American Resources Insurance Company, Inc. v. W.G. Yates & Sons Construction Company et al

Filing 137

ORDER granting 79 Motion for Summary Judgment; denying 112 Motion for Partial Summary Judgment. Signed by District Judge Henry T. Wingate on 3/27/2012 (SM)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF MISSISSIPPI
EASTERN DIVISION
AMERICAN RESOURCES INSURANCE
COMPANY, INC.

PLAINTIFF

VS.

Civil Action No. 4:09-CV-181-HTW-LRA

W.G. YATES & SONS CONSTRUCTION
COMPANY, ET AL

DEFENDANTS

ORDER
Before the court are the following motions:
1.

Motion for Summary Judgment [docket no. 79], filed by defendant W.G. Yates &
Sons Construction Company (“Yates”);

2.

Motion for Review of Magistrate Judge Order [docket no. 98], filed by nineteen
defendants;

3.

Motion for Partial Summary Judgment against the plaintiff [docket no. 112], filed
by Yates;

4.

Motion for Summary Judgment as to Workers’ Compensation Lien [docket no.
113], filed by Yates;

5.

Motion to Dismiss Individual Co-Defendants [docket no. 120], filed by individual
defendants Tammy Ducksworth and Hope Haigler;

6.

Motion to Withdraw as Attorney [docket no. 121], filed by attorney for several of
the individual co-defendants;

7.

Motion to Bifurcate [docket no. 122], filed by nine of the defendants;

8.

Motion in Limine [docket no. 126], filed by six of the defendants;

9.

Supplemental Motion to Withdraw [docket no. 132], filed by the attorney for
Jamie Tranquillino.
The court has heard arguments on two of these motions, docket numbers 79 and

112. The court will announce its ruling on those two motions in this order. After
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resolution of those motions, the parties will be afforded the opportunity to argue or
amend the remaining motions as appropriate.
This court’s subject matter jurisdiction over the underlying declaratory judgment
action is founded on diversity jurisdiction, Title 28 U.S.C. § 1332(a).1
American Resources Insurance Company, Inc., an Alabama corporation, has its
principal place of business in Mobile, Alabama. Defendant Travelers Property Casualty
Company of America (“Travelers”) is a Connecticut corporation with its principal place of
business in Connecticut. The remaining defendants are Mississippi residents.
I. Facts/ Background
Yates entered into a contract with “Spectrum Concrete Services” on August 19,
2008, to provide concrete services for a construction project at the Jeff Anderson
Regional Medical Center (“JARM”) in Meridian, Mississippi. Telly Walsworth signed the
subcontractor agreement as “owner” of Spectrum Concrete Services. “Spectrum II,” a
d/b/a of Telly Walsworth, provided a Certificate of Insurance to Yates indicating that
FirstComp Insurance Company (“FirstComp”) was providing workers’ compensation
coverage for Spectrum’s workers and American Resources Insurance Company was
providing commercial general liability insurance.
Prior to the contract in question, Telly Walsworth shared ownership of a company
named Spectrum Concrete Services, LLC, with his brother. That company also

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Title 28 U.S.C. § 1332 states in pertinent part:
(a) The district courts shall have original jurisdiction of all civil actions where the matter in
controversy exceeds the sum or value of $75,000, exclusive of interest and costs, and is
between-(1) citizens of different States;

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purchased insurance from American Resources Insurance Company, but terminated its
business operations and cancelled its insurance policy on April 14, 2008, before Telly
Walsworth signed the subcontract agreement with Yates. Cancellation Request, docket
no. 87-9.
The parties dispute the relationship between Spectrum Concrete Services;
Spectrum Concrete Services, LLC; Spectrum II; and Telly Walsworth (collectively
“Spectrum”). Plaintiff alleges that Yates contracted with Spectrum Concrete Services,
LLC, which was defunct before the start of this project, and that Telly Walsworth d/b/a
Spectrum II performed the concrete work on the project without a subcontractor
agreement. Yates claims that Spectrum Concrete Services was a d/b/a of Telly
Walsworth. Because Spectrum Concrete Services and Spectrum II were both d/b/a’s of
Telly Walsworth, says Yates, its contract was with Telly Walsworth.
On November 17, 2008, a second story wooden formwork and scaffolding
constructed by Yates at its JARM jobsite in Meridian, Mississippi, collapsed, injuring
several concrete workers. Telly Walsworth d/b/a Spectrum II, employed a number of
these workers, and carried a workers’ compensation insurance policy from FirstComp
Insurance Company at the time of the collapse. Workers’ Compensation and
Employers Liability Insurance Policy, docket no. 115-1.
Spectrum II’s general liability insurance carrier, American Resources Insurance
Company (“ARIC”), filed this declaratory judgment action in federal court on December
29, 2009, contesting its duty to indemnify and provide a defense to Yates. On March
11, 2010, ARIC amended its complaint, replacing “John Doe” defendants, with named
individual workers who had, or might make, personal injury claims (Donald Arrington,
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Tammy Ducksworth, José Refugio Munoz Garcie, José Gonzalez, Raul Gonzales, Hope
Haigler, Elias Jacobo, Lina Lopez, Manual Martinez, David McKean, Francisco Medina,
Timothy Mobley, Wayne Robertson, Daniel Solis, Jamie Traqillino, Manual Utz, and
Jerry Vallarta).
On September 1, 2010, the injured workers sued Yates in the Circuit Court of
Lauderdale County, Mississippi, for personal injuries, alleging negligence and/or gross
negligence, amending their complaint on February 23, 2011. Complaints in David
McKean, et al. V. W.G. Yates & Sons Construction, Cause No. 10-CV-122(W), docket
no. 79-1.
Yates filed a motion to dismiss in the state court action, relying on the exclusivity
provision of the Mississippi Workers’ Compensation Act, on October 25, 2010. The
parties filed briefs regarding Yates’ motion to dismiss. The Circuit Court of Lauderdale
County, Mississippi, held a hearing on January 26, 2011. The state court judge
reserved ruling on the motion to dismiss and stayed the case until August, 2011, citing
the pendency of this declaratory judgment action. Order of Circuit Court of Lauderdale
County, dated February 11, 2011, docket no. 79-2.
On March 22, 2011, with this court’s leave, in this federal declaratory judgment
action, Yates filed an answer to ARIC’s amended complaint, adding a cross claim for
declaratory judgment against the individual defendants, a counterclaim against ARIC,
and invoking the arbitration provision of its contract with Spectrum.
On June 24, 2011, in this federal action, Yates filed a third party complaint
[docket no. 92] against Spectrum II’s workers’ compensation carrier, FirstComp.
FirstComp had issued Workers’ Compensation Notices of Liens claiming a subrogation
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interest against Yates for amounts to be paid to the workers injured at the Yates’ jobsite.
Yates, in its third party complaint, requested that this court declare the rights of the
parties with respect to FirstComp’s insurance policy and FirstComp’s subrogation rights
against Yates.
II. Motions for Summary Judgment
Summary judgment is appropriate "if the pleadings, depositions, answers to
interrogatories, and admissions on file, together with the affidavits, if any, show that
there is no genuine issue as to any material fact and that the moving party is entitled to
judgment as a matter of law." Fed.R.Civ.P. 56(c); see also Celotex Corp. v. Catrett, 477
U.S. 317, 322-23, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986).
A. Motion for Summary Judgment on Cross Claim [79]
After ARIC amended its complaint to name the individual workers as defendants,
Yates asserted a cross claim for declaratory judgment against those defendants.
[docket no. 70]. Title 28 U.S.C. § 13672 confers supplemental jurisdiction over Yates’
cross claim on this court. The cross claim was filed in accordance with Fed.R.Civ.P.
13(g)3 and arises from the same transaction or occurrence as the underlying claims in

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Title 28 U.S.C. § 1367(a) states:
Except as provided in subsections (b) and (c) or as expressly provided otherwise by Federal
statute, in any civil action of which the district courts have original jurisdiction, the district courts
shall have supplemental jurisdiction over all other claims that are so related to claims in the
action within such original jurisdiction that they form part of the same case or controversy under
Article III of the United States Constitution. Such supplemental jurisdiction shall include claims
that involve the joinder or intervention of additional parties.
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Fed.R.Civ.P. 13(g) states:
CROSSCLAIM AGAINST A COPARTY. A pleading may state as a crossclaim any claim by one
party against a coparty if the claim arises out of the transaction or occurrence that is the subject
matter of the original action or of a counterclaim, or if the claim relates to any property that is the
subject matter of the original action. The crossclaim may include a claim that the coparty is or

