Progressive Halcyon Insurance Co. v. Philippi

#24596-a-DG

2008 SD 69

IN THE SUPREME COURT
OF THE
STATE OF SOUTH DAKOTA

* * * *

PROGRESSIVE HALCYON INSURANCE
CO. and CAROL WELLNITZ, Plaintiffs and Appellees,

v.

ROXANNE PHILIPPI, PERSONAL
REPRESENTATIVE OF THE SYLVIA
RUHR ESTATE, DECEASED, Defendant and Appellant.

* * * *
APPEAL FROM THE CIRCUIT COURT OF
THE THIRD JUDICIAL CIRCUIT
GRANT COUNTY, SOUTH DAKOTA

* * * *
HONORABLE RONALD K. ROEHR
Judge

* * * *
MARK J. ARNDT of
May & Johnson, P.C.
Sioux Falls, South Dakota Attorneys for plaintiffs
and appellees.

DAVID R. STRAIT of
Austin, Hinderaker, Hopper,
Strait & Bratland, LLP
Watertown, South Dakota Attorneys for defendant
and appellant.

* * * *
ARGUED MARCH 26, 2008

OPINION FILED 07/23/08
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GILBERTSON, Chief Justice

[¶1.] On August 22, 2006, Carol Wellnitz (Wellnitz) and her auto insurance

provider, Progressive Halcyon Insurance Co. (Progressive), filed a declaratory

judgment action in the South Dakota Third Judicial Circuit seeking a

determination that immunity extended to her under South Dakota’s workers’

compensation statute, SDCL 62-3-2, for an injury that she caused to Sylvia Ruhr

(Ruhr). On February 8, 2007, Wellnitz and Progressive filed a motion for summary

judgment under SDCL 15-6-56(c). The circuit court granted the motion. Ruhr’s

estate appeals and we affirm.

FACTS AND PROCEDURE

[¶2.] The parties stipulated to the material facts of the case. Ruhr and

Wellnitz were employed by Beverly Healthcare Center (BHC) in Milbank, South

Dakota. On February 13, 2006, they were both working at BHC. Their shifts ended

at approximately 10:30 p.m. As was their routine at the end of a shift, the two left

the facility through the usual exit and proceeded across the adjacent BHC parking

lot to their respective vehicles. Wellnitz exited the facility first, reaching her

vehicle ahead of Ruhr. Wellnitz backed out of her parking space and struck and

injured Ruhr as Ruhr continued to her parked vehicle. There was no showing that

Wellnitz intentionally struck Ruhr.

[¶3.] Ruhr collected benefits from BHC’s workers’ compensation insurance

provider. Ruhr then filed a claim with Progressive seeking to recover from

Wellnitz’s auto insurance liability coverage. Under SDCL 62-3-2, BHC was immune

from further liability due to Ruhr’s receipt of workers’ compensation benefits.

Wellnitz and Progressive then filed a declaratory judgement action seeking a
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determination that the employer immunity provided under the statute also

extended to Wellnitz as an employee of BHC. In its memorandum decision,

incorporated by reference in the June 21, 2007 judgment and order, the circuit court

concluded that the standard applied to establish Ruhr’s eligibility for workers’

compensation benefits under SDCL 62-3-2 also applied to Wellnitz, and established

that at the time of the accident she too was an employee of BHC and thereby

entitled to immunity under the statute.

[¶4.] On March 31, 2007, Ruhr died of causes unrelated to this accident. On

July 23, 2007, Roxanne Philippi, personal representative of Ruhr’s estate (PR), was

substituted in this action.

[¶5.] PR appeals raising the following issue:

Whether at the time of the accident, Wellnitz was an
employee of BHC within the meaning of SDCL 62-3-2 so
that Ruhr’s personal injury claim, filed with Wellnitz’s
auto liability insurance provider, was precluded.

STANDARD OF REVIEW

In reviewing a trial court’s order granting a motion for
summary judgment, [w]e will affirm only when there are
no genuine issues of material fact and the legal questions
have been correctly decided. We view all reasonable
inferences drawn from the facts in the light most favorable
to the non-moving party.

