Allstate Fire and Casualty Insurance Company v. Adame et al

Filing 35

ORDER granting 29 Motion for Summary Judgment. Signed by Honorable Timothy D. DeGiusti on 11/21/2017. (mb)

IN THE UNITED STATES DISTRICT COURT FOR THE
WESTERN DISTRICT OF OKLAHOMA
ALLSTATE FIRE AND CASUALTY
INSURANCE COMPANY,
Plaintiff,
v.
LUIS ADAME, FERNANDO
ABOYTES, JUAN ARAIZA,
ELSYE DAMAS, JOSE BARAJAS,
and JOSE COTUC,
Defendants.

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Case No. CIV-15-1118-D

ORDER
In this declaratory judgment action, Plaintiff Allstate Fire and Casualty
Insurance Company (Allstate) contends it owes no defense or indemnity obligations
to Defendant Luis Adame (Adame) for a single-vehicle accident involving several
of Adame’s employees. Before the Court is Allstate’s Motion for Summary
Judgment [Doc. No. 29], to which Defendants have responded.1 The matter is fully
briefed and at issue.

1

Default judgment was previously entered against Defendants Adame, Elsye Damas
and Jose Cotuc for failing to answer or otherwise defend this action [Doc. Nos. 20,
22]. Accordingly, only Defendants Fernando Aboytes, Juan Araiza, and Jose Barajas
contest the requested relief.

BACKGROUND
The following material facts are either uncontroverted or deemed admitted,
and are viewed in the light most favorable to Defendants. Lounds v. Lincare, Inc.,
812 F.3d 1208, 1220 (10th Cir. 2015).
Adame is the owner of LA Painting (LAP). In connection with his business,
Adame owned a 1997 Ford Econoline van that was insured under an automobile
policy, Policy No. 985 328 727, issued by Allstate (the Policy). The Policy stated,
in pertinent part:
Exclusions – What Is Not Covered
We will not pay for any damages an insured person is legally obligated
to pay because of:
***
6.
bodily injury to an employee of any insured person2 arising out
of or in the course of employment. …
7.
bodily injury to a co-worker injured in the course of
employment. …
(Emphasis in original). Defendants Cotuc, Aboytes, Araiza, Damas, and Barajas
were employees of LAP and Adame permitted Cotuc to drive the van as part of his
employment. On July 12, 2014, Aboytes, Araiza, Damas, and Barajas were
passengers in the van being driven by Cotuc. They were returning from a job site to
LA Painting when they were involved in a single-vehicle accident. At the time of
the accident, Aboytes, Araiza, Damas, Barajas, and Cotuc were acting within the

2

The Policy defined an “insured person” as Adame, “any resident,” and “any other
person using [the van] with [Adame’s] permission.”
2

