Appeal by defendant from opinion and award entered 29 November
2005 by the North Carolina Industrial Commission. Heard in the
Court of Appeals 16 November 2006.
Wallace & Graham, by Edward L. Pauley, for plaintiff-appellee.
Ogletree, Deakins, Nash, Smoak & Stewart, P.C., by Mary Lou
Hill, for defendant-appellant ACE-USA.
Defendant ACE-USA appeals from an opinion and award of the
North Carolina Industrial Commission arguing that the Commission
erred in finding that defendant was the carrier on the risk with
respect to plaintiff Roy Lee Vaughan's asbestosis. This case
presents a novel scenario. The parties agree that ACE-USA provided
workers' compensation insurance to defendant Carolina Industrial
Insulation Company ("Carolina Industrial") during the pertinent
time frame. Nevertheless, ACE-USA contends that the policy was
limited to work performed in South Carolina, the state where
Carolina Industrial was located. ACE-USA, however, has lost the
policy, and no other evidence was presented as to the policy's
We hold, under the circumstances of this case, that ACE-USA
bore the burden of proving that its policy, which otherwise would
have covered plaintiff, excluded plaintiff's claim based on a last
injurious exposure to asbestos in North Carolina. Because the
Commission applied the proper burden of proof and because the
Commission's determination that ACE-USA was the carrier on the risk
is supported by competent evidence, we affirm.
Plaintiff began working for Carolina Industrial, a South
Carolina corporation, in 1964 as an insulator mechanic. In this
position, plaintiff routinely traveled to various job sites to
remove old insulation and install new pipe and duct insulation and
other insulated products. During plaintiff's tenure as aninsulator mechanic, he was exposed to high amounts of asbestos
In 1971, plaintiff performed his last job as an insulator
mechanic for Carolina Industrial at a plant in Asheville, North
Carolina. Plaintiff worked at this job site for five or six weeks,
including most weekends, removing asbestos insulation and replacing
it with fiberglass insulation. The parties agree that this project
represented plaintiff's last injurious exposure to asbestos. Later
that year, Carolina Industrial promoted plaintiff to field
superintendent, and plaintiff ceased working directly with asbestos
Carolina Industrial was purchased by Pipe & Boiler Insulation
("Pipe & Boiler"), a North Carolina company, in 1974. Plaintiff
continued to work as a field superintendent for that company until
1978 when he was promoted to branch manager, a position plaintiff
held until he left the company in 1982.
On 18 May 1998, immediately following a diagnosis of
asbestosis, plaintiff filed a Form 18B seeking workers'
compensation benefits for asbestosis and pleural disease from
Carolina Industrial and Pipe & Boiler. Both companies denied
liability. On 14 June 2001, Deputy Commissioner Phillip A. Holmes
entered an opinion and award in favor of plaintiff. With respect
to the carrier on the risk, he found that Pipe & Boiler was insured
on the pertinent date by Atlantic Mutual Insurance Company and that
"[w]hile Pipe & Boiler and Carolina Industrial were different
companies, they were part of the same corporation." The deputycommissioner concluded that, "[t]herefore, Atlantic Mutual
Insurance provided coverage for both Carolina Industrial and Pipe
& Boiler from 1964 to 1973" and that Atlantic Mutual was "the
responsible carrier in this claim."
Carolina Industrial, Pipe & Boiler, and Atlantic Mutual
appealed to the Full Commission, which entered an opinion and award
on 27 February 2002 affirming the deputy commissioner's decision
with respect to plaintiff's asbestosis and last injurious exposure.
Regarding the issue of the carrier on the risk, however, the Full
Commission found that the evidence indicated that, at the time of
plaintiff's injury, Atlantic Mutual had provided insurance only for
Pipe & Boiler and not for Carolina Industrial. Because plaintiff
had been an employee of Carolina Industrial at the pertinent time,
the Full Commission remanded for additional discovery regarding
Carolina Industrial's corporate structure and insurance coverage.
On remand, following receipt of information from "the South
Carolina Industrial Commission that [Carolina Industrial] was
insured by [ACE-USA] . . . on the relevant date," Deputy
Commissioner Holmes added ACE-USA as a defendant. ACE-USA was
provided with the necessary materials from the proceeding and
allowed time to investigate the issues.