Gakin v. City of Rapid City, 2005 SD 68, ¶7, 698 NW2d 493, 497 (internal citations

omitted). “‘Questions of law are reviewed de novo without deference to the trial

court.’” Thompson v. Mehlhaff, 2005 SD 69, ¶8, 698 NW2d 512, 516 (citations

omitted). “Construction of workers’ compensation statutes and their application to

the facts is a question of law.” Id. (citing Faircloth v. Raven Industries, Inc., 2000

SD 158, ¶4, 620 NW2d 198, 200).
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Statutory construction is an exercise to determine legislative
intent. In analyzing statutory language we adhere to two
primary rules of statutory construction. The first rule is
that the language expressed in the statute is the paramount
consideration. The second rule is that if the words and
phrases in the statute have plain meaning and effect,
we should simply declare their meaning and not resort
to statutory construction. When we must, however, resort
to statutory construction, the intent of the legislature is
derived from the plain, ordinary and popular meaning
of statutory language.

State v. Johnson, 2004 SD 135, ¶5, 691 NW2d 319, 331-32 (Petition of West River

Electric Assoc., 2004 SD 11, ¶15, 675 NW2d 222, 226 (internal citations omitted).

ANALYSIS AND DECISION

[¶6.] Whether at the time of the accident, Wellnitz was an
employee of BHC within the meaning of SDCL 62-3-2
so that Ruhr’s personal injury claim, filed with Wellnitz’s
auto liability insurance provider, was precluded.

[¶7.] An employee’s eligibility for workers’ compensation benefits arising

from an employment related injury and the employer’s immunity from liability are

governed under SDCL 62-3-2. Under the statute, an employer’s immunity also

extends to its officers, directors, partners and employees. SDCL 62-3-2. SDCL 62-

3-2 provides:

The rights and remedies herein granted to an employee
subject to this title, on account of personal injury or death
arising out of and in the course of employment, shall exclude
all other rights and remedies of the employee, the employee’s
personal representatives, dependents, or next of kin, on
account of such injury or death against the employer or any

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employee, partner, officer, or director of the employer,
except rights and remedies arising from intentional tort.

(Emphasis added).

[¶8.] PR’s appeal raises an issue of first impression – namely how one is

determined to be an “employee” immune from liability under SDCL 62-3-2. PR

argues that while this statute sets out a standard by which an employee’s injuries

are assessed for purposes of workers’ compensation, no standard is expressly

provided to assess whether a co-employee tortfeasor is an “employee” for purposes of

determining if immunity under the statute applies. PR argues that by inclusion of

the immunity-limiting phrase – “except rights and remedies arising from

intentional tort” – the Legislature meant to imply that the respondeat superior

standard should be applied to assess whether a co-employee tortfeasor is immune

from liability. I.e., a co-employee tortfeasor is immune from liability for injury to a

fellow employee only when the injurious act occurs within the scope of the

tortfeasor’s employment. PR offers Saala v. McFarland, 403 P2d 400 (Cal 1965) in

support of this argument.

a. Whether the “workers’ compensation” standard or the
“respondeat superior” standard applies to the determination
of whether a co-employee tortfeasor is entitled to immunity
under SDCL 62-3-2.

[¶9.] In Saala, the California Supreme Court clarified that two standards

apply in the context of workers’ compensation claims arising from employee injuries

caused by a co-employee tortfeasor. 403 P2d at 403. First, the “arising out of and in

the course of employment” or workers’ compensation standard is applied to

determine whether an employer is liable for an employee’s injuries such that the

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employee is eligible for workers’ compensation benefits. Id. at 401. Second, the

“scope of employment” or respondeat superior standard is applied to determine if

the co-employee tortfeasor’s injurious act occurred within the context of

employment such that the co-employee too is immune from liability. Id. at 403. In

other words, the co-employee tortfeasor is immune from liability for only those acts

from which, under the common law, liability would have attached to his employer.

Id. at 404. The court then reiterated that the standards are distinguishable:

[T]his court recognized . . . that scope of employment defines
a more restricted area of employee conduct than the customary
phrase “arising out of and in the course of the employment.”
We stated: “Although this court has not gone so far as
to hold that every injury to an employee attending to his
duties and within the course of his employment is
compensable, it has, in many cases, upheld the allowance
of compensation for injuries arising out of acts not strictly
within the scope of the employment: returning from lunch
[citation]; drinking wine because of indisposition [citation];
smoking [citation] . . . .

Id. at 403 n3. (internal citations omitted) (first emphasis added, second emphasis

original).

[¶10.] The dual standards discussed in Saala, however, were grounded in

statute. Id. at 403. The court cited the relevant portions of the California Labor

Code §§ 3600 and 3601: 1

Section 3600 . . . states in relevant part that “Liability
for the compensation provided by [the California Workers’
Compensation Code], in lieu of any other liability
whatsoever to any person . . . shall, without regard to
negligence, exist against an employer for any injury
sustained by his employees arising out of and in the course

1. Relevant portions of California Labor Code §§ 3600 and 3601 remain
intact.

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of the employment . . . .” It is then provided in section
3601, as amended . . . , that “(a) Where the conditions
of compensation exist, the right to recover such
compensation . . . is . . . the exclusive remedy for injury
or death of an employee against the employer or against
any other employee of the employer acting within the scope
of his employment . . . .”