course and scope of their employment with LAP. Adame did not have workers’
compensation insurance. On March 26, 2015, Aboytes, Araiza, and Barajas filed suit
in Oklahoma County District Court against Cotuc and Adame, seeking damages for
injuries suffered in the accident.
Allstate contends summary judgment is appropriate because (1) under
Oklahoma’s Financial Responsibility Law, the Policy bars coverage for claims
against Adame and Cotuc for on-the-job injuries, and (2) under Oklahoma’s
Administrative Workers’ Compensation Act, Cotuc is statutorily immune from suit
brought by his co-workers for injuries arising from the accident.
STANDARD OF DECISION
Rule 56(a), Federal Rules of Civil Procedure, provides that “[t]he court shall
grant summary judgment if the movant shows that there is no genuine dispute as to
any material fact and the movant is entitled to judgment as a matter of law.” The
Court’s function at the summary judgment stage is not to weigh the evidence and
determine the truth of the matter asserted, but to determine whether there is a genuine
issue for trial. Birch v. Polaris Indus., Inc., 812 F.3d 1238, 1251 (10th Cir. 2015).
An issue is “genuine” if there is sufficient evidence on each side so that a rational
trier of fact could resolve the issue either way. Adler v. Wal-Mart Stores, Inc., 144
F.3d 664, 670 (10th Cir. 1998). An issue of fact is “material” if under the substantive
law it is essential to the proper disposition of the claim. Id.
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Once the moving party has met its burden, the burden shifts to the nonmoving
party to present sufficient evidence in specific, factual form to establish a genuine
factual dispute. Bacchus Indus., Inc. v. Arvin Indus., Inc., 939 F.2d 887, 891 (10th
Cir. 1991). The nonmoving party may not rest upon the mere allegations or denials
of its pleadings. Rather, it must go beyond the pleadings and establish, through
admissible evidence, that there is a genuine issue of material fact that must be
resolved by the trier of fact. Salehpoor v. Shahinpoor, 358 F.3d 782, 786 (10th Cir.
2004). Unsupported conclusory allegations do not create an issue of fact. Finstuen
v. Crutcher, 496 F.3d 1139, 1144 (10th Cir. 2007).
DISCUSSION
Subject matter jurisdiction for this action is predicated upon diversity of
citizenship. See Compl. ¶ 8 [Doc. No. 1]. Therefore, the issues before the Court
require consideration of Oklahoma law as well as the Policy. Universal
Underwriters Ins. Co. v. Winton, 818 F.3d 1103, 1105-06 (10th Cir. 2016) (federal
court applies law of forum state in diversity actions). Oklahoma’s rules of
construction for insurance policies are identical to those for contracts:
An insurance policy is a contract. The rules of construction and analysis
applicable to contracts govern equally insurance policies. The primary
goal of contract interpretation is to determine and give effect to the
intention of the parties at the time the contract was made. In arriving at
the parties’ intent, the terms of the instrument are to be given their plain
and ordinary meaning. Where the language of a contract is clear and
unambiguous on its face, that which stands expressed within its four
corners must be given effect. A contract should receive a construction
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that makes it reasonable, lawful, definite and capable of being carried
into effect if it can be done without violating the intent of the parties.
May v. Mid-Century Ins. Co., 2006 OK 100, ¶ 22, 151 P.3d 132, 140 (citations
omitted); see also State Ins. Fund v. Ace Transp. Inc., 195 F.3d 561, 564 (10th Cir.
1999).
In addition, under Oklahoma law, “a contract of insurance ordinarily must be
construed liberally in favor of the insured and strictly against the insurer where there
exists any ambiguity, doubt or uncertainty as to its meaning. . . . An insurance
policy’s words of exclusion are to be narrowly viewed.” An-son Corp. v. HollandAmerica Ins. Co., 767 F.2d 700, 703 (10th Cir. 1985) (citations omitted). An
insurance policy is to be taken as a whole, giving effect to every part if reasonably
practicable, each clause helping to interpret the others. 15 OKLA. STAT. § 157. The
Court should not focus on a particular clause or take language out of context.
Shawnee Hosp. Auth. v. Dow Constr., Inc., 1990 OK 137, ¶ 6, 812 P.2d 1351, 1353.
Likewise, Oklahoma’s rules of statutory construction require that the Court,
in reviewing a statutory provision, ascertain legislative intent by reading the statute’s
language in its plain and ordinary meaning. Glasco v. State ex rel. Okla. Dep’t of
Corr., 2008 OK 65, ¶ 16, 188 P.3d 177, 184. “If the intent is plainly expressed and
the statutory provision is uncontrolled by other parts of the statute or other statutes
upon the same subject, there is no room for further inquiry.” Id. (citing McNeill v.
City of Tulsa, 1998 OK 2, ¶ 9, 953 P.2d 329, 332). “Where a plain reading leads to
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inconsistency between the provisions in statutes on the same subject, the conflicting
provisions dealing with the same subject will be harmonized to give effect to both.”
Id. “In construing conflicting statutory provisions, the courts will consider together
the various provisions in the relevant statutes in harmony with the purpose.” Id.
It is undisputed that Defendants Aboytes, Araiza, Damas, and Barajas were
employees of LAP at the time of the accident and their injuries arose out of the
course of their employment. It is further undisputed that LAP was a permissive user
of Adame’s van, and thus constituted an “insured person” under the terms of the
policy. Under the plain language of the policy, there is no contractual obligation for
Allstate to provide coverage to Defendants because the liability arose from injuries
sustained as a result of the use of a vehicle by another employee (Cotuc) in Adame’s
business. The policy further excludes coverage in the instant case because
Defendants’ injuries arose out of their employment with an “insured person,” here,
LAP. Accordingly, Allstate is entitled to a declaratory judgment unless coverage is
otherwise mandated.
Oklahoma’s compulsory insurance law, 47 OKLA. STAT. 7-600 et seq., which
is codified in the state’s Financial Responsibility Act (“FRA” or “the Act”), requires

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liability insurance in conjunction with the operation of a motor vehicle. Id. § 7600(4).3 The FRA states in relevant part:
(b)

Owner’s policy. Such owner’s policy of liability insurance:
2.

***
Shall insure the person named therein and any other person
except as herein provided, as insured, using any such
vehicle or vehicles with the express or implied permission
of such named insured, against loss from the liability
imposed by law for damages arising out of the ownership,
maintenance or use of such vehicle ….
***

(e)

Policy need not insure workmen’s compensation. Such motor
vehicle liability policy need not insure any liability under any
workmen’s compensation law nor any liability on account of
bodily injury to or death of an employee of the insured while
engaged in the employment, other than domestic, of the insured,
or while engaged in the operation, maintenance or repair of any
such vehicle nor any liability for damage to property owned by,
rented to, in charge of or transported by the insured.

