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Williams v. Williams Insulation Materials, Inc.

Supreme Court of Arizona

March 14, 1962

Barbara G. WILLIAMS, Executrix of the Estate of Oran Adna Williams, deceased, and widow of Oran Adna Williams, deceased, Petitioner,
WILLIAMS INSULATION MATERIALS, INC., Defendant-Employer, and The Industrial Commission of Arizona, Defendant Insurance Carrier, Respondents.

In Banc.

Page 60

[91 Ariz. 91] McRae, Elliott & Thompson, Phoenix, for petitioner.

Lorin G. Shelley, Phoenix, for respondent Industrial Commission; Donald J. Morgan, James D. Lester, Edward E. Davis, C. E. Singer, Jr., Phoenix, of counsel.

LOCKWOOD, Justice.

This is an appeal by certiorari from an award of the Industrial Commission denying two claims of petitioner Barbara G. Williams under the Workmen's Compensation Act. On May 7, 1959 Oran A. Williams, president of Williams Insulation Materials, Inc., and husband of petitioner, sustained severe burns while fighting a fire on the corporation's premises and died ten days later. Prior to her husband's death, petitioner filed a claim on his behalf which was rejected July 8, 1959. Thereafter as executrix of his estate she filed for a rehearing and for the widow's benefits under the act. The claims were consolidated, and after a formal hearing the Commission on April 12, 1960 issued an award denying both.

The corporation was formed on January 31, 1957 to buy, sell and manufacture insulation, acquiring the business from Williams Insulation Company, a co-partnership which remained in business to install the insulation. Deceased was president and petitioner was secretary of the corporation

Page 61

and together with petitioner's father were [91 Ariz. 92] its principal stockholders and made up its Board of Directors. On March 15, 1957 the Industrial Commission issued a Workmen's Compensation and Employer's Liability Policy to the corporation stating in its covering letter:

'It is understood that officers of corporations receiving remuneration for personal services rendered are covered under the terms of the policy in the same manner as other employees. The matter of rejection is personal to the employee (A.R.S. § 23-906) and if executives do not elect to be covered under the policy, it is necessary that they reject the terms and provisions of the Compensation Acts. Should they elect to reject, the forms are to be signed in duplicate and one forwarded to this office for filing within five days of signing * * *.' (Emphasis added.)

The policy was signed and at no time did deceased reject that coverage under the terms set forth in the letter.

The by-laws were adopted February 8, 1957 and provided that the compensation of the officers, agents and directors of the corporation would be fixed by the board. A motion was passed that no salaries be paid at that time but would be determined at a future date in accordance with earnings. The Board of Directors met from time to time, and the ordinary procedure with respect to the records of the meetings was for the attorney of the corporation to make a memorandum of the occurrences thereat with the actual preparation of the formal minutes being made thereafter and approval and signing taking place at the next board meeting. The official minutes for the meeting of January 7, 1959 were as follows:

'* * * income was realized in an amount that would provide sufficient funds to pay both Oran A. Williams and his wife salaries for the current fiscal year * * *. It was agreed at this meeting that salary payments be established to Oran A. Williams and Barbara G. Williams commencing with the next fiscal year, which commences February 1, 1959, in an amount to be determined after the current year's accounting is closed and the audit is completed.'

The minutes for the meeting of April 9, 1959 stated:

'It was also moved, seconded and passed that salaries be paid to Oran A. Williams in the amount of $1,000.00 per month and to Barbara G. Williams in the amount of $500.00 per month commencing with the fiscal year commencing February 1, 1959, and thereafter.'

The formal minutes of both meetings were prepared subsequent to the accident.

[91 Ariz. 93] No salary was paid deceased until petitioner, four days after the accident, requested and received $3,000.00 from the corporation which sum the payroll record shows to have been $1,000.00 salary for each of the three preceding months. No premiums were paid by the corporation to the Industrial Commission on behalf of deceased until August 5, 1959 at which time $383.93 was tendered by the corporation and rejected by the Commission.

The Commission's denial of benefits to petitioner was based on findings that: a) deceased did not appear on the corporation's payroll prior to the accident; b) the first payment for services rendered, as shown by the books and records of the corporation, was made May 11, 1959 at the request of petitioner; c) this payment was not made under any contract of hire and would not have been made except for the exigencies of the situation occasioned by the accident; and d) no coverage was afforded under the workmen's ...

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