Id. at 401 (emphasis original). Section 3601 was amended in 1959 by the addition

of the employee-immunity provision and corresponding “scope of employment”

standard following a string of decisions in which the courts held that a co-employee

tortfeasor was liable for injury inflicted on the job. Id. at 402-03. In holding that

the California Legislature intended distinct standards to be applied in the two

contexts, the court opined:

The presumption that an overall change is intended where
a statute is amended following a judicial decision . . . is
given its full effect if section 3601 as amended is construed
to change the law stated in [our prior decisions] and exempt
from civil liability only a coemployee’s actions within the
scope of employment, rather than those “arising out of and
in the course of the employment.”

Id. at 403.

[¶11.] In Donnelly v. Herron, 727 NE2d 882 (Ohio 2000), the Ohio Supreme

Court addressed this issue. Ohio’s Revised Code § 4123.741, which codifies

employer and employee tortfeasor immunity for job related injuries to co-employees,

is analogous to SDCL 62-3-2 with respect to employer and employee immunity.

Ohio RC 4123.741 provides:

No employee of any employer, as defined in [Ohio’s Workers’
Compensation Code], shall be liable to respond in damages
at common law or by statute for any injury or occupational
disease, received or contracted by any other employee of
such employer in the course of and arising out of the latter
employee’s employment, or for any death resulting from

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such injury or occupational disease, on the condition that
such injury, occupational disease, or death is found to be
compensable under [Ohio’s Workers’ Compensation Code].

(Emphasis added).

[¶12.] The court in Donnelly reflected on the comments of Professor Larson

regarding the standard applied in California in light of its labor code:

The commonest question that arises in these cases is:
which test of “course of employment” applies? Is it the
workers’ compensation test [, i.e. arising out of and in the course
of employment], or the vicarious liability test [, i.e. in the scope
of employment]? The answer may be dictated by the
wording of the immunity clause itself. In California,
for example, under the statutory phrase “acting within the
scope of his employment,” suit is barred against the
coemployee only if at the time of the injury he or she was
actively engaged in some service for the employer.
Accordingly, it can readily happen in California – indeed
has happened – that in a marginal course of employment
situation an employee will be held to have been sufficiently
within the course of employment to receive workers’
compensation, but not sufficiently actively engaged in
service for his or her employer to enjoy the immunity from
suit conferred by the California Labor Code. Parking lot
accidents are a familiar example of this marginal
category, and in one such case, an employee who was
struck by a coemployee’s automobile after work on the
employer’s parking lot was held not barred from suing
the coemployee, although the coemployee had actually
been awarded workers’ compensation benefits as for an
injury in the course of employment.

727 NE2d at 884 (quoting 6 Larson’s Workers’ Compensation Law (1999) 111-12 to

111.14, § 111.03[3]) (emphasis added). In holding that under Ohio RC 4123.741 the

“workers’ compensation” test, or “arising out of and in the course of employment”

standard, applies in the context of the co-employee tortfeasor as well as the injured

employee, id. at 885, the court further considered the rationale of Professor Larson:

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The more satisfactory test, unless expressly ruled out
by statute, is that adopted by Illinois, New Jersey, Kentucky,
Indiana, Oklahoma, and Florida, which simply use the
regular workers’ compensation course of employment standard
for this purpose. After all, there are troubles and
complications enough administering one course of
employment test under the act, without adding a second.
By adopting the [workers’] compensation test, a court has
at hand a ready-made body of cases with which to dispose
of most borderline situations.

Id. at 884 (quoting 6 Larson’s Workers’ Compensation Law § 111.03[3]) (emphasis

added).

[¶13.] Our workers’ compensation chapter, as originally codified, acted as an

“all-inclusive” exclusion of any other rights and or remedies that an injured

employee might have against “anybody and everybody” in exchange for benefits.

Hagemann ex rel. Estate of Hagemann v. NJS Engineering, Inc., 2001 SD 102, ¶13,

632 NW2d 840, 846 (Gilbertson, J., concurring in result). However, in 1977 and

1978, the Legislature amended SDCL 62-3-2 to limit the exclusion by extending

consequential employer immunity to only the employer’s other employees, partners,

officers, and directors. SDSess Laws 1977, ch 422; SDSess Laws 1978, ch 370, § 2.

