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State Farm Mutual Automobile Ins. v. Staff

MARCH 12, 1975.




APPEAL from the Circuit Court of Sangamon County; the Hon. HARVEY BEAM, Judge, presiding.


State Farm Mutual Automobile Insurance Company sought a declaratory judgment holding that the terms of an insurance policy issued by it to James Staff created no obligation to provide a defense for or indemnify either Staff or Stephen Kazimir in a suit brought against them by the administrator of the estate of Edward Newman. The trial court found for State Farm as to Staff and Kazimir. Defendant Kazimir appeals the judgment order declaring that State Farm has no obligation or duty to defend or indemnify Staff.

As the result of a fatal truck accident on September 12, 1966, a wrongful death action was filed in the circuit court of Sangamon County against the driver of the truck, Stephen Kazimir, and the owner of the truck, James Staff. Kazimir instituted a negligence action against Staff, d/b/a J & S Floor Covering Company, for injuries sustained in the accident. Staff was insured by a policy issued by State Farm Mutual Automobile Insurance Company. This appeal involves State Farm's declaratory judgment action for determination of its rights and duties under that policy.

The policy contains the following:

"This insurance does not apply under:

(g) coverage A, except as to the named insured and his spouse, if a resident of the same household, to any employee with respect to bodily injury or another employee of the same employer injured in the course of such employment arising out of the maintenance or use of an automobile in the business of such employer;

(h) coverage A, (1) to bodily injury to an employee of the insured arising out of and in the course of (i) domestic employment by the insured, if benefits therefor are in whole or in part either payable or required to be provided under any workmen's compensation law, or (ii) other employment by the insured; or (2) to any obligation for which the insured or his insurer may be held liable under any workmen's compensation, unemployment compensation or disability benefits law, or under any similar law;"

The trial court held that Kazimir and Edward Newman were employees of James Staff on the date of the accident for the purpose of carriage, loading, unloading and distribution of commodities, and that the accident occurred in the course of this employment. The court also held that Kazimir and Newman were covered by the provisions of the Workmen's Compensation Act (Ill. Rev. Stat. 1969, ch. 48, ¶ 138.1 et seq.) at the time of the accident. Therefore, Newman and Kazimir were subject to the exclusions of plaintiff's insurance policy and not entitled to any of the benefits, protection or coverage provided by that policy.

Defendant Kazimir, then recently discharged from the United States Navy and unemployed, was approached by Jerry Lavigne and told of great earning potential in selling vinyl floor coverings. Lavigne indicated that he worked for James Staff, d/b/a J & S Floor Covering Company. Lavigne told Kazimir that Staff would teach him how to sell these floor coverings for expenses plus commissions. Lavigne indicated that Staff conducted his business in the manner of a peddler. Although Staff maintained a warehouse in Springfield, Illinois, most selling was done from loaded trucks at the customers' places of business. The trucks would be loaded, and the selling party would set out in a particular direction at the beginning of a week and continue until all the goods were sold. Staff took care of meals and accommodations. Kazimir expressed interest in the job, and was told by Lavigne where to report on the following Monday morning. Although Lavigne directed some of the business operations, Staff was in control.

On the designated Monday morning, Kazimir reported to Staff's warehouse. There Kazimir met Staff and Edward Newman. Newman and Kazimir assisted in preparing the rolls of vinyl floor covering and boxes of glue for transport. These were loaded onto the two trucks to be used in that week's business. After the trucks were loaded, the parties started in the general direction of Kansas City. Kazimir was driving one truck with Newman as his passenger. Near New Berlin, Illinois, that truck veered off the highway and struck a pole. Newman was killed in this accident and Kazimir suffered injuries. The Newman wrongful death action and the Kazimir negligence action arose from this accident.

Staff and Kazimir both testified they understood that Kazimir would train as a salesman on an expenses-plus-commissions basis. They differ in their understanding of the financial arrangement during the initial training period, however. Staff testified he had expected to pay Kazimir for the work he did during the initial period, even though he expected him to make no sales. No exact amount had been agreed upon according to Staff. Kazimir testified he believed he was working only for expenses and commissions with no minimum amount guaranteed.

Defendant Staff gave all orders as to how, where, and to whom sales pitches would be made. He testified he could and would have discharged Kazimir after a trial period if the latter had not been successful as a salesman. All materials necessary for the work as well as accommodations and meals were furnished by Staff. Staff owned the floor-covering materials which were to be sold, none of these being consigned to either Kazimir or Newman.

Kazimir contends he was an independent contractor, not an employee. Staff's payroll consisted of himself, his wife, and one Harvey Miller, a warehouse worker. Defendant Staff had no workmen's compensation insurance in effect nor had he elected Workmen's Compensation Act coverage for his employees.

The trial court found the two above-quoted clauses of the insurance policy issued by State Farm excluded coverage. We agree. Bodily injury liability (coverage A) is not provided under exclusion (g) where the injured party is an employee injured by another employee of the ...

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