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the ARIC’s declaratory judgment action because all claims stem from the collapse at the
Yates’ jobsite.
Claiming that the Mississippi Workers’ Compensation Act (“MWCA” or the “Act”)
barred recovery by these injured workers, Yates asked this court to:
[D]eclare and enter judgment as follows:
The Personal Injury Cross Defendants may not pursue any personal injury
action(s) against Yates on account of any injury/ies allegedly suffered in
the subject collapse. Yates’ amended answer and counter claim, docket
no. 70 at 21.
Yates now moves this court to grant it summary judgment on its cross claim.
The individual co-defendants, in their response to Yates’ motion for summary
judgment, cross moved to dismiss Yates’ cross claim.
The individuals injured in the accident at Yates’ work site sued Yates in state
court on September 1, 2010 for negligently causing their injuries. These individual
defendants oppose Yates’ motion for summary judgment arguing that 1) Yates is not
protected from liability by the exclusivity provision of MWCA because Yates’ had no
contract with their employer, Spectrum II, and does not qualify as an employer under
the statute; 2) this court should abstain and dismiss Yates’ cross claim based on
considerations of comity with the state court; and 3) Yates’ cross claim for declaratory
judgment violates the spirit of the Declaratory Judgment Act, because it asks this court
to enjoin tort victims from suing the tortfeasor in their chosen forum.
1. Mississippi Workers’ Compensation Act
Yates’ filed its cross claim asking for a declaratory judgment that the MWCA bars

may be liable to the crossclaimant for all or part of a claim asserted in the action against the
crossclaimant.

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the individual co-defendants from bringing personal injury tort claims against it. In its
motion for summary judgment Yates requests that this court address the merits of its
cross claim and grant it judgment as a matter of law.
Workers’ compensation statutes are creatures of state law and, thus, this court
will analyze this issue under the MWCA, Miss. Code. Ann. § 71-3-1, et seq.; see Patin
v. Allied Signal, Inc., 77 F.3d 782, 786-87 (5th Cir. 1996).
Each state has put in place a workers’ compensation scheme, which replaces
common law negligence for injuries in the workplace. Workers’ compensation laws
create a no-fault system, with the aim of ensuring that workers and their families receive
prompt payments for job-related injuries. Doubleday v. Boyd Const. Co., 418 So.2d
823, 825-26 (Miss.1982).
While the Act mandates that covered employers provide compensation insurance
to protect their employees, it removes from the employees and their families the right to
sue compliant employers for negligence. Id.; Miss. Code Ann. §§ 71-3-7,4 71-3-9. The
provision of the Act which abrogates common law remedies, referred to as the
“exclusive remedy” provision, bars workers from suing their employers if the employer

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Miss. Code Ann. § 71-3-7 states in part:
Compensation shall be payable for disability or death of an employee from injury or
occupational disease arising out of and in the course of employment, without regard to fault as
to the cause of the injury or occupational disease. An occupational disease shall be deemed to
arise out of and in the course of employment when there is evidence that there is a direct causal
connection between the work performed and the occupational disease.
Every employer to whom this chapter applies shall be liable for and shall secure the payment to
his employees of the compensation payable under its provisions.
In the case of an employer who is a subcontractor, the contractor shall be liable for and shall
secure the payment of such compensation to employees of the subcontractor, unless the
subcontractor has secured such payment.

7

provides compensation insurance coverage to the worker. Miss. Code Ann. § 71-3-9.5
If the employer fails to provide compensation insurance, the injured employee may elect
to receive statutory compensation or sue the employer in tort. Id. If the employee sues,
the Act bars the employer from raising some common law tort defenses. Id. The
MWCA does apply to intentional acts by the employer or co-workers. Davis v. Pioneer,
Inc., 834 So.2d 739, 741-42 (Miss. Ct. App. 2003).
The Act extends to contractors and subcontractors, placing the ultimate
responsibility on general contractors to ensure that subcontractors’ employees have the
benefit of compensation insurance. The Act also extends the protections of the
“exclusive remedy” provision to general contractors. The key portion of this section of
the Act states:
In the case of an employer who is a subcontractor, the contractor shall be
liable for and shall secure the payment of such compensation to
employees of the subcontractor, unless the subcontractor has secured
such payment. Miss. Code Ann. § 71-3-7.
The parties to this suit agree that Yates, the contractor, may benefit from the
“exclusive remedy” provision of the Act if it contractually obligated Spectrum II, the
injured workers’ employer, to purchase compensation insurance for its employees. The

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Miss. Code Ann. § 71-3-9. Employer liability exclusive, states in part:
The liability of an employer to pay compensation shall be exclusive and in place of all other
liability of such employer to the employee, his legal representative, husband or wife, parents,
dependents, next-of-kin, and anyone otherwise entitled to recover damages at common law or
otherwise from such employer on account of such injury or death, except that if an employer
fails to secure payment of compensation as required by this chapter, an injured employee, or his
legal representative in case death results from the injury, may elect to claim compensation
under this chapter, or to maintain an action at law for damages on account of such injury or
death. In such action the defendant may not plead as a defense that the injury was caused by
the negligence of a fellow servant, nor that the employee assumed the risk of his employment,
nor that the injury was due to the contributory negligence of the employee.

8

parties dispute facts related to whether Spectrum II entered a subcontract with Yates for
the JARM project. They also dispute, assuming a subcontract existed, the terms of that
contract with respect to maintenance of compensation insurance.
The parties also hotly contest whether under Mississippi law the general
contractor must contractually require the subcontractor to buy compensation insurance,
in order for the general contractor to receive immunity under the Act.
The individual co-defendants argue that Mississippi law requires a contract
between the contractor and subcontractor in order for the general contractor to qualify
as a statutory employer, and receive protection against common law liability under the
Act. In this case, say the individual co-defendants, the only contract executed was
between Yates and Spectrum Concrete Services, a separate entity from the injured
workers’ employer, Spectrum II. Further, argue these individual defendants, even if the
subcontractor agreement is deemed to bind Spectrum II, its language regarding
compensation insurance is insufficient to protect Yates, because it does not explicitly
mandate that the subcontractor purchase compensation insurance.6

6

The Yate’s subcontract signed by Telly Walsworth for Spectrum Concrete Services
contains the following language regarding the subcontractor’s duty to maintain insurance:
Article 9.0 - Subcontractor shall obtain, before commencement of work, and shall maintain until
final acceptance of the Prime Contract work, full insurance coverage, including as a minimum
the same types of insurance at the same policy limits which are specified by the Prime Contract
or which the Contractor requires for the Project, whichever is greater. The Subcontractor is
hereby made responsible for determining and obtaining the types and extent of such additional
insurance as may be necessary to give adequate and complete protection to the Subcontractor,
the Contractor, and the Owner from claims for property damage and from claims for bodily
injury, including death, which may arise from or be connected with this Subcontract, [. . . ]. The
Subcontractor shall name the Contractor as a named additional insured (but not subject to
premium terms or liability) on all insurance policies and coverages [. . .].
Article 9.2 - Before beginning any Subcontract work, the Subcontractor shall deliver to the
Contractor three (3) copies of Certificates of Insurance, certifying the types and the amounts of
coverage, certifying that said insurance was in force before Subcontractor started work,

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Yates argues that Mississippi workers’ compensation law protects the
subcontractor, if the employee receives compensation insurance benefits, regardless of
whether an agreement exists between the contractor and subcontractor. This immunity,
says Yates, springs from the formation of the contractor-subcontractor relationship, and
the liability the law places on the contractor to ensure protection for the subcontractor’s
employees.
Mississippi Workers’ Compensation Law and Contractor Immunity
Early Mississippi Supreme Court cases applied immunity to general contractors if
they required their subcontractors to carry compensation insurance. See Doubleday,
418 So.2d at 826-27. In Doubleday v. Boyd Construction Co., the Mississippi Supreme
Court enunciated the long-standing rule that general contractors benefit from the
“exclusive remedy” provision of Mississippi workers’ compensation law if they
contractually require their subcontractors to maintain compensation insurance for their
employees. Id. The Mississippi Supreme Court held that “a contractor is liable for and
shall secure compensation to the employees of his subcontractors, even though such
contractors have the status of independent contractors, and that if such contractor has
in fact, secured such compensation, either directly or indirectly through the
subcontractor, the remedy under the [Workers’ Compensation] Act is exclusive. Id at
826. Doubleday ensures that, under the MWCA, a general contractor is immune from

certifying that said insurance applies to the Subcontract work and to all activities and liability of
the Subcontractor pursuant to this Subcontract, and certifying that the Contractor is a named
additional insured on Subcontractor’s policies of Insurance by endorsement in a form
acceptable to Contractor. W.G. Yates & Sons Construction Company Subcontract, dated
8/19/08, docket no. 112-1.