At a hearing before Deputy Commissioner George T. Glenn II on
12 November 2003, the parties stipulated into evidence the
information Deputy Commissioner Holmes received from the South
Carolina Industrial Commission. Plaintiff rested on the evidence
he had previously introduced, and ACE-USA did not call anyadditional witnesses. Instead, ACE-USA submitted an affidavit from
an adjuster stating that a diligent search was conducted of all
locations at which insurance policies are physically located and
that "no record of any workers' compensation insurance policy
issued by [ACE-USA] providing coverage for [Carolina Industrial]
during the periods 1964 to 1974 in any state was found." On 17
February 2004, the deputy commissioner entered an opinion and award
in favor of plaintiff, concluding that ACE-USA was the carrier on
the risk for Carolina Industrial at the time of plaintiff's last
injurious exposure to asbestos.
Defendants appealed to the Full Commission, which, on 29
November 2005, entered an opinion and award affirming the decision
of the deputy commissioner with minor modifications. The Full
Commission made the following pertinent findings of fact:
14. According to South Carolina Workers'
Compensation records, Insurance Company of
North America (ACE-USA) was the carrier for
Carolina Industrial Insulating Co., Inc.
(hereinafter Carolina Industrial Insulation)
at the time of Plaintiff's last injurious
15. Defendant asserts that it cannot
locate an insurance policy and argues that
since the policy only exists in South
Carolina, it must only cover South Carolina
injuries and not out of state injuries.
However, it is uncontroverted that Carolina
Industrial Insulation insured its workers with
a contract of insurance through ACE-USA.
Carolina Industrial Insulation on [sic] a
South Carolina corporation, filed its
insurance policy with the South Carolina
Workers' Compensation Division. It is also
undisputed that employees of Carolina
Industrial Insulation worked in both North
Carolina and South Carolina. Plaintiff
performed a significant portion of his work inNorth Carolina. Carolina Industrial
Insulation did not file any statement of
insurance with the North Carolina Industrial
Commission. Carolina Industrial Insulation
employed five or more employees in North
16. The initial burden is on the insured
to establish coverage for a claim. The burden
then shifts to the defendant-carrier to
establish that an exclusion applies to the
claim. ACE-USA has offered no evidence to
support its argument that its policy of
insurance excluded Carolina Industrial
Insulation employees when working in North
Carolina. Based on the greater weight of the
evidence, Carolina Industrial Insulation's
workers' compensation insurance with ACE-USA
covered its employees while working in North
(See footnote 1)
Based on these findings, the Commission concluded that "[c]arrier
ACE-USA was on the risk at the time of Plaintiff's last injurious
exposure to asbestos and is therefore liable for payment of
compensation due Plaintiff pursuant to the Workers Compensation
Act." ACE-USA timely appealed to this Court.
Our review of a decision of the Industrial Commission "is
limited to determining whether there is any competent evidence to
support the findings of fact, and whether the findings of fact
justify the conclusions of law." Cross v. Blue Cross/Blue Shield
104 N.C. App. 284, 285-86, 409 S.E.2d 103, 104 (1991). "The
findings of the Commission are conclusive on appeal when such
competent evidence exists, even if there is plenary evidence for
contrary findings." Hardin v. Motor Panels, Inc.
, 136 N.C. App.351, 353, 524 S.E.2d 368, 371, disc. review denied
, 351 N.C. 473,
543 S.E.2d 488 (2000). This Court reviews the Commission's
conclusions of law de novo. Deseth v. LensCrafters, Inc.
, 160 N.C.
App. 180, 184, 585 S.E.2d 264, 267 (2003).
N.C. Gen. Stat. § 97-57 (2005) provides:
In any case where compensation is payable
for an occupational disease, the employer in
whose employment the employee was last
injuriously exposed to the hazards of such
disease, and the insurance carrier, if any,
which was on the risk when the employee was so
last exposed under such employer
, shall be
(Emphasis added.) In prior cases, the carrier on the risk was
identified for the most part simply by determining the liable
employer and considering the dates of coverage for that employer's
insurance policies. See, e.g.
, Abernathy v. Sandoz Chems./Clariant
, 151 N.C. App. 252, 259-60, 565 S.E.2d 218, 222-23, cert.
