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are subject to modification and technical correction prior to official
publication in the North Carolina Reports and North Carolina Court of Appeals
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authoritative.
NO.
COA06-579
NORTH
CAROLINA COURT OF APPEALS
Filed: 1 May
2007
ROY LEE
VAUGHAN,
Employee,
Plaintiff,
v.
North Carolina Industrial Commission
I.C. File No. 921267
CAROLINA
INDUSTRIAL
INSULATION,
aka, CAROLINA
INDUSTRIAL
INSULATING CO., INC.,
Employer,
ACE-USA,
Carrier,
Defendants.
Appeal by
defendant from opinion and award entered 29 November 2005 by the North Carolina
Industrial Commission. Heard in the
Court of Appeals 16 November 2006.
Wallace &
Graham, by Edward L. Pauley, for plaintiff-appellee.
Ogletree,
Deakins, Nash, Smoak & Stewart, P.C., by Mary Lou Hill, for
defendant-appellant ACE-USA.
GEER,
Judge.
Defendant
ACE-USA appeals from an opinion and award of the North Carolina Industrial
Commission arguing that the Commission erred in finding that defendant was the
carrier on the risk with respect to plaintiff Roy Lee Vaughan’s asbestosis. This case presents a novel
scenario. The parties agree that
ACE-USA provided workers’ compensation insurance to defendant Carolina
Industrial Insulation Company (“Carolina Industrial”) during the pertinent time
frame. Nevertheless, ACE-USA
contends that the policy was limited to work performed in South Carolina, the
state where Carolina Industrial was located. ACE-USA, however, has lost the policy,
and no other evidence was presented as to the policy’s specific
terms.
We hold,
under the circumstances of this case, that ACE-USA bore the burden of proving
that its policy, which otherwise would have covered plaintiff, excluded
plaintiff’s claim based on a last injurious exposure to asbestos in North
Carolina. Because the Commission
applied the proper burden of proof and because the Commission’s determination
that ACE-USA was the carrier on the risk is supported by competent evidence, we
affirm.
Plaintiff
began working for Carolina Industrial, a South Carolina corporation, in 1964 as
an insulator mechanic. In this
position, plaintiff routinely traveled to various job sites to remove old
insulation and install new pipe and duct insulation and other insulated
products. During plaintiff’s tenure
as an insulator mechanic, he was exposed to high amounts of asbestos
dust.
In 1971,
plaintiff performed his last job as an insulator mechanic for Carolina
Industrial at a plant in Asheville, North Carolina. Plaintiff worked at this job site for
five or six weeks, including most weekends, removing asbestos insulation and
replacing it with fiberglass insulation.
The parties agree that this project represented plaintiff’s last
injurious exposure to asbestos.
Later that year, Carolina Industrial promoted plaintiff to field
superintendent, and plaintiff ceased working directly with asbestos
products.
Carolina
Industrial was purchased by Pipe & Boiler Insulation (“Pipe & Boiler”),
a North Carolina company, in 1974.
Plaintiff continued to work as a field superintendent for that company
until 1978 when he was promoted to branch manager, a position plaintiff held
until he left the company in 1982.
On 18 May
1998, immediately following a diagnosis of asbestosis, plaintiff filed a Form
18B seeking workers’ compensation benefits for asbestosis and pleural disease
from Carolina Industrial and Pipe & Boiler. Both companies denied liability. On 14 June 2001, Deputy Commissioner
Phillip A. Holmes entered an opinion and award in favor of plaintiff. With respect to the carrier on the risk,
he found that Pipe & Boiler was insured on the pertinent date by Atlantic
Mutual Insurance Company and that “[w]hile Pipe & Boiler and Carolina
Industrial were different companies, they were part of the same
corporation.” The deputy
commissioner concluded that, “[t]herefore, Atlantic Mutual Insurance provided
coverage for both Carolina Industrial and Pipe & Boiler from 1964 to 1973”
and that Atlantic Mutual was “the responsible carrier in this
claim.”
Carolina
Industrial, Pipe & Boiler, and Atlantic Mutual appealed to the Full
Commission, which entered an opinion and award on 27 February 2002 affirming the
deputy commissioner’s decision with respect to plaintiff’s asbestosis and last
injurious exposure. Regarding the
issue of the carrier on the risk, however, the Full Commission found that the
evidence indicated that, at the time of plaintiff’s injury, Atlantic Mutual had
provided insurance only for Pipe & Boiler and not for Carolina
Industrial. Because plaintiff had
been an employee of Carolina Industrial at the pertinent time, the Full
Commission remanded for additional discovery regarding Carolina Industrial’s
corporate structure and insurance coverage.