47 OKLA. STAT. § 7-324.
As indicated, Oklahoma law does not require coverage in all situations; the
FRA expressly excludes any requirement of coverage for liability on account of
bodily injury to an “employee of the insured.” See Deffenbaugh v. Hudson, 1990 OK

3

The Oklahoma Supreme Court “has often pronounced that the clearly articulated
public policy underlying Oklahoma’s compulsory insurance law is to establish a
comprehensive compulsory liability insurance law for the benefit of the innocent
victims of the negligent operation or use of motor vehicles in this state.” Mulford v.
Neal, 2011 OK 20, ¶ 23, 264 P.3d 1173, 1179 (collecting cases).
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37, ¶ 5, 791 P.2d 84, 86 (“The terms of [§ 7–324] clearly relieve insurers of any legal
obligation to include in the standard motor vehicle liability policy a provision for
indemnity against employment-related harm.”) (emphasis in original). Such
exclusions are aimed at employees because employees are, presumably, already
covered by workers’ compensation insurance and thus do not need such protection.
Cf. State Farm Mut. Auto. Ins. Co. v. Dyer, 19 F.3d 514, 524 (10th Cir. 1994) (“There
is no imperative public policy need for automobile liability insurance where the
injured party is covered by worker’s compensation.”) (applying Wyoming law,
citation omitted); Evanston Ins. Co. v. Dean, No. 09-CV-49-CVE-TLW, 2009 WL
2972336, at *5 (N.D. Okla. Sept. 11, 2009) (noting that “employee exclusions” are
commonplace and prevent insurers from paying claims against an employer that are
covered by state workers’ compensation laws); see also 8 COUCH ON INSURANCE 3d
§ 115:13.
To that end, under the exclusive remedy provision of the Oklahoma
Administrative Workers’ Compensation Act, 85A OKLA. STAT. § 5 (OWCA), an
employee who is injured in the course of employment must seek recovery through
the state’s administrative workers’ compensation plan. Id. § 5(A).4 This exclusivity

4

As noted by Judge Heaton, § 5’s predecessor, 85 OKLA. STAT. § 12, was ruled
unconstitutional by the Oklahoma Court of Civil Appeals as a prohibited special law.
See Cornelsen v. S&A Mfg., Inc., No. CIV-16-959-HE, 2017 WL 1610384, at *2
(W.D. Okla. Apr. 28, 2017) (citing Wells v. Okla. Roofing & Sheet Metal, L.L.C.,
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provision does not, however, bar suit if “[a]n employer fails to secure the payment
of compensation due to the employee as required by this act.” Id. § 5(B)(1). Under
such circumstances, “[a]n injured employee, or his or her legal representative in case
death results from the injury, may, at his or her option, elect to claim compensation
under this act or to maintain a legal action in court for damages on account of the
injury or death[.]” Id.5
It is undisputed that Adame did not have workers’ compensation insurance at
the time of the accident. Accordingly, as permitted by Oklahoma law, Defendants
pursued a state court action for damages on account of their injuries suffered in the
accident. Although the Policy relieves Allstate from its duty to defend and
indemnify, other defendants are not precluded from seeking redress in state court
against Adame and Cotuc, and their contention that enforcing the exclusion would
render them “without protection” is belied by the provision of § 5(B)(1). In sum, the

No. 112,844 (Okla. Civ. App. Apr. 28, 2016)). That ruling is currently on appeal to
the Oklahoma Supreme Court.
5

The OWCA provides “[t]he rights and remedies granted to an employee subject to
the provisions of the Administrative Workers’ Compensation Act shall be exclusive
of all other rights and remedies of the employee … or anyone else claiming rights to
recovery on behalf of the employee against the employer, or any … employee,
stockholder, partner, or prime contractor of the employer on account of injury,
illness, or death.” 85A OKLA. STAT. § 5(A). Earlier versions of the statute were
interpreted to bar an action against a co-employee for on-the-job injuries. See, e.g.,
Barfield v. Barfield, 1987 OK 72, ¶ 11, 742 P.2d 1107, 1111; Carroll v. Dist. Ct. of
Fifteenth Judicial Dist. Ct., Cherokee Cnty., 1978 OK 73, ¶¶ 16-17, 579 P.2d 828,
832.
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Court finds there is no duty to indemnify or defend the claims asserted by LAP’s
employees against Cotuc and Adame in the underlying state court action, which is
not precluded by the OWCA.
CONCLUSION
Defendant’s Motion for Summary Judgment [Doc. No. 29] is GRANTED as
set forth herein.
IT IS SO ORDERED this 21st day of November 2016.

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