, 356 N.C. 432, 572 S.E.2d 421 (2002). Litigation has
focused primarily on determining the date of the last injurious
exposure with the liability of the carrier flowing from that date.
This appeal presents a question not previously addressed in
this State: How do you determine the carrier on the risk when any
applicable insurance policies have been lost? This question in
turn gives rise to issues regarding who bears the burden of proof,
and what type of evidence is sufficient.
(See footnote 2)
We find little guidance on these questions from other opinions
addressing occupational diseases. In setting forth the elements
that a claimant must prove under N.C. Gen. Stat. § 97-57, our
Supreme Court has written:
Under [N.C. Gen. Stat. § 97-57], consequently,
it is not necessary that claimant show that
the conditions of her employment with
defendant caused or significantly contributed
to her occupational disease. She need only
show: (1) that she has a compensable
occupational disease and (2) that she was
"last injuriously exposed to the hazards of
such disease" in defendant's employment. The
statutory terms "last injuriously exposed"
mean "an exposure which proximately augmented
the disease to any extent, however slight."
Rutledge v. Tultex Corp.
, 308 N.C. 85, 89, 301 S.E.2d 359, 362-63
(1983) (quoting Haynes v. Feldspar Producing Co.
, 222 N.C. 163,
166, 22 S.E.2d 275, 277 (1942)). Nothing in Rutledge
progeny addresses whether the claimant bears any burden regarding
proof of the identity of the carrier on the risk for the last
injurious exposure. We observe that typically the defendant-
employer would be actively addressing this issue, but, in this
case, the employer is not participating in the litigation.
With respect to the burden of proof, ACE-USA first argues that
plaintiff had an initial burden of bringing himself within the
language of the insurance policy, citing various non-workers'
compensation cases. See, e.g.
, Duncan v. Cuna Mut. Ins. Soc'y
N.C. App. 403, 405, 614 S.E.2d 592, 594 (2005) (life insurance
policy); Hobson Constr. Co. v. Great Am. Ins. Co.
, 71 N.C. App.
586, 590, 322 S.E.2d 632, 635 (1984) (general liability insurance
policy), disc. review denied
, 313 N.C. 329, 327 S.E.2d 890 (1985);Nationwide Mut. Fire Ins. Co. v. Allen
, 68 N.C. App. 184, 188, 314
S.E.2d 552, 554 (homeowner's insurance policy), disc. review
, 311 N.C. 761, 321 S.E.2d 142 (1984). These cases hold that
bears the burden of establishing that the language
contained in an existing policy covers his or her injury:
It is the insured that has the burden of
bringing himself within the insuring language
of the policy. Once it has been determined
that the insuring language embraces the
particular claim or injury, the burden then
shifts to the insurance company to prove a
policy exclusion excepts the particular injury
, 68 N.C. App. at 188, 314 S.E.2d at 554. None of these
cases, however, involve the situation present in this case: a
claimant, who is not the insured, and a missing insurance policy
that likely was never in the possession of the claimant.
ACE-USA argues, based on these cases, that plaintiff could not
meet this burden "because no policy for coverage was produced;
therefore, no language
, from which a court could appropriately
determine that coverage existed, was admitted into evidence."
Defendants have, however, pointed to no authority suggesting that
an employee in a workers' compensation action must produce the
actual insurance policy to establish coverage. Significantly,
although defendants submitted an affidavit to the Commission
maintaining that they were unable to locate any
policy of insurance
between ACE-USA and Carolina Industrial from 1964 to 1974 in any
state, ACE-USA concedes that it provided coverage for Carolina
Industrial in South Carolina during the relevant time period. In
other words, ACE-USA seeks to avoid liability simply becauseplaintiff cannot produce an insurance policy that ACE-USA agrees
existed, but is now lost _ even though plaintiff would likely never
have received a copy of his employer's policy.
In the absence of any authority supporting such an outcome, we
decline to so hold. ACE-USA's suggestion that plaintiff should be
denied any coverage for his asbestosis because he cannot prove the
precise terms of a policy ACE-USA lost is troubling. Under the
Workers' Compensation Act, "plaintiff has the right to enforce the
insurance contract made for his benefit," Hartsell v. Thermoid Co.,
, 249 N.C. 527, 533, 107 S.E.2d 115, 119 (1959), but under
ACE-USA's view, he could never do so when the carrier and employer
misplaced the insurance policy. Such an approach cannot be
reconciled with the intent of the Act to ensure compensation for
injured employees. Johnson v. Herbie's Place
, 157 N.C. App. 168,
170-71, 579 S.E.2d 110, 113, disc. review denied
, 357 N.C. 460, 585
S.E.2d 760 (2003).
