LOUISIANA SAFETY ASSOCIATION OF TIMBERMEN - SELF INSURERS FUND Plaintiff-Appellant
WILL TRANSPORT, L.L.C. Defendant-Appellant
from the Eighth Judicial District Court for the Parish of
Winn, Louisiana Trial Court No. 40287 Honorable Jacque D.
PROVOSTY, SADLER & DELAUNAY, APC, Joseph J. Bailey John
Dexter Ryland Eli Jules Meaux Counsel for Appellant,
Louisiana Safety Association of Timbermen - Self Insurers
Fund, Brett Brunson, Trustee
LOY HURD Counsel for Appellant/ Third Party Petitioner, Will
McKEITHEN, RYLAND & CHAMPAGNE By: Joseph W. Grassi
Counsel for Appellee, K.P. Trucking, L.L.C., Karl Pentecost
d/b/a Ouachita Truck & Trailer
DONELSON BERMAN CALDWELL & BERKOWITZ, PC By: Gregory E.
Bodin Robert L. Blankenship Counsel for Appellee/ Third Party
Defendant, Lexington Insurance Company
BROWN, WILLIAMS, and GARRETT, JJ.
defendant, Will Transport, L.L.C., appeals from a trial court
judgment which held that it owed almost $670, 000 in unpaid
premiums for long haul truck drivers under a workers'
compensation insurance policy for the years 2004 to 2006. It
maintains that the drivers were statutorily exempt from
coverage and benefits under the Louisiana Workers'
Compensation Act (hereinafter "LWCA"). Will
Transport also appeals from the dismissal of its third-party
demand against Lexington Insurance Company, its contingent
liability insurer. The plaintiff, Louisiana Safety
Association of Timbermen - Self Insurers Fund (hereinafter
"LSAT"), appeals the trial court's dismissal of
two other defendants which it contends were solidarily liable
with Will Transport. For the reasons set forth below, we
affirm in part and reverse in part the trial court judgment.
suit, which began with the filing of a simple one-and-a-half
page petition, has spawned more than a decade of litigation,
including numerous motions, two writ applications, and now
two appeals. To understand the issues currently before us,
which date back to events occurring years ago, some
background information is necessary.
1996, Karl Pentecost started K.P. Trucking, L.L.C.
(hereinafter "K.P."). This company owned 18-wheeler
trucks which were leased to various freight haulers and
employed drivers. In 2000, Pentecost created another entity,
Will Transport, a contract hauler which secured shipping
contracts and subcontracted cargo pick-up and delivery of the
contracts to independent drivers. After Will Transport was
created, K.P. provided trucks and drivers only to it.
However, Will Transport also utilized drivers not affiliated
with K.P. The cargo included roll stock paper, recycled
paper, and lumber products from customers such as
Georgia-Pacific and Graphic Packaging. Pentecost owned 95% of
each of the two L.L.C.s, with the remaining 5% being owned by
office manager Janet Hill. He was also the sole owner of
Ouachita Truck & Trailer (hereinafter
"Ouachita"), which performed repairs for a number
of trucking companies, including K.P. All three business had
the same street address, and the payroll for all three
entities flowed through Will Transport. K.P.'s drivers
were employees who received W-2 tax forms. Other drivers who
provided services for Will Transport did so under a written
contract which was labelled "Equipment Lease."
These drivers received 1099 tax forms for the compensation
they received, and they are the drivers at issue in this
2003, seeking a better rate for workers' compensation
insurance, Pentecost submitted an application for membership
with LSAT on behalf of Will Transport. He signed these
documents as "manager LLC"; however, he attached
member financial statements for both Will Transport and K.P.
Additionally, a workers' compensation application was
submitted to LSAT by the insurance agency used by Pentecost.
The application was made on behalf of both Will Transport and
Ouachita and signed by Pentecost. In a box specifying
"additional coverages/endorsements, " there was a
notation to add K.P. as a named insured. The federal employer
identification numbers ("FEIN") for each of these
three entities were included on the application next to their
provided workers' compensation coverage for
Pentecost's companies for the policy years 2004 to 2006.