Prior to amendment, SDCL 62-3-2 included the phrase “arising out of and in the

course of employment” as the standard under which an injured employee could

receive benefits. Notably, when the statute was amended no additional standard

was included under which to assess whether a co-employee was entitled to

immunity.

[¶14.] In Thompson v. Melhaff, we stated the purpose of South Dakota’s

Workers’ Compensation Act:

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is to provide an injured employee with an expeditious
remedy independent of fault and to limit the liability of
employers and fellow employees. There is an inherent
trade-off in the worker’s compensation scheme. The
employee is guaranteed compensation if injured on the
job but the employer’s liability is limited in exchange for
this certainty. The quid pro quo is liability for immunity.
Therefore, “[w]orker’s compensation is the exclusive remedy
for all on-the-job injuries to workers except those injuries
intentionally inflicted by the employer.”

2005 SD 69, ¶11, 698 NW2d 512, 516-17 (internal citations omitted). SDCL 62-3-2

is devoid of express language that the respondeat superior, or “scope of employment”

standard is to apply to the determination of whether one is an “employee” entitled

to immunity under the statute. Had such a significant change been contemplated

by the Legislature, surely it would have been specifically stated in the amended

statute. To conclude otherwise would be to add omitted language to the statute in

violation of our rule of statutory construction. Delano v. Petteys, 520 NW2d 606,

608 (SD 1994) (reiterating that the fundamental objective of statutory construction

is to ascertain legislative intent from the language in the statute and that to add

omitted language would be to add unlimited hazard to the inexact and uncertain

business of searching for legislative intent). Therefore, we hold that under SDCL

62-3-2, the “arising from and in the course of employment” standard applies to

determine both when an injured employee’s exclusive remedy is the receipt of

workers’ compensation benefits and when a co-employee tortfeasor is entitled to

immunity from liability.

b. Whether at the time of the injury to Ruhr, Wellnitz was an
“employee” under SDCL 62-3-2 entitled to immunity from
liability.

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[¶15.] PR argues that notwithstanding the application of the less stringent

workers’ compensation standard to assess Wellnitz’s actions, Wellnitz was not an

“employee” of BHC at the time of Ruhr’s injury, as that term applies under SDCL

62-3-2, and therefore, could not invoke immunity under the statute.

[¶16.] In Fair v. Nash Finch Co., 2007 SD 16, 728 NW2d 623, we summarized

the procedure for determining whether an injured employee is entitled to benefits

under the workers’ compensation standard.

A claimant who wishes to recover under South Dakota’s
Workers’ Compensation Laws must prove by a
preponderance of the evidence that [s]he sustained an
injury ‘arising out of and in the course of the employment.
Both factors of the analysis, “arising out of employment”
and “in the course of employment,” must be present in
all claims for workers’ compensation. The interplay of
these factors may allow the strength of one factor to make
up for the deficiencies in strength of the other. These factors
are construed liberally so that the application of the workers’
compensation statutes is not limited solely to the times
when the employee is engaged in the work that he was
hired to perform. Each of the factors is analyzed
independently although they are part of the general inquiry
of whether the injury or condition complained of is connected
to the employment.

Id. ¶9 (internal citations omitted).

[¶17.] Wellnitz backed her vehicle into Ruhr while Ruhr walked to her

vehicle, as she usually did, across the company parking lot adjacent to the BHC

facility where she was employed. We have reviewed cases with comparable facts

and have held that similar employee injuries arose out of and within the course of

employment. See Fair, 2007 SD 16, ¶¶17-18, 728 NW2d at 631 (convenience store

clerk fell while leaving the store in the usual manner after her shift following a

reasonable period of time to shop for groceries); Steinberg v. S.D. Dept. of Military

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and Veterans Affairs, 2000 SD 36, ¶22, 607 NW2d 596, 603 (employee was injured

from a fall on ice during her unpaid lunch hour while in the ordinary course of

walking across a public street, between the situs of her employment and the

employer provided parking lot where her car was located); Howell v. Cardinal

Industries, Inc., 497 NW2d 709, 709 (SD 1993) (after leaving employer-designated

exit following the completion of her shift, employee was injured by falling on the ice

in employer’s parking lot); see also Walz v. Fireman’s Fund Ins. Co., 1996 SD 135,

¶¶1-2, 556 NW2d 68, 69 (reversing summary judgment dismissing employee’s claim

where employee was injured in a fall on the ice after exiting the workplace during

an unpaid lunch). However, we assess whether Wellnitz’s act of backing up her

vehicle arose out of and in the course of her employment within the context of

Ruhr’s injury, which gave rise to the issue.