Nor does the fact that an insurance policy is missing
necessarily preclude recovery under that policy. Rule 1004 of the
North Carolina Rules of Evidence specifically provides:
The original is not required, and other
evidence of the contents of a writing . . . is
(1) Originals Lost or Destroyed. All
originals are lost or have been
destroyed, unless the proponent lost
or destroyed them in bad faith; or
(2) Original Not Obtainable. No
original can be obtained by any
available judicial process or
(3) Original in Possession of Opponent.
At a time when an original was under
the control of a party against whom
offered, he was put on notice, by
the pleadings or otherwise, that the
contents would be a subject of proof
at the hearing, and he does not
produce the original at the hearing
. . . .
Any one of these subsections could apply to permit plaintiff to
offer "other evidence of the contents" of the insurance policy.
See Hoerner v. ANCO Insulations, Inc.
, 812 So. 2d 45, 72 (La. Ct.
App.) (allowing asbestos worker to use parole evidence to prove
existence of insurance policy insuring dissolved corporation),
, 819 So. 2d 1023-24 (La. 2002).
Assuming that the cases cited by ACE-USA apply to workers'
compensation claimants, we hold that plaintiff has met his burden:
"[T]he burden is on the insured to show coverage." Nationwide Mut.
Ins. Co. v. McAbee
, 268 N.C. 326, 328, 150 S.E.2d 496, 497 (1966).
Here, plaintiff offered evidence, which ACE-USA does not dispute,
that ACE-USA issued a workers' compensation policy to Carolina
Industrial, that provided coverage for workers' compensation
injuries to plaintiff at the time of plaintiff's last injurious
exposure. The only dispute is whether the policy contained
We disagree with ACE-USA's contention that plaintiff was
obligated to prove that this coverage extended not only to work
performed in South Carolina, where Carolina Industrial was located,
but also to work done in North Carolina. We hold, instead, that
ACE-USA bore the burden of proving that there was no workers'compensation coverage under this missing policy for work performed
in North Carolina.
In the only possibly analogous case involving workers'
compensation insurance, our Supreme Court addressed a carrier's
contention that it was not the carrier on the risk because it had
cancelled the policy prior to the date of the plaintiff's injury.
See Moore v. Adams Elec. Co.
, 264 N.C. 667, 142 S.E.2d 659 (1965).
The Court held that the carrier was "obligated for the sums
adjudged by the Commission, unless it has, as it asserts,
cancellation of its insurance contract." Id.
142 S.E.2d at 663 (emphasis added). In other words, the plaintiff
did not bear the burden of proving that the policy continued in
effect; rather, the carrier bore the burden of proving cancellation
of the policy. Thus, once there is evidence that a policy of
workers' compensation was issued covering the plaintiff, the burden
of proof shifts to the carrier to prove that circumstances existed
under which coverage was not available for the plaintiff. We
believe this burden-shifting should apply equally in this case in
which the carrier seeks to avoid otherwise existing coverage.
This approach is also consistent with that employed in the
non-workers' compensation cases relied upon by ACE-USA. Under that
line of authority, "[i]f the insurer relies on a clause of the
policy which excludes coverage, the burden is on the insurer to
establish the exclusion." McAbee
, 268 N.C. at 328, 150 S.E.2d at
497. See also Allen
, 68 N.C. App. at 188, 314 S.E.2d at 554(holding that burden shifts "to the insurance company to prove a
policy exclusion excepts the particular injury from coverage").
In this case, ACE-USA does not dispute that had plaintiff been
last exposed to asbestos in South Carolina on the specified date,
the ACE-USA policy would provide coverage. In arguing that the
policy did not cover injuries occurring in North Carolina, ACE-USA
is relying upon a theoretical clause of the policy that it claims
would have excluded coverage of this particular injury because of
where it occurred. ACE-USA's defense thus fits squarely within
this Court's definition of an "exclusion" in an insurance policy:
"'In [an] insurance policy, [an] "exclusion" is [a] provision which
eliminates coverage where were it not for [the] exclusion, coverage
would have existed.'" N.C. Farm Bureau Mut. Ins. Co. v. Fowler
162 N.C. App. 100, 104, 589 S.E.2d 911, 913 (2004) (alterations
original) (quoting Black's Law Dictionary
563 (6th ed. 1990)).