Its certificate of self-insurance provided as follows for the
computation of the premiums:
Premium for each work classification is determined by
multiplying a rate times a premium basis. Remuneration is the
most common premium basis. This premium basis includes
payroll and all other remuneration paid or payable during the
policy period for the services of:
1. all your officers and employees engaged in work covered by
this policy; and
2. all other persons engaged in work that could make
us liable under Part One (Workers' Compensation
Insurance) of this certificate of coverage. If you
do not have payroll records for these persons, the contract
price for their services and materials may be used as the
premium basis. This paragraph 2 will not apply if you
give us proof that the employers of these persons lawfully
secured their workers' compensation obligations.
2004, the Louisiana legislature passed a workers'
compensation bill designed "to exempt 'owner
operators' from being classified as employees." See
Acts 2004, No. 188, ' 1, which became effective on June
10, 2004. It amended the definition of "independent
contractor" and added a definition of "owner
operator" in La. R.S. 23:1021. Specifically, La. R.S.
23:1021(7) was amended to add the last sentence:
(7) "Independent contractor" means any person who
renders service, other than manual labor, for a specified
recompense for a specified result either as a unit or as a
whole, under the control of his principal as to results of
his work only, and not as to the means by which such result
is accomplished, and are expressly excluded from the
provisions of this Chapter unless a substantial part of the
work time of an independent contractor is spent in manual
labor by him in carrying out the terms of the contract, in
which case the independent contractor is expressly covered by
the provisions of this Chapter. The operation of a
truck tractor or truck tractor trailer, including fueling,
driving, connecting and disconnecting electrical lines and
air hoses, hooking and unhooking trailers, and vehicle
inspections are not manual labor within the meaning of this
Chapter. [Emphasis added.]
La. R.S. 23:1021(10) was enacted and states:
(10) "Owner operator" means a person who provides
trucking transportation services under written contract to a
common carrier, contract carrier, or exempt haulers which
transportation services include the lease of equipment or a
driver to the common carrier, contract carrier, or exempt
hauler. An owner operator, and the drivers provided by an
owner operator, are not employees of any such common carrier
or exempt hauler for the purposes of this Chapter if the
owner operator has entered into a written agreement with the
carrier or hauler that evidences a relationship in which the
owner operator identifies itself as an independent
contractor. For purposes of this Chapter, owner operator does
not include an individual driver who purchases his equipment
from the carrier or hauler, and then directly leases the
equipment back to the carrier or hauler with the purchasing
the law changed, Pentecost did not exclude any of his
contract drivers from his workers' compensation policy.
He collected payment for the coverage from the drivers and
remitted it to the insurer on their behalf. He exempted them
from this reimbursement procedure if they had their own
workers' compensation policy. According to Pentecost, the
owner operators wanted to be exempt to reduce their costs. If
Pentecost allowed them to be exempt, it was a competitive
advantage in recruiting for him against other trucking
companies. Because of legal uncertainty arising from the 2004
changes in the law, which was viewed as a "gray area,
" Pentecost sought a solution from his insurance agent
in order to protect against suits and claims by the contract
drivers. He was presented with a package of an AIG
occupational accident policy combined with a Lexington
contingent liability policy.
proposal designed for Will Transport stated, in relevant
[In the Truckers Occupational Accident Insurance portion]
THIS [sic] NOT WORKERS' COMPENSATION INSURANCE OR
[In the Contingent Liability Insurance portion]
The Contingent Liability Program is a policy which is
purchased by the motor carrier to help fill the gray area
that exists between owner-operator drivers and employee
drivers. It does pay benefits which may be equivalent to
those that would be payable in accordance with workers'
Contingent Liability responds only in the event that an
owner-operator is deemed, or is seeking to be deemed, an
employee of a motor carrier by a workers' compensation
board, bureau or court.
The Contingent Liability Program is available in all states
except Delaware and requires an AIG Occupational Accident
Program with at least $500, 000 Combined Single Limit
coverage. The Contingent Liability Program cannot be
written as a stand-alone product[.] [Emphasis theirs.]
and Lexington policies were issued to Will Transport,
effective July 1, 2004. The AIG policy contained a notation,
again stating that its coverage was not workers'
compensation coverage and not a substitute for such coverage.
The declarations page of the Lexington policy, which was a
companion policy to the AIG occupational accident ...