Indiana Supreme Court Sides with Insureds in Farm Liability Dispute

The Indiana Supreme Court has found that an insurance company was wrong to deny coverage for injuries to an employee of an independent contractor under a farm personal liability policy.

Indiana farmers Rick and Katrina Taylor held a farm personal liability policy issued by Everett Cash Mutual Insurance Company (Everett Cash). They filed for coverage under the policy after an employee of an independent contractor hired to paint a barn and some other buildings on the Taylors’ property was injured.

After Everett Cash denied the claim citing an exclusion for workers’ compensation in the policy, the Taylors sued the insurer for breach of contract.

The Court explained the underlying claim in Everett Cash Mutual Insurance Co. v. Rick Taylor and Katrina Taylor as follows:

“On July 1, 2005, the Taylors employed independent contractor Sherlock Contract Painting (‘Sherlock’) … While painting, Sherlock employee Christopher Collis sustained injuries when he was shocked by an electrical wire and fell from a ladder.”

Collis filed a workers’ comp claim against Sherlock but the company did not carry workers’ compensation coverage. Collis then “sought payment from the Taylors pursuant to Indiana Code section 22-3-2-14(b).

“This provision of the Indiana Workers’ Compensation Act imposes liability upon a person who hires a contractor without verifying that the contractor carries workers’ compensation insurance to the same extent as the contractor for the injury or death of any of the contractors’ employees,” the Court said.

The Taylors had not verified that Sherlock had workers’ comp insurance.

When the Taylors purchased their policy, they asked their agent, Jake Owens, for a policy that provided “all risk” coverage. “In particular,” the Court explained, “the Taylors requested coverage for ‘any invitee, licensee, contractor or employee of contractor who may come upon the … [f]arm.’ When the Taylors first inquired as to whether the Everett Cash policy covered the Collis claim, Owens stated that it would.”

In addition to filing suit against Everett Cash, the Taylors filed against Owens and two other insurance agencies.

The Supreme Court rejected Everett Cash’s argument that the Taylors’ claim was not for an “occurrence” as defined in the policy, stating the claim was “filed as a result of an ‘accident’ in which [Collis] suffered bodily injury and incurred medical expenses. This was an occurrence within the meaning of the policy.”

The court reasoned that the exemption in the Everett Cash policy “simply clarifies that the policy provides no coverage in the conventional workers’ compensation context.” Everett Cash doesn’t provide workers’ comp policies, and the Taylors had no employees at the time they purchased their policy.

“It would be beyond the ordinary understanding of the workers’ compensation system to extend the exclusion to the matter-of-first-impression scenario here – where a claim is filed against an insured by an injured worker in the employ of a third-party who did not comply with its obligations under the Act,” the Court explained.

The Court also pointed out that the exclusion was written ambiguously enough that apparently Everett Cash’s own agent thought coverage would be provided in this case.

“We hold that for an insurance policy to exclude such a claim, any exclusion must be more explicit than the language used here,” the Court said.

The Court’s decision was written by Justice Sullivan.