On remand,
following receipt of information from “the South Carolina Industrial Commission
that [Carolina Industrial] was insured by [ACE-USA] . . . on the relevant date,”
Deputy Commissioner Holmes added ACE-USA as a defendant. ACE-USA was provided with the necessary
materials from the proceeding and allowed time to investigate the
issues.
At a hearing
before Deputy Commissioner George T. Glenn II on 12 November 2003, the parties
stipulated into evidence the information Deputy Commissioner Holmes received
from the South Carolina Industrial Commission. Plaintiff rested on the evidence he had
previously introduced, and ACE-USA did not call any additional witnesses. Instead, ACE-USA submitted an affidavit
from an adjuster stating that a diligent search was conducted of all locations
at which insurance policies are physically located and that “no record of any
workers’ compensation insurance policy issued by [ACE-USA] providing coverage
for [Carolina Industrial] during the periods 1964 to 1974 in any state was
found.” On 17 February 2004, the
deputy commissioner entered an opinion and award in favor of plaintiff,
concluding that ACE-USA was the carrier on the risk for Carolina Industrial at
the time of plaintiff’s last injurious exposure to
asbestos.
Defendants
appealed to the Full Commission, which, on 29 November 2005, entered an opinion
and award affirming the decision of the deputy commissioner with minor
modifications. The Full Commission
made the following pertinent findings of fact:
14. According to South Carolina Workers’ Compensation records, Insurance Company of North America (ACE-USA) was the carrier for Carolina Industrial Insulating Co., Inc. (hereinafter Carolina Industrial Insulation) at the time of Plaintiff’s last injurious exposure.
15. Defendant
asserts that it cannot locate an insurance policy and argues that since the
policy only exists in South Carolina, it must only cover South Carolina injuries
and not out of state injuries.
However, it is uncontroverted that Carolina Industrial Insulation insured
its workers with a contract of insurance through ACE-USA. Carolina Industrial Insulation on [sic]
a South Carolina corporation, filed its insurance policy with the South Carolina
Workers’ Compensation Division. It
is also undisputed that employees of Carolina Industrial Insulation worked in
both North Carolina and South Carolina.
Plaintiff performed a significant portion of his work in North
Carolina. Carolina Industrial
Insulation did not file any statement of insurance with the North Carolina
Industrial Commission. Carolina
Industrial Insulation employed five or more employees in North
Carolina.
16. The initial
burden is on the insured to establish coverage for a claim. The burden then shifts to the
defendant-carrier to establish that an exclusion applies to the claim. ACE-USA has offered no evidence to
support its argument that its policy of insurance excluded Carolina Industrial
Insulation employees when working in North Carolina. Based on the greater weight of the
evidence, Carolina Industrial Insulation’s workers’ compensation insurance with
ACE-USA covered its employees while working in North Carolina.[Note
1]
Based on
these findings, the Commission concluded that “[c]arrier ACE-USA was on the risk
at the time of Plaintiff’s last injurious exposure to asbestos and is therefore
liable for payment of compensation due Plaintiff pursuant to the Workers
Compensation Act.” ACE-USA timely
appealed to this Court.
Our review of
a decision of the Industrial Commission “is limited to determining whether there
is any competent evidence to support the findings of fact, and whether the
findings of fact justify the conclusions of law.” Cross v. Blue Cross/Blue Shield,
104 N.C. App. 284, 285‑86, 409 S.E.2d 103, 104 (1991). “The findings of the
Commission are conclusive on appeal when such competent evidence exists, even if
there is plenary evidence for contrary findings.” Hardin v. Motor Panels, Inc., 136
N.C. App. 351, 353, 524 S.E.2d 368, 371, disc. review denied, 351 N.C.
473, 543 S.E.2d 488 (2000). This
Court reviews the Commission’s conclusions of law de novo. Deseth v. LensCrafters, Inc., 160
N.C. App. 180, 184, 585 S.E.2d 264, 267 (2003).
N.C. Gen.
Stat. §97-57 (2005) provides:
In any case
where compensation is payable for an occupational disease, the employer in whose
employment the employee was last injuriously exposed to the hazards of such
disease, and the insurance carrier, if any, which was on the risk when the
employee was so last exposed under such employer, shall be
liable.