[¶18.] We address the first factor of the workers’ compensation standard by

considering the following principles:

In order for an injury to “arise out of” the employment,
the employee must show that there is a causal connection
between the injury and the employment. The employment
need not be the direct or the proximate cause of the injury,
rather it is sufficient if the accident had its origin in the
hazard to which the employment exposed the employee
while doing [her] work. The injury “arose out of” the
employment if: 1) the employment contributes to causing
the injury; 2) the activity is one in which the employee
might reasonably engage; or 3) the activity brings about
the disability upon which compensation is based.

Mudlin v. Hills Materials Co., 2005 SD 64, ¶11, 698 NW2d 67, 71-72 (internal

citations omitted) (alteration in original).

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[¶19.] In the instant case, Wellnitz, like Ruhr, was employed with BHC. Like

Ruhr, the situs of Wellnitz’s employment was the BHC facility adjacent to the

company parking lot. That Wellnitz was backing her vehicle out of her parking

space to go home was a direct result of her having driven her vehicle to work earlier

in the day and parking it in the company parking lot so that she could engage in her

employment with BHC. Consequently, Wellnitz’s employment with BHC

contributed to the injury she caused Ruhr when she backed the vehicle into her.

[¶20.] That Wellnitz’s act arose out of her employment is further evident by

the fact that her activities at the time of the injury to Ruhr were within those which

might reasonably be expected of BHC employees under the circumstances. Wellnitz

like Ruhr had just ended a 10:30 p.m. shift and had just left the BHC facility

through the usual exit. Both employees, as one might reasonably expect, had

parked their vehicles in the company parking lot adjacent to the BHC facility. That

Wellnitz would walk across the parking lot, get in her vehicle and back out of the

parking spot to drive away could be reasonably foreseen under the circumstances.

Wellnitz’s employment contributed to her activity that caused Ruhr’s injury and her

activities immediately preceding and during the injury-causing accident were

within those that one might expect a BHC employee to reasonably engage. We

therefore conclude that Wellnitz’s injury causing activity arose out of her

employment.

[¶21.] We have interpreted the second factor in the workers’ compensation

analysis, “in the course of employment,” to refer to the time, place and

circumstances of the injury. Mudlin, 2005 SD 64, ¶15, 698 NW2d at 73 (quoting

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Bearshield v. City of Gregory, 278 NW2d 166, 168 (SD 1979)). Moreover we

recognized:

An employee is considered within his course of employment
if he is doing something that is either naturally or
incidentally related to his employment or which he is either
expressly or impliedly authorized to do by the contract
or nature of the employment.

Id. (citations omitted).

[¶22.] The injury causing accident occurred shortly after Wellnitz’s and

Ruhr’s shifts ended at 10:30 p.m. The accident occurred in the company parking lot

adjacent to the BHC facility where Wellnitz and Ruhr were employed. At the time

of the accident both employees were in the process of leaving work to go home for

the day. That Wellnitz was in the company parking lot backing her vehicle out of

its parking spot at the time of the accident is both natural and incidental to her

employment. Wellnitz was incidentally in the company parking lot because of her

employment in the adjacent BHC facility and she naturally would get in her vehicle

and back it out of her parking spot in order to go home at the end of her shift.

Moreover, there is no suggestion that Wellnitz was acting without authorization

when she parked in the company parking lot adjacent to the BHC facility, went to

her vehicle at the end of her shift, and then began to back out of her parking spot in

order to leave for home. We conclude that Wellnitz’s injury causing activity

occurred in the course of her employment.

[¶23.] Having established that both elemental factors of the workers’

compensation standard were present in the context of Wellnitz’s injury-causing act,

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we hold that at the time of the accident she was an employee of BHC and within the

immunity under SDCL 62-3-2. 2

[¶24.] Affirmed.

[¶25.] SABERS, KONENKAMP, ZINTER, and MEIERHENRY, Justices,

concur.

2. PR suggests that our holding today amounts to an adoption of the “premise
rule” whereby the workers’ compensation standard is satisfied by an
employee’s mere presence on the employer’s premises prior to or after a work
shift. This interpretation is too broad. Immunity under SDCL 62-3-2
necessarily ends where an intentional tort begins. Furthermore, we merely
hold today that for purposes of satisfying the workers’ compensation
standard, there is an inconsequential distinction between an employee who
receives benefits for an injury occurring in the company parking lot while
making her way home following the conclusion of a shift and the co-employee
tortfeasor who caused the injury and is also on her way home, but only a few
moments ahead of the injured employee.

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