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personal injury liability for subcontractors’ employees, if the general contractor
“complies with the statute by contractually securing compensation insurance by his
subcontractor.” Id.
The parties have cited a number of cases which document the evolution of
contractor immunity under the Act. The court in Salyer v. Mason Technologies, Inc.,
690 So.2d 1183 (Miss. March 27, 1997), found that the contractor was protected by the
“exclusive remedy” provision, regardless of whether the contractor mandated that the
subcontractor purchase compensation insurance. The fact that the subcontractor
provided these benefits to its employees was sufficient. In Salyer an employee of a
subcontractor sued the general contractor, Mason, for injuries sustained on a
construction project. SCI Steelcon, the subcontractor and plaintiff’s employer, carried
workers’ compensation insurance which paid benefits to the plaintiff. The state circuit
court granted summary judgment in favor of Mason, finding the general contractor to be
a statutory employer entitled to the “exclusive remedy” defense under the MWCA. The
Supreme Court of Mississippi affirmed.
The Mississippi Supreme Court discussed the standard from Doubleday v. Boyd
Construction, saying that “where a subcontractor provided compensation coverage to its
employees pursuant to its contract with the prime contractor, the prime contractor
qualified as a statutory employer and was immune from a common law tort suit by the
injured employee.” 690 So.2d at 1184. The Salyer court extended this immunity to
prime contractors regardless of whether they contractually required their subcontractors
to carry compensation coverage. The court stated:
Although there is no evidence in the record that Mason contractually
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required its subcontractors to provide compensation coverage for their
employees, we see no reason to draw a distinction between prime
contractors who contractually require subcontractors to provide
compensation coverage on one hand, and prime contractors who hire
subcontractors who already provide compensation coverage on the
other hand. Id at 1185.
The court in Richmond v. Benchmark Construction Corp., 692 So.2d 60 (Miss.
April 10, 1997), decided just weeks after Salyer v. Mason Technologies, Inc., found that
a written subcontractor agreement was not necessary to protect the general contractor
from tort liability. In the Richmond case, an employee for subcontractor United Piping
Systems, Inc. (“UPS”), sued the general contractor, Benchmark, for injuries sustained
on Benchmark’s project at a Kroger store. The trial court granted summary judgment in
favor of Benchmark, and Richmond appealed. On appeal, the Mississippi Supreme
Court affirmed that the “exclusive remedy” provision of the MWCA protected a general
contractor which had an oral agreement with the subcontractor to provide compensation
insurance. The court found that the statute puts the general contractor in the place of
the subcontractor. If the subcontractor fails to procure compensation insurance, the
general contractor must provide it. The court said that the statute does not require a
written contract between general contractor and the subcontractor, but “[i]f a contractorsubcontractor relationship exists, the employee of the subcontractor covered by
workers’ compensation insurance is prohibited from making a common law claim for
negligence or gross negligence against the contractor.” Id at 63.
Some confusion exists, reflected in the parties’ opposing briefs, as to what
affirmative steps the contractor must take to enjoy immunity under the Act. This conflict
stems from recent Mississippi Supreme Court cases which cite Doubleday and its
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language granting immunity to contractors who contractually require subcontractors to
provide insurance. These cases, however, confront factual scenarios in which the
existence of a subcontract agreement meeting the requirement of Doubleday is not in
question.
One case relied upon by the individual co-defendants is Powe v. Roy Anderson
Construction Co., 910 So.2d 1197 (Miss. Ct. App. Sept. 6, 2005), reh’g denied, 942
So.2d 164 (Aug. 8, 2006). The individual co-defendants argue that this case says that
the MWCA only protects a prime contractor from tort liability if the contractor has
contractually obligated the subcontractor to carry compensation insurance, and the
subcontractor does in fact provide that insurance. In the Powe case, a subcontractor’s
employee sued the subcontractor and the general contractor for injuries sustained when
a platform collapsed on the contractor’s construction worksite. The injured employee
received workers’ compensation benefits through his employer, the subcontractor. The
trial court granted summary judgment to the defendants, finding that the worker’s claims
were barred by the exclusive remedy provision of the MWCA.
The Powe court opinion cites Doubleday v. Boyd Construction, saying that the
immunity of the “exclusive remedy” provision of the Act extends “to general contractors
who have required subcontractors to secure workers’ compensation insurance.” Id at
1205. The individual co-defendants argue that the standard from Doubleday, which
protected contractors only when they contractually obligated subcontractors to provide
compensation insurance, continues as the standard today.
In the Powe case, however, the contractor, Roy Anderson Construction
Company, had unquestionably required its subcontractor to provide compensation
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insurance. The Powe court found that, in the circumstances presented, the contractor
was protected by the “exclusive remedy” provision of the MWCA. Because the
Mississippi Court of Appeals found that Roy Anderson Construction Company had
complied with the statute under the particular facts presented, does not necessarily
mean that the contractor could not have availed itself of the MWCA protections had it
acted less decisively to ensure compensation coverage for the subcontractor’s workers.
This court finds a better reading of the current standard in Judge Leslie
Southwick’s concurrence in the case of Lamar v. Thomas Fowler Trucking, Inc., 956
So.2d 911, 927 (Miss. Ct. App. 2006). The Mississippi Supreme Court affirmed the
appeals court’s ruling, but disagreed with the majority’s reasoning. In it’s opinion, the
supreme court affirmed the decision based on a rationale similar to that offered by
Judge Southwick’s concurrence. See Lamar v. Thomas Fowler Trucking, Inc., 956 So.
2d 878 (Miss. 2007). The Lamar case differs from the case sub judice, in that it
concerns the subcontractor’s immunity, and not that of the general contractor. But the
framework for workers’ compensation law described in Judge Southwick’s concurrence
applies to the case at hand.
In the Lamar case, the plaintiff’s decedent worked for Fowler Trucking, a
company which the general contractor, Golden Timber, Inc., hired to haul timber.
Golden Timber and Fowler Trucking had a long-standing agreement by which Golden
Timber maintained compensation insurance covering Fowler Trucking’s employees, and
deducted the costs of insurance from its payments to Fowler Trucking. Fowler Trucking
did not carry its own compensation insurance. A Fowler Trucking employee was killed
while hauling logs for Golden Timber. The decedent’s older daughter sued both the
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subcontractor and general contractor for her father’s wrongful death. Golden Timber’s
workers’ compensation carrier paid benefits to the employee’s younger daughter, the
deceased worker’s dependent child. The older daughter, and plaintiff, was not a
dependent and received no workers’ compensation benefits. The trial court dismissed
Golden Timber, the contractor, finding it immune under the MWCA because its workers’
compensation carrier paid benefits for the employee’s death.
The Court of Appeals found that Fowler Trucking had not complied with the
workers’ compensation statute, because it had not “procured” compensation insurance
for its workers. The court assessed whether its relationship with the contractor which
covered the decedent afforded Fowler Trucking “down-the-line” immunity. The appeals
court came to the conclusion that Fowler Trucking’s failure to purchase compensation
insurance opened it to tort liability. The court decided, however, that because the
dependent child of the deceased employee had received workers’ compensation
benefits, the plaintiff could not sue. The court deemed the acceptance of benefits by
the dependent child an “election” on the part of the family to receive compensation
under the MWCA instead of suing for negligence. Lamar, 956 So.2d at 926.
The Mississippi Supreme Court affirmed the decision by the Court of Appeals,
but disagreed about whether Fowler Trucking had complied with the MWCA. The
Supreme Court, applying similar reasoning as Judge Southwick in his Court of Appeals
concurrence, found both the contractor and subcontractor qualified for statutory
immunity under the “exclusive remedy” provision.

