionally, Eells
  participated in  other tasks at CVA including opening and closing CVA,
  answering the phone, clerical duties, and  mowing the lawn.  These duties
  assigned to Eells were part of the regular business of CVA supporting the 
  argument that he was an employee.

       Whether the worker contracts with and collects money directly from
  third parties is indicative of his  employment status.  See Falconer v.
  Cameron, 151 Vt. 530, 532, 561 A.2d 1357, 1358 (1989) (where  payment was
  made to employer who paid driver of leased truck percentage, driver was
  employee).  Eells  never contracted directly with third parties.  Instead,
  Eells was to instruct all students that CVA acquired  through its
  advertising or by referral.  All fees for flight instruction, including the
  flight instructor's time,  were paid directly to CVA.  Eells was then paid
  a percentage of the hourly tuition paid by student pilots to  CVA.  Because
  Eells' compensation was calculated by the number of hours he worked, he
  appears to have  been paid "by time" rather than "by the job."  The fact
  that Eells was paid by and through CVA and that  pay was calculated by the
  time he worked adds weight to the argument that Eells was an employee.

       The length of employment and the ability to terminate the relationship
  without liability may also  help to differentiate between an employee and
  an independent contractor.  See Soucy, 693 A.2d  at 1144-1145.  Here, Eells
  had an ongoing relationship with CVA for a period of more than one year. He
  was not  retained to instruct one student or one class.  Instead, Eells
  provided instruction to any students acquired  by CVA during his year of
  employment.  Neither CVA nor Eells was barred from ending their 
  relationship before any particular student finished instruction.  This
  ongoing relationship of one year and  the ability to terminate it also
  support the conclusion that Eells was an employee.

       RLI argues that Eells was an independent contractor because the
  parties had an understanding that  Eells was not to be an employee.  This
  agreement was evidenced by the fact that Eells' income was  reported to the
  IRS on Form 1099.  Characterization as an independent contractor for tax
  purposes alone  does not necessarily lead to a legal determination of
  employment status.  See Soucy, 693 A.2d  at 1145.   The trial court found
  that it appeared that this arrangement was reached not to control the
  actual  relationship of the parties, but as a way to avoid tax withholding. 
  This factual finding is entitled to  deference on appeal and will not be
  overturned unless clearly 

 

  erroneous.  See V.R.C.P. 52(a).  On balance, the facts in this case
  indicate that Eells was an employee of  CVA.  Therefore, the court did not
  err in granting summary judgment in favor of the defendant.


       Affirmed.			



                                       BY THE COURT:



                                       _______________________________________
                                       Jeffrey L. Amestoy, Chief Justice
                    
                                       _______________________________________
                                       John A. Dooley, Associate Justice

                                       _______________________________________
                                       James L. Morse, Associate Justice

                                       _______________________________________
                                       Denise R. Johnson, Associate Justice

                                       _______________________________________
                                       Marilyn S. Skoglund, Associate Justice