Indiana Supreme Court Will Take Closer Look at Exclusionary Clause in Farmer’s Personal Liability Policy with Everett Cash Mutual Insurance Company

Indiana Supreme Court has granted transfer of a case involving Indiana’s workers’ compensation statute and a farmer’s insurance policy which aimed at excluding the farmer’s liability coverage. Everett Cash Mutual Insurance Company vs. Rick Taylor and Katrina Taylor, No. 02A03-0808-CV-386 (Ind. Ct. App. 2009), transfer granted (September 3, 2009).

In Everett, a farmer employed an independent contractor business to paint his house, grain bin, and barn. The farmer did not check to see if the business carried workers’ compensation insurance for its employees and in fact they did not. One of the business’ employees came into contact with an electrical wire while painting and was injured.

The employee initially filed a workers’ compensation claim against the independent contractor business, but he discovered the business had no such insurance. He then amended his complaint to name the farmer, alleging the farmer failed to verify whether the independent contractor business had workers’ compensation insurance pursuant to Indiana Code 22-3-2-14(b). At no time did the employee file any tort-related claims against the farmer.

Following the accident, the farmer asked his insurance agent if his insurance policy would cover the incident. He was told it would. However, the farmer was subsequently denied coverage when the employee amended his complaint to add the farmer. The farmer filed suit against the insurance company and their agent seeking to recover for breach of contract and estoppel. This lawsuit was stayed pending the result of the employee’s workers’ compensation claim, however, in the interim the insurance company moved for summary judgment against the farmer.

The Allen County Superior Court denied the insurance company’s motion for summary judgment, but the Indiana Court of Appeals reviewed the denial on interlocutory appeal. Two issues on appeal were decided: 1) Whether an exclusion in a farm personal liability policy issued by the insurance company applied; and 2) Whether the insurance company was estopped from relying on that exclusion.

When the farmer purchased the policy in question, he asked the agent for a policy that covered all risks. However, the policy he received contained an exclusionary clause that excluded “bodily injury to a person, including a domestic employee, if the insured has a workers’ compensation policy covering the injury or if benefits are payable or are required to be provided by an insured under a workers’ compensation, non-occupational disability, occupational disease or like law. . . .”

The Indiana Court of Appeals first looked to IC 22-3-2-14(b), which charged the farmer with the duty of obtaining a certificate of compliance from the independent contractor business stating they have workers’ compensation insurance for the employee. Failure to do so holds the farmer liable for the payment of the employee’s worker compensation benefits. The Indiana Court of Appeals then looked at the plain language of the insurance policy and held it excluded the farmer from coverage. The reasoning being that even though the farmer was not directly responsible for obtaining workers’ compensation insurance for the employee, under the statute, he is now required to pay those benefits for failing to obtain a certificate from the independent contractor business.

In deciding the estoppel issue, the Indiana Court of Appeals held there was no designated evidence that shows the farmer was led to believe he was receiving coverage for this particular scenario at the time he originally purchased the policy. The Indiana Court of Appeals held “[a]n insured’s belief that they have purchased ‘all risk’ coverage cannot, without more, be sufficient to negate all exclusions in an insurance policy.” The Indiana Court of Appeals further explained that the insurance agent’s statement was made after the accident and there is no evidence that the farmer relied on it to his detriment.

The Indiana Court of Appeals reversed the trial court’s denial of the insurance company’s motion for summary judgment and directed that it be entered in its favor. As mentioned, transfer has been granted by the Indiana Supreme Court.