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In his Mississippi Court of Appeals concurrence, Judge Southwick7 stated:
[T]he Mississippi statutes establish a scheme of protection in which the
contractor is the primary insurer for the injuries of the workers of
subcontractors. A subcontractor may legally provide that protection
instead. In certain situations, if either secures workers’ compensation
protection, both the general and the sub-contractor are entitled to the
exclusive remedy provision.
Judge Southwick reviewed the history of Mississippi case law related to
contractor immunity under the MWCA, interpretting Richmond v. Benchmark
Construction as a reaction rejecting a prior Supreme Court Justice’s attempt to expand
contractor tort liability. Id at 929-30 (citing Nash v. Damson Oil Corp., 480 So.2d 1095
(Miss. 1985)(Sullivan J., concurring). In his Lamar concurrence, Judge Southwick
referenced Richmond saying:
the holding of Richmond is that a contractor who does not require a
subcontractor to obtain insurance and does not itself do so remains an
employer, i.e., the contractor of the subcontractor is a statutory employer
and is never a third party under section 71-3-71, regardless of whether
there is insurance. Lamar, 956 So.2d at 930.
He cited the language of the statute in conjunction with the Richmond opinion,
saying that the Richmond decision, which “gave tort suit immunity to lucky general
contractors who did nothing to assure that subcontractors’ employees were protected by
workers’ compensation insurance, but the employees had coverage anyway,” was
consistent with the statutory language indicating that the contractor shall be liable,
“unless the subcontractor has secured such payment.” Lamar, 956 So.2d at 930-31.
This court agrees with Judge Southwick’s determination that if the subcontractor

7

Judge Southwick since has been appointed to the United States Fifth Circuit Court of

Appeals.

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and contractor have formed a working relationship, the contractor is always a statutory
employer under the MWCA. If the contractor does not provide compensation insurance,
and the subcontractor also fails to insure its employees, the employees may either elect
to receive statutory compensation from the contractor, or may sue the contractor in tort.
Yates also cites Weiss v. Granite Construction Co., 2009 WL 3334620 (S.D.Miss
Oct. 14, 2009), in which a subcontractor’s employee sustained injuries while working on
a highway construction project. He sued his employer (the subcontractor) and the
general contractor, a joint venture between two construction companies, for negligence.
The district court found his state tort law claims were barred by the exclusive remedy
provision of workers’ compensation law. The court cited Richmond v. Benchmark
Constr. Corp., 692 So.2d 60, 63 (Miss. 1997), saying, “[t]herefore, where ‘a contractorsubcontractor relationship exists, the employee of a subcontractor covered by workers’
compensation insurance is prohibited from making a common law claim for negligence
or gross negligence against the contractor.’” Id at *3.
Finally, an earlier Mississippi Supreme Court decision, Crowe v. Brasfield &
Gorrie General Contractor, Inc., 688 So.2d 752, 757 (Miss. 1996), cautions against a
narrow reading of Doubleday. In the Crowe case, the United States Court of Appeals
for the Fifth Circuit certified to the Mississippi Supreme Court the question of “whether
Mississippi’s Workers’ Compensation Act extends immunity to a general contractor or a
subcontractor in a negligence action brought against them by the employee of a subsubcontractor.” Id at 753. The plaintiff argued that the “Doubleday decision requires
the general contractor to either secure the workers’ compensation insurance [. . .] or
contractually require that the subcontractor purchase workers’ compensation insurance”
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in order to benefit from immunity under the statute. Id at 756. The Mississippi Supreme
Court responded that:
Doubleday does not stand for the narrow proposition advanced by
[the plaintiff]. [. . .] This Court did not hold that the only way a
general contractor could fulfill this obligation [to secure
compensation] was either to purchase the insurance itself or to
specifically contract with the subcontractor requiring such
coverage. In fact, we stated that ‘[i]t is our opinion [that] the
legislature did not intend to subject a general contractor to
common law liability if he complied with § 71-3-7 by requiring the
subcontractor to have workmen’s compensation insurance.” 688
So.2d at 757.
The cases following Doubleday indicate that a contractor does not have to
contractually mandate that a subcontractor obtain compensation insurance to benefit
from the “exclusive remedy” defense in the Act. The formation of a contractorsubcontractor relationship is key to imposing liability on the contractor to provide
compensation insurance to the subcontractor’s employees. When a subcontractor
performs work for a contractor, that contractor is by definition a statutory employer
under the Act. Once the parties establish that the contractor-subcontractor relationship
exists, the only remaining question is whether the subcontractor or contractor secured
compensation insurance which covered the workers’ injury. If the answer is yes, the
injured employee cannot sue the contractor for negligence. If the answer is no, the
injured employee may elect to pursue benefits under the Act or sue in tort.
This interpretation comports with the language and spirit of the Act, imposing
liability and ensuring the injured employee can receive immediate payment. The other
side of this coin is that the contractor has the “exclusive remedy” defense available to it,
regardless of whether it has imposed a written or verbal requirement on the
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subcontractor.
In this case, the parties do not dispute the following facts. Telly Walsworth,
representing either Spectrum Concrete Services, LLC, or a d/b/a, signed a
subcontractor agreement to perform work for Yates. The injured employees worked for
Spectrum II, a d/b/a of Telly Walsworth. These employees worked on the Yates’ JARM
jobsite performing concrete services. Walsworth billed Yates for these services under
the name of Spectrum II. See Sworn Statement of Payment Obligations, docket no.
113-3. Walsworth provided a Certificate of Liability Insurance to Yates demonstrating
that Spectrum II carried workers’ compensation insurance for its employees. Certificate
of Liability Insurance, docket no. 113-2. Walsworth d/b/a Spectrum II’s compensation
insurance, purchased from First Comp Underwriters, paid workers’ compensation
benefits to the injured employees.
Yates would only be subject to tort liability, under these circumstances, if this
court found it to be a “third party,” and not a statutory employer; or if the employees did
not receive compensation coverage. Given the facts present in the record, Yates
cannot be a “third party” under the statute. Neither Spectrum II, nor Yates dispute that
Spectrum II performed work and was paid as a subcontractor to Yates. The terms of
their agreement may be disputed, but the relationship is clear. If this court were to
decide otherwise, Yates could avoid its responsibility under the statute to ultimately
ensure its subcontractor’s employees compensation by disputing some aspect of its
agreement with the subcontractor. This no-fault system could be foiled, and payments
to workers delayed, based on contract squabbles between contractors and
subcontractors.
19

This court finds that Spectrum II and Yates entered into a contractorsubcontractor relationship as contemplated by the workers’ compensation statute.
Yates had a duty under the statute to ensure Spectrum II’s workers received
compensation in the event of injury. The fact that Yate’s duty was never triggered to
pay compensation, because Spectrum II’s compensation insurance carrier paid
benefits, does not change this analysis. Had Spectrum II failed to provide coverage,
Yates would have been obligated to do so.
2. Brillhart/Wilton Abstention Doctrine
The individual co-defendants have asked this court to abstain from deciding
Yates’ cross claim against them under the Brillhart/Wilton abstention doctrine, to allow
these issues to be decided in state court. The Brillhart/Wilton abstention doctrine
applies to declaratory judgment actions for which parallel litigation is pending in state
court.
Usually, “the pendency of an action in the state court is no bar to proceedings
concerning the same matter in the Federal court having jurisdiction.” Wilton v. Seven
Falls Co., 515 U.S. 277, 284, 115 S.Ct. 2137, 2141, 132 L.Ed.2d 214 (1995)(citing Will
v. Calvert Fire Ins. Co., 437 U.S. 655, 98 S.Ct. 2552, 57 L.Ed.2d 504 (1978)).
Abstention in most civil actions is governed by the Colorado River abstention doctrine,
which limits the court’s ability to avoid hearing the case to those instances in which it
finds “exceptional circumstances.” Id at 284-285 (citing Colorado River Water
Conservation Dist. v. United States, 424 U.S. 800, 96 S.Ct. 1236, 47 L.Ed.2d 483
(1976)). The Brillhart/Wilton abstention doctrine, an exception to the Colorado River
doctrine, applies to actions brought under the Declaratory Judgment Act and vests
20