(Emphasis
added.) In prior cases, the carrier
on the risk was identified for the most part simply by determining the liable
employer and considering the dates of coverage for that employer’s insurance
policies. See, e.g.,
Abernathy v. Sandoz Chems./Clariant Corp., 151 N.C. App. 252, 259-60, 565
S.E.2d 218, 222-23, cert. denied, 356 N.C. 432, 572 S.E.2d 421
(2002). Litigation has focused
primarily on determining the date of the last injurious exposure with the
liability of the carrier flowing from that date.
This appeal
presents a question not previously addressed in this State: How do you determine
the carrier on the risk when any applicable insurance policies have been
lost? This question in turn gives
rise to issues regarding who bears the burden of proof, and what type of
evidence is sufficient.[Note 2]
We find
little guidance on these questions from other opinions addressing occupational
diseases. In setting forth the
elements that a claimant must prove under N.C. Gen. Stat. §97-57, our Supreme
Court has written:
Under [N.C.
Gen. Stat. §97-57], consequently, it is not necessary that claimant show that
the conditions of her employment with defendant caused or significantly
contributed to her occupational disease. She need only show: (1) that she has a
compensable occupational disease and (2) that she was “last injuriously exposed
to the hazards of such disease” in defendant’s employment. The statutory terms
“last injuriously exposed” mean “an exposure which proximately augmented the
disease to any extent, however slight.”
Rutledge v.
Tultex Corp., 308 N.C.
85, 89, 301 S.E.2d 359, 362‑63 (1983) (quoting Haynes v. Feldspar Producing
Co., 222 N.C. 163, 166, 22 S.E.2d 275, 277 (1942)). Nothing in Rutledge or its
progeny addresses whether the claimant bears any burden regarding proof of the
identity of the carrier on the risk for the last injurious exposure. We observe that typically the
defendant-employer would be actively addressing this issue, but, in this case,
the employer is not participating in the litigation.
With respect
to the burden of proof, ACE-USA first argues that plaintiff had an initial
burden of bringing himself within the language of the insurance policy, citing
various non-workers’ compensation cases.
See, e.g., Duncan v. Cuna Mut. Ins. Soc’y, 171 N.C. App.
403, 405, 614 S.E.2d 592, 594 (2005) (life insurance policy); Hobson Constr.
Co. v. Great Am. Ins. Co., 71 N.C. App. 586, 590, 322 S.E.2d 632, 635 (1984)
(general liability insurance policy), disc. review denied, 313 N.C. 329,
327 S.E.2d 890 (1985); Nationwide Mut. Fire Ins. Co. v. Allen, 68 N.C.
App. 184, 188, 314 S.E.2d 552, 554 (homeowner’s insurance policy), disc.
review denied, 311 N.C. 761, 321 S.E.2d 142 (1984). These cases hold that the insured
bears the burden of establishing that the language contained in an existing
policy covers his or her injury:
It is the
insured that has the burden of bringing himself within the insuring language of
the policy. Once it has been
determined that the insuring language embraces the particular claim or injury,
the burden then shifts to the insurance company to prove a policy exclusion
excepts the particular injury from coverage.
Allen, 68 N.C.
App. at 188, 314 S.E.2d at 554.
None of these cases, however, involve the situation present in this case:
a claimant, who is not the insured, and a missing insurance policy that likely
was never in the possession of the claimant.
ACE-USA
argues, based on these cases, that plaintiff could not meet this burden “because
no policy for coverage was produced; therefore, no language, from which a
court could appropriately determine that coverage existed, was admitted into
evidence.” Defendants have,
however, pointed to no authority suggesting that an employee in a workers’
compensation action must produce the actual insurance policy to establish
coverage. Significantly, although
defendants submitted an affidavit to the Commission maintaining that they were
unable to locate any policy of insurance between ACE-USA and Carolina
Industrial from 1964 to 1974 in any state, ACE-USA concedes that it
provided coverage for Carolina Industrial in South Carolina during the relevant
time period. In other words,
ACE-USA seeks to avoid liability simply because plaintiff cannot produce an
insurance policy that ACE-USA agrees existed, but is now lost — even though
plaintiff would likely never have received a copy of his employer’s
policy.
In the
absence of any authority supporting such an outcome, we decline to so hold. ACE-USA’s suggestion that plaintiff
should be denied any coverage for his asbestosis because he cannot prove the
precise terms of a policy ACE-USA lost is troubling. Under the Workers’ Compensation Act,
“plaintiff has the right to enforce the insurance contract made for his
benefit,” Hartsell v. Thermoid Co., S. Div., 249 N.C. 527, 533, 107
S.E.2d 115, 119 (1959), but under ACE-USA’s view, he could never do so when the
carrier and employer misplaced the insurance policy. Such an approach cannot be reconciled
with the intent of the Act to ensure compensation for injured employees. Johnson v. Herbie’s Place, 157
N.C. App. 168, 170-71, 579 S.E.2d 110, 113, disc. review denied, 357 N.C.