Accordingly, ACE-USA bore the burden of proving the existence of
any geographic limitation.
The Commission applied this burden of proof framework in its
opinion and award and found that "[b]ased on the greater weight of
the evidence, Carolina Industrial Insulation's workers'
compensation insurance with ACE-USA covered its employees while
working in North Carolina." The only evidence that ACE-USA points
to as being contrary to the Commission's finding is the parties'
stipulation "that there is no record of insurance coverage in North
Carolina for Carolina Industrial Insulating Co., Inc." ACE-USA
argues this stipulation establishes that there was no insurancecoverage in North Carolina. To the contrary, as the plain language
states, the stipulation specifies only that there was "no record"
of any insurance. Carolina Industrial could have been insured for
North Carolina work, but not have notified the North Carolina
Industrial Commission of that coverage. This stipulation did not,
therefore, mandate a finding of no coverage, but rather only
permitted an inference of non-coverage that the Commission could
choose to draw or not.
Alternatively, ACE-USA challenges the Commission's findings on
the grounds that "evidence that [ACE-USA] provided coverage for
[Carolina Industrial] in South Carolina does not mean that it did
the same in North Carolina." While this contention may well be
true, it again is simply an argument for the Commission to consider
and weigh _ like the stipulation _ and does not mandate that the
Commission find that no coverage existed for work done in North
We agree with ACE-USA, however, that the Commission erred to
the extent that it found applicable to this case the principle that
ambiguous provisions should be resolved in favor of the insured and
against the insurance company. See Hobbs Realty & Constr. Co. v.
Scottsdale Ins. Co.
, 163 N.C. App. 285, 292, 593 S.E.2d 103, 108,
, 358 N.C. 543, 599 S.E.2d 47 (2004). Because the
policy is missing, there is no language to construe and thus no
possibility of an ambiguity. Without the policy, all we have is a
disagreement between the parties as to what terms were included in
that policy. "[A] mere disagreement between the parties over thelanguage of the insurance contract does not create an ambiguity."
Pennsylvania Nat'l Mut. Ins. Co. v. Strickland
, 178 N.C. App. 547,
550, 631 S.E.2d 845, 847 (2006), disc. review denied
, 361 N.C. 221,
__ S.E.2d __ (2007).
Nevertheless, we view this error as immaterial since it
represents only an alternative basis for the Commission's decision.
The Commission's final conclusion of law sets forth another basis
for the opinion and award:
7. There is no evidence that the ACE-
USA policy only covered Carolina Industrial
Insulation employees who were injured in South
Carolina. The Commission cannot create policy
provisions that do not exist. It cannot be
assumed that the policy had restrictive
provisions; it must be proven. The initial
burden is on the insured to establish coverage
for a claim. In the case at hand, Plaintiff
has proven that he was an employee of Carolina
Industrial Insulation during the time period
when ACE-USA provided workers' compensation
coverage. The burden then shifts to the
defendant-carrier to establish that an
exclusion applied to the claim and that
employees of Carolina Industrial Insulation
were not insured under its policy while
working in North Carolina. In the case at
hand, ACE-USA argues that an exclusion existed
in that the coverage was only applicable to
South Carolina injuries. ACE-USA has offered
no evidence to support this argument.
Therefore, ACE-USA has not met its burden.
As explained above, this is a correct statement of the law.
The Commission's conclusion number 7 is supported by the
Commission's findings of fact. Further, in the absence of evidence
that the policy was limited to work occurring in South Carolina,
the undisputed evidence that ACE-USA provided workers' compensation
coverage for Carolina Industrial on the pertinent date wassufficient to support the Commission's finding that ACE-USA was the
carrier on the risk. Because the Commission's findings are
supported by competent evidence, and those findings in turn support
one of the grounds relied upon by the Commission, we affirm.
Judges McCULLOUGH and JACKSON concur.