greater discretion in the district court. Id at 285.
In Brillhart v. Excess Ins. Of America, 316 U.S. 491, 62 S.Ct. 1173, 86 L.Ed.1620
(1942), the United States Supreme Court addressed how the Federal Declaratory
Judgments Act impacted the district court’s discretion to abstain from hearing a
declaratory judgment action which had parallel litigation ongoing in state court. The
Brillhart case involved an excess insurance provider’s suit for declaratory judgment
regarding its liability to pay a default judgment against an insured. The claimant in the
default judgment action had initiated garnishment proceedings in state court against the
insured, the insured’s primary insurer, and ultimately against Excess Insurance of
America (“Excess”), the secondary insurance provider. Id at 492-93. The district court
granted the claimant’s motion to dismiss, which had been argued, in large part, on the
grounds that the claims involved in the declaratory judgment action could be resolved in
the state court garnishment action. Id at 493. The court of appeals reversed the district
court, directing it to allow the declaratory judgment action to proceed. Id at 494.
The majority in Brillhart, stated that “[a]lthough the District Court had jurisdiction
of the suit under the Federal Declaratory Judgments Act [. . .], it was under no
compulsion to exercise that jurisdiction.” Id at 494. Pointing out that the issue of
abstention was squarely within the discretion of the district court, the Court reversed the
appeals court and remanded the case to the district court. The Court cited, as key for
the district court’s decision on abstention, whether the issues not foreclosed by
substantive law “can be better settled in the proceeding pending in the state court.” Id
at 495.
In Wilton v. Seven Falls Co., the Supreme Court confirmed that the trial court has
21

discretion to abstain in declaratory judgment actions which have parallel proceedings in
state court. 515 U.S. at 286. The Court stated that “[d]istinct features of the
Declaratory Judgment Act, we believe, justify a standard vesting district courts with
greater discretion in declaratory judgment actions than that permitted under the
‘exceptional circumstances’ test of Colorado River.” Id. The Wilton Court cited its
Brillhart decision, directing the district court to examine, “the scope of the pending state
court proceeding and the nature of defenses open there,” when deciding whether to
abstain in the declaratory judgment action. Id at 283.
The Fifth Circuit has provided further guidance for application of the
Brillhart/Wilton abstention doctrine. In Sherwin-Williams, the Fifth Circuit described
three guiding principles of law which underpin its test for abstention–“the proper
allocation of decision-making between state and federal courts,” “fairness,” and
“efficiency.” The Sherwin-Williams Co. v. Holmes County, 343 F.3d 383, 390-91 (5th Cir.
2003). These principles should be considered when evaluating the three part test for
abstention announced in Orix v. Credit Alliance, Inc. v. Wolfe, 212 F.3d 891, 895 (5th
Cir. 2000). The Orix test requires the district court to determine: “(1) whether the
declaratory judgment action is justiciable; (2) whether the court has the authority to
grant declaratory relief; and (3) whether to exercise its discretion to decide or dismiss
the action.” 343 F.3d at 387. If the court affirmatively answers the first two parts of the
test, it should evaluate the third part by applying the non-exclusive list of factors
described in the case of St. Paul Ins. Co. v. Trejo, 39 F.3d 585 (5th Cir. 1994). The
Trejo factors are:
1. whether there is a pending state action in which all of the matters in
22

2.
3.
4.
5.
6.
7.

controversy may be fully litigated;
whether the plaintiff filed suit in anticipation of a lawsuit filed by the
defendant;
whether the plaintiff engaged in forum shopping in bringing the suit;
whether possible inequalities in allowing the declaratory plaintiff to gain
precedence in time or change forums exist;
whether the federal court is a convenient forum for the parties and
witnesses;
whether retaining the lawsuit would serve the purposes of judicial
economy; and
whether the federal court is being called on to construe a state judicial
decree involving the same parties and entered by the court before
whom the parallel state suit between the same parties is pending.
V343 F.3d at 388.

The Fifth Circuit, in its Sherwin-Williams opinion, placed particular weight on the
pendency of a state court lawsuit, to reverse the district court’s decision to abstain. 343
F.3d at 394 (“although the lack of a parallel state proceeding did not require the district
judge to hear the declaratory judgment action, it is a factor that weighs strongly against
dismissal.”). In that opinion, the Fifth Circuit also considered factors beyond those listed
in Trejo, such as the presence of federal law questions, and whether the state law
issues were novel. Id at 396.

Application of Trejo factors
a. Pending state court action
The individual co-defendants filed suit on September 1, 2010, claiming
negligence and demanding compensation for personal injuries caused by the collapse
at the Yates’ jobsite. The state court judge stayed that lawsuit from February 11, 2011
through August 1, 2011, pending resolution of this declaratory judgment action. Prior to
23

staying the state court litigation, the Circuit Court of Lauderdale County received briefs
regarding Yates’ motion to dismiss. Yates based its motion to dismiss, filed in state
court, on similar grounds as this motion for summary judgment--that the tort claims are
barred by the exclusive remedy provision of the MWCA. The parties dispute whether
Yates’ motion to dismiss was argued before the judge at a January 26, 2011 hearing.
Yates claims that the motion was noticed for hearing, but that the Lauderdale County
District Court Judge stayed the case before hearing oral arguments.
Yates argues that questions regarding the exclusive remedy provision of the
MWCA were raised first in this action in federal court and must be decided here. ARIC
raised this defense to insurance coverage against Yates in Count V of its original
complaint on December 29, 2009. Count V of the original complaint states:
49.

American Resources Pollicy No. ATA0416900 contains the
following exclusion:
SECTION II - LIABILITY
...
B. Exclusions
1. Applicable to Business Liability Coverage
This insurance does not apply to:
...
d. Workers’ Compensation and Similar Laws
Any obligation of the insured under a workers’
compensation, disability benefits or unemployment
compensation law or any similar law.

50.

If Spectrum Concrete Services or Yates are insureds under
American Resources Policy No. ATA-0416900, this exclusion
applies to eliminate coverage because the injured individuals’
exclusive remedy is under Mississippi workers’ compensation laws.
Original complaint, docket no. 1, ¶¶ 49-50.

Further, the workers’ compensation issue, say both Yates and ARIC, is
intertwined with the arguments underpinning the underlying declaratory judgment
24

action, and must be decided by this court whether it abstains or decides Yates’
cross claim.

b. Whether the plaintiff filed the declaratory judgment action in anticipation of
defendant’s lawsuit
The record contains a demand letter dated November 21, 2008, addressed to
Travelers Insurance Company, Yates’ insurance carrier, with a complaint attached,
notifying Travelers that seventeen plaintiffs were filing a lawsuit against Yates for
damages related to the November 17, 2008, collapse at the Yates’ construction site.
More than a year later, the workers had not filed suit.
On December 29, 2009, ARIC filed this declaratory judgment action, including as
defendants “John Does (1-20) [who] are as yet unknown individuals or entities who
were working at the W.G.Yates & Sons Construction site [. . .] and may have claims for
bodily injuries [. . .] as a result of the collapse.” Complaint, ¶ 7. ARIC amended its
complaint on March 11, 2010, replacing the John Doe defendants with the current
named individual co-defendants. Amended complaint, ¶ 7. These individual codefendants filed a tort action against Yates and others in state court on September 1,
2010. Yates filed its cross claim for declaratory judgment against the individual codefendants on March 22, 2011.
Yates’ cross claim was not filed in anticipation of the state court action, but in
reaction to it. Yates says this is an effort to litigate the key issues central to the many
claims and parties in one action.
c. Whether the plaintiff engaged in forum shopping in bringing the suit
25