460, 585 S.E.2d 760 (2003).
Nor does the
fact that an insurance policy is missing necessarily preclude recovery under
that policy. Rule 1004 of the North
Carolina Rules of Evidence specifically provides:
The original
is not required, and other evidence of the contents of a writing . . . is
admissible if:
(1)
Originals Lost or Destroyed.
All originals are lost or have been destroyed, unless the proponent lost
or destroyed them in bad faith; or
(2)
Original Not Obtainable. No
original can be obtained by any available judicial process or procedure;
or
(3)
Original in Possession of Opponent.
At a time when an original was under the control of a party against whom
offered, he was put on notice, by the pleadings or otherwise, that the contents
would be a subject of proof at the hearing, and he does not produce the original
at the hearing . . . .
Any one of
these subsections could apply to permit plaintiff to offer “other evidence of
the contents” of the insurance policy.
See Hoerner v. ANCO Insulations, Inc., 812 So. 2d 45, 72
(La. Ct. App.) (allowing asbestos worker to use parole evidence to prove
existence of insurance policy insuring dissolved corporation), cert.
denied, 819 So. 2d 1023-24 (La. 2002).
Assuming that
the cases cited by ACE-USA apply to workers’ compensation claimants, we hold
that plaintiff has met his burden: “[T]he burden is on the insured to show
coverage.” Nationwide Mut. Ins.
Co. v. McAbee, 268 N.C. 326, 328, 150 S.E.2d 496, 497 (1966). Here, plaintiff offered evidence, which
ACE-USA does not dispute, that ACE-USA issued a workers’ compensation policy to
Carolina Industrial, that provided coverage for workers’ compensation injuries
to plaintiff at the time of plaintiff’s last injurious exposure. The only dispute is whether the policy
contained geographical limitations.
We disagree
with ACE-USA’s contention that plaintiff was obligated to prove that this
coverage extended not only to work performed in South Carolina, where Carolina
Industrial was located, but also to work done in North Carolina. We hold, instead, that ACE-USA bore the
burden of proving that there was no workers’ compensation coverage under this
missing policy for work performed in North Carolina.
In the only
possibly analogous case involving workers’ compensation insurance, our Supreme
Court addressed a carrier’s contention that it was not the carrier on the risk
because it had cancelled the policy prior to the date of the plaintiff’s
injury. See Moore v.
Adams Elec. Co., 264 N.C. 667, 142 S.E.2d 659 (1965). The Court held that the carrier was
“obligated for the sums adjudged by the Commission, unless it has, as it
asserts, established cancellation of its insurance contract.” Id. at 672, 142 S.E.2d at 663
(emphasis added). In other words,
the plaintiff did not bear the burden of proving that the policy continued in
effect; rather, the carrier bore the burden of proving cancellation of the
policy. Thus, once there is
evidence that a policy of workers’ compensation was issued covering the
plaintiff, the burden of proof shifts to the carrier to prove that circumstances
existed under which coverage was not available for the plaintiff. We believe this burden-shifting should
apply equally in this case in which the carrier seeks to avoid otherwise
existing coverage.
This approach
is also consistent with that employed in the non-workers’ compensation cases
relied upon by ACE-USA. Under that
line of authority, “[i]f the insurer relies on a clause of the policy which
excludes coverage, the burden is on the insurer to establish the
exclusion.” McAbee, 268 N.C.
at 328, 150 S.E.2d at 497. See
also Allen, 68 N.C. App. at 188, 314 S.E.2d at 554 (holding that
burden shifts “to the insurance company to prove a policy exclusion excepts the
particular injury from coverage”).
In this case,
ACE-USA does not dispute that had plaintiff been last exposed to asbestos in
South Carolina on the specified date, the ACE-USA policy would provide
coverage. In arguing that the
policy did not cover injuries occurring in North Carolina, ACE-USA is relying
upon a theoretical clause of the policy that it claims would have excluded
coverage of this particular injury because of where it occurred. ACE-USA’s defense thus fits squarely
within this Court’s definition of an “exclusion” in an insurance policy: “‘In
[an] insurance policy, [an] “exclusion” is [a] provision which eliminates
coverage where were it not for [the] exclusion, coverage would have
existed.’“ N.C. Farm Bureau Mut.
