Johnson v. United States Life Insurance

Citations: 69 N.J. Super. 317; 174 A.2d 265; 1961 N.J. Super. LEXIS 539

Court: New Jersey Superior Court Appellate Division; September 27, 1961; New Jersey; State Appellate Court

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Plaintiff seeks reimbursement for hospital, nursing, medical, and surgical expenses under two insurance policies issued by the defendant, The United States Life Insurance Company. The defendant contests liability, asserting that the expenses are not covered due to explicit policy exclusions related to injuries compensated under Workmen’s Compensation laws. 

The first policy, effective June 15, 1958, specifically excludes coverage for losses resulting from injuries or sickness for which compensation is payable under any Workmen’s Compensation or Occupational Disease Law. The second policy, effective July 1, 1958, contains a similar exclusion, stating that it does not cover losses related to injuries or sickness compensated under Workmen’s Compensation laws.

On November 16, 1959, the plaintiff sustained injuries from a fall while working on a scaffolding he was erecting at a property owned by the Brighton Apartment Company, where he served as president. The company was incorporated in 1936, with the plaintiff and his wife owning the majority of the shares. The company owned multiple rental properties and was engaged in leasing and managing these assets. Evidence presented at trial indicated that the corporation's net worth had increased prior to the accident.

On November 16, 1959, the plaintiff constructed scaffolding against the Brighton Street apartment building, using vertical posts and outlookers to create a platform for examining a building eave. At approximately 1:30 PM, while transitioning from a ladder to the scaffolding platform, an outrigger broke, causing the plaintiff to fall and sustain injuries. Following the incident, he was transported to Shore Memorial Hospital by the Ocean City Rescue Squad. The Brighton Apartment Company held a Workmen’s Compensation and Employer’s Liability insurance policy from American Surety Company, which was active at the time of the accident, covering Brighton Apartment Co. Inc. and IRA Scott Johnson. Notice of the accident was given to the insurance company. The court has jurisdiction to determine the eligibility for workmen's compensation and its implications for medical expense claims under the insurance policy, referencing the Bonney case where the court ruled that such determinations can be made to assess eligibility for policy benefits, despite the specialized role of the Workmen’s Compensation Division. In Bonney, the court clarified that cases concerning insurance reimbursements are distinct from those seeking workmen’s compensation, allowing the trial court to ascertain the plaintiffs' eligibility for compensation solely for the purpose of resolving insurance policy claims.

Exclusive jurisdiction granted to the workmen’s compensation commission does not eliminate the court's authority to resolve rights stemming from different relationships or types of proceedings, even if the employer-employee relationship is tangentially involved. The court can ascertain if compensation is payable in this case, but such a determination will not be binding on the New Jersey Workmen’s Compensation Division in future proceedings. The defendant's counterclaim requests that the plaintiff first seek resolution under the Workmen’s Compensation Act, highlighting that if the court's decision is overturned on appeal and the statute of limitations expires in the compensation division, the plaintiff could be left without recourse.

The court is tasked with considering whether compensation is payable under the New Jersey Workmen’s Compensation Law, excluding liability under the defendant's policies. This inquiry involves assessing the plaintiff's status as an employee under the workmen’s compensation statute, which defines an 'employee' as any natural person, including corporate officers, who provides service for financial compensation, excluding casual employment defined as accidental or by chance. Courts recognize that the Workmen’s Compensation Act is remedial social legislation, designed to maximize coverage and assist those it intends to benefit. 

Prior to 1956, the definition of 'employee' included all persons performing services for financial consideration, allowing corporate officers to qualify. The plaintiff argues that despite the corporate structure, he operates as an entrepreneur with ultimate control, suggesting the corporate entity should be disregarded. Jurisprudence indicates that while control remains a factor in determining employee status, it is no longer the sole criterion; the totality of circumstances must be evaluated, as demonstrated in various cases.

The case establishes that the economic and functional tests for determining coverage under the Workmen’s Compensation Act do not apply to the current plaintiff, who is a majority stockholder and effectively the alter ego of the corporation. The defendant contends that legislative amendments following the Mahoney case aimed to eliminate the requirement that a corporation maintain direct control over its officers for them to qualify as employees. However, the right of control is merely an indication, not a definitive criterion. The plaintiff's role and ownership in the corporation undermine the significance of his work, making it difficult to classify his contributions as substantial. The defendant cites the Goldmann case to argue against disregarding the corporate entity, but that case is not directly relevant. Previous New Jersey cases show that coverage generally increases, but they did not involve a situation where one individual owned the majority of the corporation. A Wisconsin case, Leigh Atchison, Inc., where the claimant owned nearly all shares and was denied compensation, suggests that a sole proprietorship analogy may not support the plaintiff's claim. The defendant argues exclusion based on the plaintiff's election of compensation under the Act without prior written notice, but this raises the fundamental question of the Act's applicability. Ultimately, the court rules in favor of the plaintiff, awarding $4,259.32 with interest and costs.