Yates appeared and defended the individual co-defendants’ personal injury suit
in state court. The individual co-defendants argue that Yates should not be allowed to
bar any claims they may have properly brought in state court by bringing this
declaratory judgment cross claim here.
As mentioned above, the issue of the MWCA was raised here before the state
court suit was filed. It is properly before this court, brought by the plaintiff in the
underlying declaratory judgment action.
d. Whether possible inequalities in allowing the declaratory plaintiff to gain
precedence in time or change forums exist
The individual co-defendants argue that it would be unfair to allow Yates to have
its cross claim heard in federal court prior to a decision from the state court in Yates’
motion to dismiss. The individual co-defendants and Spectrum II, say that all parties
have expended considerable expense preparing for and arguing before the state court.
Yates says that the state court has not heard arguments on its motion to dismiss,
and no decision from the state court is pending. Further, Yates again points to the need
for this court to decide the issue of its immunity under the MWCA in order to address
the underlying declaratory judgment action filed by ARIC.
Contrary to the individual co-defendants arguments, this court is persuaded that
fairness dictates deciding the MWCA issues here in a consolidated action. This court
will inevitably address this issue as part of ARIC’s declaratory judgment action. As it
stands, the individual defendants have had the opportunity to brief this issue and
provide extensive oral argument to the court. Abstaining from deciding Yates’ cross
claim would unfairly exclude the individual co-defendants from full participation in a
26

determination which is central to its state court claims.
e. Whether the federal court is a convenient forum for the parties and
witnesses
Parties to the personal injury action hail from Philadelphia, MS; Laurel, MS;
Hattiesburg, MS; Soso, MS; Mount Olive, MS; Poplarville, MS. The events surrounding
the personal injury action occurred in Meridian, MS, and the individual co-defendants
argue that many of the witnesses, including laborers, bystanders, and expert engineers,
all reside in Lauderdale County.
f. Whether retaining the lawsuit would serve the purposes of judicial economy
The individual co-defendants argue that this factor weighs in favor of abstention
because the issues underlying the cross claim and this motion for summary judgment
have been briefed and argued in the Circuit Court of Lauderdale County.
Yates claims that the parties filed briefs addressing its immunity under the
MWCA in the Circuit Court of Lauderdale County, but that the state court stayed the
action before hearing arguments on that issue. This court, says Yates, could achieve
greater judicial economy by deciding this motion, because the matter has been fully
briefed and argued here, and returning the issue to state court would only prolong
litigation in both forums.
g. Other factors: questions of federal law and novelty of state law issues
Issues of federal law are lacking in this diversity suit, but employer immunity
under the MWCA has been decided many times in state and federal courts in
Mississippi. While contractor immunity under these specific circumstances may not be
well-tread ground, the Mississippi appellate courts have provided ample guidance for
27

this federal court’s decision.
Abstention is generally reserved for exceptional circumstances. In the case of
declaratory judgment actions, the district court need not demonstrate these exigencies,
and has considerable discretion regarding whether to abstain. But the obligation to
exercise the jurisdiction conferred on it by Congress, must be considered by the court at
all times.
This court is not persuaded that abstention is appropriate in this case. The great
weight of the factors dictate that this court address these claims. Contractor immunity
under the MWCA is a central issue which effects all claims, including Yates’ counter
claim and cross claim, in this suit. Even if this court were to abstain from deciding
Yates’ cross claim against the individual co-defendants, this court is not insulated from
addressing this issue. The underlying declaratory judgment suit by ARIC raised the
issue as early as December 29, 2009, approximately eight months before the individual
co-defendants filed suit in state court. This issue is implicated in ARIC’s complaint and
amended complaint, and is central to all three motions for summary judgment before
this court. Further, principles of fairness require that this court decline abstention and
allow all parties affected to fully participate in briefing and arguments.

3. The Declaratory Judgment Act
The individual co-defendants argue that forcing them to litigate their personal
injury tort claims in this forum as a declaratory judgment action violates the spirit of the

28

Declaratory Judgments Act, Title 28 U.S.C. § 2201.8 The individual co-defendants cite
a Seventh Circuit case which states:
to compel potential personal injury plaintiffs to litigate their claims at a time
and in the forum chosen by the alleged tort-feasor would be a perversion
of the Declaratory Judgment Act. The primary purpose of that Act is ‘to
avoid accrual of avoidable damages to one not certain of his rights and to
afford him an early adjudication without waiting until his adversary should
see fit to begin suit, after damage had accrued.’ Cunningham Brothers,
Inc. v. Bail, 407 F.2d 1165, 1167-68 (7th Cir. 1969).
In Frito-Lay, Inc. v. Dent, 373 F.Supp. 771 (N.D. Miss 1974), the district court
dismissed, sua sponte, a lawsuit brought by Frito Lay seeking non-liability related to a
multi-vehicle accident involving a Frito-Lay truck. The court stated that “it is not one of
the purposes of the declaratory judgments acts to enable a prospective negligence
action defendant to obtain a declaration of non-liability.” 373 F.Supp. at 773 (citing
Wright and Miller, Federal Practice and Procedure, Civil § 2765).
The underlying declaratory judgment action filed by American Resources sub
judice, however, is properly before this court and squarely fits within the purposes of the
Declaratory Judgment Act. Because of the peculiar circumstances of this case,
involving common claims and defenses in the underlying declaratory judgment action
and the cross claim against the individual defendants, this court finds that it should
address the cross claim here.
B. Motion for Partial Summary Judgment [112]

8

Title 28 U.S.C. § 2201 states in pertinent part:
(a) In a case of actual controversy within its jurisdiction, [. . .], any court of the United States,
upon the filing of an appropriate pleading, may declare the rights and other legal relations of any
interested party seeking such declaration, whether or not further relief is or could be sought.
Any such declaration shall have the force and effect of a final judgment or decree and shall be
reviewable as such.

29

Yates has filed a motion asking the court to decide the issue of whether ARIC
owes Yates a duty to defend it in the underlying tort action, and to indemnify it. Yates’
reserves it’s right to present a claim for bad faith denial of coverage at trial.
ARIC, in its amended complaint for declaratory judgment [docket no. 16] asserts
the following grounds as a basis to deny coverage: 1) breach of duty to cooperate; 2)
Yates is not an insured under the “who is an insured” clause; 3) the policy’s “other
insurance” clause makes Yates’ general liability carrier, Travelers, its primary insurer for
this risk; 4) the “employers liability exclusion” excludes coverage; 5) the “workers
compensation exclusion” excludes coverage; 6) Yates violated its duty to provide notice;
7) Yates is not covered as an “additional insured;” 8) property damage was not the
result of an “occurrence” as defined by the policy; and 9) a “property damage exclusion”
excludes coverage.
In its response to Yates motion for summary judgment regarding ARIC’s duty to
defend and indemnify Yates, ARIC only addressed its arguments that Yates failed to
provide notice and failed to cooperate, Yates is not an insured under the policy, and the
other insurance clause makes the ARIC policy excess over Yates’ primary insurance.
ARIC did not argue the last two grounds from its amended complaint, which allege that
“property damage [was] not [the] result of an occurrence” and the contract contained
“property damage exclusions.”

1. Breach of duties to provide notice and to cooperate
The underlying incident occurred on the Yates’ jobsite in November 17, 2008.
ARIC says it did not receive actual notice of the claims or potential claims until March or
30

April of 2009, four or five months after the incident. Because of this late notice, ARIC
says it has been prejudiced because it could not conduct an independent investigation
into the claims. ARIC also says that Yates has failed to cooperate by refusing to
provide ARIC with documents, investigative materials, and expert reports, associated
with Yates’ investigation of the scaffolding collapse and injuries on its jobsite, until ARIC
agrees to keep all information confidential. Amended complaint, ¶¶ 25-27. The late
notice, says ARIC, made Yates’ cooperation and sharing of investigative documents all
the more important because by the time ARIC received notice, the jobsite was cleaned
up. Yates failure to provide notice and to cooperate, says ARIC, left it with inadequate
information to mount a defense for Yates.
Yates says that summary judgment is appropriate on these grounds because its
insurer, Travelers, provided written notice to the ARIC on January 8, 2009,
approximately two months after the collapse. Further, says Yates, ARIC has failed to
introduce to the record any evidence showing it has suffered prejudice from Yates’
alleged lack of cooperation, a showing necessary to void coverage under the insurance
contract. Finally, Yates argues that the provision of the policy requiring the insured to
provide notice and cooperate only applies to the named insured, Spectrum II.
The ARIC insurance policy contains the following provision, requiring notice and
cooperation:

Duties in the Event of Occurrences, Offenses, Claim or Suit
a. You must see to it that we are notified as soon as practicable of an
“occurrence” or an offense which may result in a claim.
[. . .]
b. If a claim is made or “suit” is brought against any insured, you must:
31

(1) Immediately record the specifics of the claim or “suit” and the
date received: and
(2) Notify us as soon as practicable.
c. You and any other involved insured must:
(1) Immediately send us copies of any demands, notices,
summonses or legal papers received in connection with the claim
or “suit”;
(2) Authorize us to obtain records and other information;
(3) Cooperate with us in the investigation, or settlement of the claim
or defense against the “suit”; and
(4) Assist us, upon our request, in the enforcement of any right
against any person or organization that may be liable to the insured
because of injury or damage to which this insurance may also
apply. Docket no. 16-3, page 17 of 46.
The policy’s Business Owners Coverage Form defines the terms “you” and “your” as
“the Named Insured shown in the Declarations.” Docket no. 16-2, page 27 of 45.
Spectrum II is the named insured listed by the policy. Docket no. 16-2, page 9 or 45.
This language appears to remove the duty of notification from an additional
insured. The policy, however, explicitly requires “any other involved insured” to
cooperate and authorize ARIC to obtain records.
This court finds that a material issue of fact remains as to whether Yates has
cooperated in compliance with the ARIC policy, and whether its failure to cooperate has
cause prejudice to Yates.
2. Who is an insured
ARIC issued a business liability policy to “Spectrum II, Kelly Walsworth d/b/a”
which designates the business form as “individual.” Amended complaint, ¶ 36. The
policy carries an endorsement covering, as additional insureds, owners, lessees or
contractors with whom Spectrum works. This endorsement requires a written
agreement obligating the named insured to provide insurance coverage, stating:
32

BUSINESS OWNERS COVERAGE FORM
The following is added to Paragraph C. Who is An Insured in Section II
- Liability:
Any person or organization for whom you are performing operations is
also an insured, if you and such person or organization have agreed in
writing in a contract or agreement that such person or organization be
included as an additional insured on your policy. (emphasis added)
ARIC argues that this endorsement does not apply to bring Yates under the
policy’s “additional insured” umbrella, because Yates has no written contract with
Spectrum II. Yates entered into a subcontractor agreement with “Spectrum Concrete
Services” signed by “Telly Walsworth, owner.” The written subcontractor agreement
does not mention Spectrum II. Spectrum II, et al, dispute that Spectrum II had a
subcontract with Yates. In their answer and defenses to Yates’ cross claim, Spectrum,
et al, say:
Yates contracted with Spectrum Concrete Services, LLC to perform the
subject Contract [. . .]. Spectrum Concrete Services, LLC ceased doing
business shortly after the Contract was entered and Telly Walsworth d/b/a
Spectrum, II, not SCS, performed the work and was paid by Yates up until
the collapse in question. As Spectrum II was not required by contract to
carry worker’s compensation insurance by Yates, the Cross Claim must be
dismissed. Spectrum II, et al’s answer and defenses at 3, docket no. 80.
Yates argues that it is an additional insured under the policy. It points to the fact
that Spectrum II was performing work for Yates at Yates’ jobsite when the workers were
injured. Spectrum II is a d/b/a for Telly Walsworth, who signed the subcontractor
agreement under the company name Spectrum Concrete Services. Yates claims that
Spectrum Concrete Services, which contracted with Yates, is also a d/b/a of Telly
Walsworth. Because a d/b/a is merely an alterego of the principal, says Yates, Telly
Walsworth is the contracting party for both the subcontract and the ARIC insurance
33

contract. Yates cites an admission by Spectrum II in its response to ARIC’s amended
complaint which states, “[t]hese Defendants would further respond by stating that the
subject subcontract was executed by Walsworth d/b/a ‘Spectrum Concrete Services,’
with no express mention of the ‘LLC.’” Spectrum II, et al’s answer to the amended
complaint, docket no. 50, ¶ 39.
Yates also argues that under Mississippi law, the “additional insured” provision in
the ARIC policy covering Spectrum II “is triggered when a subcontractor’s employee
makes a claim for injuries against a general contractor, so long as the injuries arose out
of the operations the subcontractor was performing for the general contractor.” Yates’
motion for partial summary judgment, docket no. 112, ¶ 10; Roy Anderson Corp. v.
Transcont. Ins. Co., 358 F.Supp.2d at 562; Mid-Continent Cas. Co. v. Swift Energy Co.,
206 F.3d 487, 498 (5th Cir. 2000). For an accident or injury to “arise out of the
operations of a named insured,” thus triggering the subcontractor’s policy coverage, “it
is not necessary for the named insured’s acts to have ‘caused’ the accident; rather, it is
sufficient that the named insured’s employee was injured while present at the scene in
connection with performing the named insured’s business, even if the cause of the
injury was the negligence of the additional insured.” Mid-Continent, 206 F.3d at 498
(citations omitted).
The cases cited by Yates address whether an incident or occurrence is
sufficiently related to the subcontractor’s business to trigger the subcontractor’s
insurance coverage. These cases, however, involve contractors and subcontractors
who have admittedly entered into a written contract. In the Mid-Continent case, one of
the parties claims the contractor-subcontractor agreement as invalid under Texas law,
34

but neither party denies entering the agreement.
This case sub judice can be distinguished from those cited by Yates because,
although the ARIC policy covers an additional insured, it does so only if that party has a
written agreement with the named insured for coverage. The issue of whether Yates
and Spectrum II have a written agreement is a disputed issue of fact.
3. Other Insurance: ARIC is excess to Yates’ primary insurer, Travelers
Travelers is Yates’ primary insurer. The ARIC policy issued to Spectrum II
contains an “other insurance” clause, and ARIC claims that even if Spectrum Concrete
Services and Yates were covered under its policy, it would serve as excess insurance
with no duty to defend. In ARIC’s response to Yates’ motion for summary judgment, it
limited its argument on this point to say that its efforts to obtain information regarding
the “other insurance” from Yates’ primary insurer, Travelers, has been “thwarted by the
efforts of Yates.” Docket no. 117 at 4.
Yates argues that although a dispute over an “other insurance” clause is
generally resolved by comparing the applicable policies, in this case the ARIC insurance
coverage was provided as part of the consideration for construction work and must be
viewed as primary.
The ARIC insurance policy contains the following clause:

SECTION III - COMMON POLICY CONDITIONS 9APPLICABLE TO
SECTION 1 - PROPERTY AND SECTION II - LIABILITY)
H. Other Insurance
...
35

2. Business Liability Coverage is excess over:
a. any other insurance that insures for direct physical loss or
damage; or
b. Any other primary insurance available to you covering liability for
damages arising out of the premises or operations for which you
have been added as an additional insured by attachment or
endorsement.
3. When this insurance is excess, we will have no duty under Business
Liability Coverage to defend any claim or “suit” that any other
insurer has a duty to defend. If no other insurer defends, we will
undertake to do so; but we will be entitled to the insured’s rights
against all those other insurers.
Although the Travelers policy is not in the record, the court assumes for sake of
argument that it contains an “other insurance” clause similar to the one in the ARIC
policy.
As a general rule, when two insurance policies provide primary coverage with
respect to a particular insured and claim, and each contains an “other insurance”
clause, the insurers share the risk. See American Indemnity Lloyds v. Travelers
Property & Casualty Ins., 335 F.3d 429, 435 (5th Cir. 2003). “[A]n indemnity agreement
between the insureds [. . .], such as is commonly found in the construction industry, may
shift an entire loss to a particular insurer notwithstanding the existence of an ‘other
insurance’ clause in its policy.” Id at 436. When the insurance in question “is provided
as part of the consideration for construction work, it should be viewed as primary
insurance.” 2011 WL 96523, *2 (S.D.Miss 2011)(citing See American Indemnity Lloyds
v. Travelers Property & Casualty Ins., 335 F.3d at 439).
Case law supports Yates’ contention that the “other insurance” clause in the
ARIC policy does not necessarily make it excess to other insurance. The ARIC policy
may be primary in this case if Yates can prove that it was provided as consideration
36