Ins. Co. v. Fowler, 162 N.C. App. 100, 104, 589 S.E.2d 911, 913 (2004)
(alterations original) (quoting Black’s Law Dictionary 563 (6th ed.
1990)). Accordingly, ACE-USA bore
the burden of proving the existence of any geographic
limitation.
The
Commission applied this burden of proof framework in its opinion and award and
found that “[b]ased on the greater weight of the evidence, Carolina Industrial
Insulation’s workers’ compensation insurance with ACE-USA covered its employees
while working in North Carolina.”
The only evidence that ACE-USA points to as being contrary to the
Commission’s finding is the parties’ stipulation “that there is no record of
insurance coverage in North Carolina for Carolina Industrial Insulating Co.,
Inc.” ACE-USA argues this
stipulation establishes that there was no insurance coverage in North
Carolina. To the contrary, as the
plain language states, the stipulation specifies only that there was “no record”
of any insurance. Carolina
Industrial could have been insured for North Carolina work, but not have
notified the North Carolina Industrial Commission of that coverage. This stipulation did not, therefore,
mandate a finding of no coverage, but rather only permitted an inference of
non-coverage that the Commission could choose to draw or
not.
Alternatively,
ACE-USA challenges the Commission’s findings on the grounds that “evidence that
[ACE-USA] provided coverage for [Carolina Industrial] in South Carolina does not
mean that it did the same in North Carolina.” While this contention may well be true,
it again is simply an argument for the Commission to consider and weigh — like
the stipulation — and does not mandate that the Commission find that no coverage
existed for work done in North Carolina.
We agree with
ACE-USA, however, that the Commission erred to the extent that it found
applicable to this case the principle that ambiguous provisions should be
resolved in favor of the insured and against the insurance company. See Hobbs Realty & Constr.
Co. v. Scottsdale Ins. Co., 163 N.C. App. 285, 292, 593 S.E.2d 103, 108,
cert. denied, 358 N.C. 543, 599 S.E.2d 47 (2004). Because the policy is missing, there is
no language to construe and thus no possibility of an ambiguity. Without the policy, all we have is a
disagreement between the parties as to what terms were included in that
policy. “[A] mere disagreement
between the parties over the language of the insurance contract does not create
an ambiguity.” Pa. Nat’l Mut.
Ins. Co. v. Strickland, ___ N.C. App. ___, ___, 631 S.E.2d 845, 847 (2006),
disc. review denied, 361 N.C. 221, __ S.E.2d __
(2007).
Nevertheless,
we view this error as immaterial since it represents only an alternative basis
for the Commission’s decision. The
Commission’s final conclusion of law sets forth another basis for the opinion
and award:
7. There is no evidence that the ACE-USA policy only covered Carolina Industrial Insulation employees who were injured in South Carolina. The Commission cannot create policy provisions that do not exist. It cannot be assumed that the policy had restrictive provisions; it must be proven. The initial burden is on the insured to establish coverage for a claim. In the case at hand, Plaintiff has proven that he was an employee of Carolina Industrial Insulation during the time period when ACE-USA provided workers’ compensation coverage. The burden then shifts to the defendant-carrier to establish that an exclusion applied to the claim and that employees of Carolina Industrial Insulation were not insured under its policy while working in North Carolina. In the case at hand, ACE-USA argues that an exclusion existed in that the coverage was only applicable to South Carolina injuries. ACE-USA has offered no evidence to support this argument. Therefore, ACE-USA has not met its burden.
As explained
above, this is a correct statement of the law.
The
Commission’s conclusion number 7 is supported by the Commission’s findings of
fact. Further, in the absence of
evidence that the policy was limited to work occurring in South Carolina, the
undisputed evidence that ACE-USA provided workers’ compensation coverage for
Carolina Industrial on the pertinent date was sufficient to support the
Commission’s finding that ACE-USA was the carrier on the risk. Because the Commission’s findings are
supported by competent evidence, and those findings in turn support one of the
grounds relied upon by the Commission, we affirm.
Affirmed.
Judges
McCULLOUGH and JACKSON concur.
1.
We note that portions of this finding of fact are more properly
considered conclusions of law.
2.
Neither party to this appeal discusses the body of law applicable to lost
instruments, including whether such law is appropriately applied in a workers’
compensation case. See 52
Am. Jur. 2d Lost and Destroyed Instruments §§1 et seq.
(2000). We therefore leave
consideration of the law of lost instruments for an appeal in which the parties
have addressed those issues.