under a valid subcontract between Yates and Spectrum II. The existence of a contract
between Yates and Spectrum II remains a material question of fact.
4. Employer’s liability exclusion
ARIC argues that tort claims by employees are not covered under its policy
because of its “employer’s liability” exclusion. This exclusion states:
SECTION II - LIABILITY
B. Exclusions
1. Applicable to Business Liability Coverage
This insurance does not apply to:
e. Employer’s Liability
“Bodily injury” to:
(1) An “employee” of the insured arising out of and in the course
of:”
(a) Employment by the insured; or
(b) Performing duties related to the conduct of the insured’s
business; or
(2) The spouse, child, parent, brother or sister of that
“employee” as a consequence of Paragraph (1) above.
Yates counters that the policy contains a “separation of insureds” clause, which
makes this exclusion ineffective against Yates. Yates cites Centennial Insurance Co. v.
Ryder Truck Rental, Inc., 149 F.3d 378 (5th Cir. 1998) which addresses the application
of the “separation of insureds” clause under Mississippi insurance law. In Centennial,
Scholastic Book Fairs, Inc. (“Scholastic”) rented a truck from Ryder. Id at 380. Ryder
obligated Scholastic, as part of the lease agreement, to purchase liability insurance and
to hold Ryder harmless for any injuries sustained in the use of the truck. Id. Scholastic
purchased business auto and commercial general liability insurance from Centennial
Insurance Company (“Centennial), and added Ryder as an “additional insured” under
those policies. Id. The general liability policy excluded from coverage the insured’s
obligations under workers’ compensation law, and bodily injury to the insured’s
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employees arising from the injured workers’ employment. Id. The policy also contained
a “separation of insureds” provision which stated:
Except with respect to the Limits of Insurance, and any rights or duties
specifically assigned in this Coverage Part to the first Named Insured, this
Insurance applies:
a. As if each Named Insured were the only Named Insured; and
b. Separately to each Insured against whom claim is made or “suit” is
brought. Id.
A Scholastic employee injured himself while using the Ryder truck, and sued
Ryder for his injuries. Id at 381. Ryder requested a defense and indemnity from
Centennial. Id. Centennial denied coverage based on the policy exclusions for workers’
compensation claims and employee bodily injury. The court granted summary judgment
in favor of Centennial finding that the language of the policy excluded coverage for
Ryder. Id. On appeal, the Fifth Circuit reversed. The Fifth Circuit found that the
“insurance policy’s separation of insureds provision [. . .] limits the applicability of other
provisions excluding from coverage potential obligations [. . .].” Id at 380.
The separation of insureds clause requires that the insurer treat each insured as
if it is the only insured under the policy, and apply the language of the policy to that
unique insured. In order to determine the effect of the separation of insureds language
on the exclusions, the Fifth Circuit inserted the language from the separation of
insureds’ clause into each exclusion provision. The employer’s liability clause then read
that the policy excluded coverage for “‘[b]odily injury’ to . . . [a]n employee of [the
insured who is seeking coverage or against whom a claim or ‘suit’ is brought] arising out
of and in the course of employment by [the insured who is seeking coverage or against
whom a claim or ‘suit’ is brought].” Id at 383. Under this reading of the exclusion, the
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court found that the policy excluded coverage only if the insured requesting coverage
was the employer of the claimant or plaintiff. Ryder was not the injured worker’s
employer, and thus the exclusion did not apply to Ryder. The Fifth Circuit held that
Ryder must be afforded coverage under the Scholastic policy.
Spectrum II’s insurance policy with ARIC contains a separation of insureds
clause identical to the one in Centennial v. Ryder. Applying the logic from Centennial
brings this court to the conclusion that the employer liability exclusion does not apply to
Yates which is not the employer of the injured workers.
Like Yates’ other legal arguments regarding its counter claim against ARIC,
coverage under the ARIC policy is predicated on the existence of a valid, written
agreement between Yates and Spectrum II. As mentioned in Section II.B.2. above,
material questions of fact preclude determination of this issue at the summary judgment
stage.
5. Workers’ compensation exclusion
The ARIC insurance policy contains the following exclusion:
SECTION II - LIABILITY
B. Exclusions
1. Applicable to Business Liability Coverage
This insurance does not apply to:
...
d. Workers’ Compensation and Similar Laws
Any obligation of the insured under a workers’ compensation,
disability benefits or unemployment compensation law or any
similar law.” ARIC policy no. ATA1416900, docket no. 16-3, at
29 of 43.
In the Centennial case, the rationale which rendered the employer’s liability
exclusion inapplicable, applied equally to the workers’ compensation exclusion. The
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workers’ compensation exclusion did not apply to Ryder, because as a third party which
leased a truck to Scholastic, it had no obligations to Scholastic’s employees under
workers’ compensations law.
The reasoning from Centennial yields the opposite result here. Yates has argued
that it is protected by the MWCA from tort liability because it is a statutory employer
under that law. For Yates to benefit from workers’ compensation immunity, it must have
an obligation to provide workers’ compensation insurance as a contractor. The workers’
compensation exclusion provision applies to Yates as a separate insured under the
policy, just as it does to Spectrum II. As the court found above in Section II.A.1., Yates
had a liability or duty under the MWCA to ensure that Spectrum II’s workers were
covered by compensation insurance. Had Spectrum II not provided coverage, the
employees could have sought coverage from Yates, or sued Yates if Yates failed to pay
compensation. Yates’ liability for coverage under the Act is the reason it enjoys
immunity if it complies with the MWCA. Both Spectrum II and Yates had a statutory
obligation under workers’ compensation law. This exclusion, therefore, applies equally
to Yates as to Spectrum II.
Yates also raises the argument that while the workers’ compensation exclusion
may relieve ARIC of its duty to indemnify Yates, ARIC’s duty to provide a defense is
broader than its duty to indemnify. The workers sued Yates in tort, therefore no
workers’ compensation claims are at issue, says Yates, until a court determines that
those tort claims fall under workers’ compensation law. Until that time, says Yates,
ARIC owes it a defense. Insurers commonly provide a defense under a reservation of
rights when coverage is in question. Yates, however, has not briefed this issue, nor
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provided any legal authority to support it. Further, this argument would require this
court to decide conclusively that Yates is an insured under the ARIC policy. Questions
of fact remain regarding this coverage.
6. Definition of “occurrence” and “property damage exclusion”
In its response to Yates’ motion for summary judgment, ARIC did not address its
coverage defenses of “property damage not result of occurrence” and “property damage
exclusion.” These were Counts VIII and IX in its amended complaint. At oral argument
the attorney for ARIC stated that Mississippi law has changed since they first pressed
these claims. These defenses assume coverage for Yates under the insurance policy in
question. Because ARIC no longer presses these claims, and because their resolution
would not change the decision of the court, the court need not address their merits at
this time.
III. Conclusion
For the reasons discussed above, this court grants Yates’ motion for summary
judgment with respect to its cross claim against the individual co-defendants [docket no.
79]. Although material issues of fact remain regarding whether Yates and Spectrum II
have a binding, written contract with respect to Spectrum II’s work on the JARM project,
the responsibilities and immunity under the MWCA encompass the contractorsubcontractor relationship established by the facts of this case.
This court finds that material issues of fact regarding the contractual relationship
and obligations between Yates and Spectrum II necessitate denying Yates’ motion for
partial summary judgment on ARIC’s underlying claims and Yates’ counter claims
[docket no. 112]. This court has found that Yates was a statutory employer to Spectrum
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II’s workers injured on the Yates jobsite. The statute, however, has broad application
based on the parties’ relationship. Facts sufficient to create statutory coverage, may not
be sufficient to create contractual obligations. In order to contractually obligate ARIC to
provide coverage to Yates, the policy requires Telly Walsworth d/b/a Spectrum II to
“have agreed in writing in a contract or agreement that such person or organization be
included as an additional insured on your policy.” Whether this occurred, thus making
Yates’ an additional insured under the ARIC policy, is a material question of fact which
precludes summary judgment.
This court will hold a status conference with the parties once they have had
ample time to study this opinion. At that status conference, the parties should be
prepared to address their perspectives on the court’s approach and briefing schedule on
the remaining issues.

SO ORDERED AND ADJUDGED, this, the 27th day of March, 2012.

s/ HENRY T. WINGATE
UNITED STATES DISTRICT JUDGE

Memorandum Order and Opinion
Civil Action No. 4:09-cv-181-HTW-LRA

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