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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Trudell v. Hibbert (2/17/2012) sp-6652

Trudell v. Hibbert (2/17/2012) sp-6652

        Notice: This opinion is subject to correction before publication in the PACIFIC  REPORTER. 
        Readers are requested to bring errors to the attention of the Clerk of the Appellate Courts, 
        303 K Street, Anchorage, Alaska 99501, phone (907) 264-0608, fax (907) 264-0878, email 
        corrections@appellate.courts.state.ak.us. 

                THE SUPREME COURT OF THE STATE OF ALASKA 

LAWRENCE TRUDELL,                             ) 
                                              )       Supreme Court No. S-13608 
                 Appellant,                   ) 
                                              )       Superior Court No. 3KN-06-01053 CI 
        v.                                    ) 
                                              )       O P I N I O N 
JOHN BRENT HIBBERT, DEBRA                     ) 
HIBBERT, and AAA ALASKA                       )       No. 6652 - February 17, 2012 
CAB, INC.,                                    ) 
                                              ) 
                 Appellees.                   ) 
                                              ) 

               Appeal from the Superior Court of the State of Alaska, Third 
               Judicial District, Kenai, Charles T. Huguelet, Judge. 

               Appearances:      Michael W. Flanigan, Walther & Flanigan, 
               Anchorage,      for  Appellant.    Peter   J.   Maassen,   Ingaldson, 
               Maassen & Fitzgerald, P.C., Anchorage, for Appellees. 

               Before:       Carpeneti,    Chief   Justice,  Fabe,   Winfree,    and 
                Stowers, Justices. [Christen, Justice, not participating.] 

               CARPENETI, Chief Justice.
 
                STOWERS, Justice, dissenting in part.
 

I.      INTRODUCTION 

               The employee of a contractor was injured while repairing a building; the 

contractor did not have workers' compensation insurance.             The employee filed suit for 

----------------------- Page 2-----------------------

workers' compensation benefits against his employer and against the owners of the 

building,   alleging   that   the   owners   were   "project   owners"   as   defined   in   the   Alaska 

Workers' Compensation Act and thus liable for securing workers' compensation.  The 

employer then filed for bankruptcy.          The owners denied liability on the basis that they 

were not "project owners."  After a bench trial solely about whether the building owners 

were "project owners" or the injured worker's employers, the superior court decided that 

they were neither and that they were not liable to pay worker's compensation to the 

injured worker, and awarded attorney's fees against the employee.  Because it was error 

to interpret "project owners" as excluding the building owners, we reverse the superior 

court's decision. 

II.     FACTS AND PROCEEDINGS 

                Lawrence Trudell was injured on June 13, 2006, when he fell while trying 

to descend a ladder from the roof of a structure on which he was working.  At the time 

he was employed by Phillips Construction Co. (Phillips), a construction contracting 
company principally owned by Clayton Phillips and Trish Dorman.1                    Phillips did not 

have workers' compensation insurance, even though it was licensed by the State of 
Alaska.2    The   structure   Trudell   was   working   on   was   owned   by   John   Brent   Hibbert 

(Brent) and Debra Hibbert. 

        1       Dorman was Phillips's girlfriend and part owner of the company; she was 

not a party to this action. 

        2       AS 08.18.101(a) requires a construction contractor to provide proof of 

workers' compensation insurance when registering or renewing a contractor's license. 
Phillips was licensed in 2006.   If Phillips had no employees when it got its contractor's 
license, it did not need to secure workers' compensation insurance, but whenever it had 
employees, it was required to have workers' compensation insurance. AS 23.30.045(a), 
.239(a). 

                                                 -2-                                            6652
 

----------------------- Page 3-----------------------

                 The Hibberts own and operate AAA Alaska Cab, Inc. (AAA Cab) in Kenai. 

The company is incorporated, with Brent Hibbert acting as president and Debra Hibbert 

acting as secretary-treasurer.       Brent Hibbert is the sole shareholder.         The Hibberts also 

own   several   pieces   of   property   in   the   Kenai   area   and   have   what   the   superior   court 

described     as  a   "modest   rental   business."     They    own    all   of   their  real   property  as 

individuals.    The cab company leases its office and "shop" from the Hibberts. 

                 The building from which Trudell fell serves as both the Hibberts' residence 
and   the   cab   company's   business   office.3    The   office   is   in   a   converted   "mud   room" 

measuring about 10 feet by 15 feet; it has some office equipment and a radio on which 

the Hibberts can monitor and communicate with the cab drivers. The cab company takes 

job applications in the office and has notices about drug testing there.  Cab drivers come 

to the office to deposit cash and exchange tokens or credit slips they receive as part of 

some accounts for cab service.          Across the street from the home office is a garage or 

"shop" for the cab business. 

                 The    cab   company      and   the  Hibberts    signed    a  lease  agreement     dated 

January 1, 2006.   The lease agreement did not separate rent paid for the office from rent 

for the shop; it provided that the cab company "lease[d] the shop (1380 Nighthawk Ln) 

and office (1385 Nighthawk Ln) space" and required the cab company to pay utilities 

and taxes.     It also required that any "damage to the building and supplies" be "fixed or 

repaired by tenant."       The lease did not have a fixed rent.        The trial court found that the 

"rental amount . . . is apparently the amount of the home mortgage and utilities."  The 

trial court "could not . . . determine[]" if the cab company "absorbed all home utilities." 

        3        The office address was the address on the workers' compensation insurance 

the Hibberts got after Trudell's injury. 

                                                   -3-                                                6652 

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                 In May 2006 the Hibberts contracted with Phillips to repair the office- 

residence.      The repair work initially consisted of re-siding the building, repairing the 

foundation under the cab office space, and installing soffit and fascia.  The contract was 

later expanded to include roof repair on the office-residence and installation of eaves on 

the shop.  The Hibberts paid cash for the job and got a discount for doing so.  There was 

a dispute at trial as to who initiated the cash payment discussion. 

                 Trudell worked on the repairs, tearing off the old siding, soffit, and fascia. 

He also helped install an entryway door for the office and worked on the foundation 

underneath   the   office.     On   June   13,   2006,   he   fell   when   he   stepped   onto   a   ladder 

belonging to Phillips; the ladder began to collapse and then fell with Trudell on it.  At 

the   time   of   the   accident,   Trudell   was   working   on   the   roof   of   the   office-residence 

installing an ice and water shield.   Trudell fell about 25 feet to the ground and sustained 

serious injuries:      He broke his back, became paralyzed from the waist down, lost most 

of his hearing, suffers extreme vertigo, and must use a catheter. He spent several months 

in   the   hospital.  Phillips   apparently   did   not   file   a   report   of   injury   with   the   Alaska 

Workers' Compensation Board (the Board) as required by AS 23.30.070. 

                 Trudell sued Clayton Phillips d/b/a Phillips and the Hibberts d/b/a AAA 
Cab   in   November   2006.4       He   also   filed   a   lien   on   the   Hibberts'   property   to   secure 

payment of workers' compensation.               He sought to foreclose on the lien he had filed, 

claiming   that   the   Hibberts   were   responsible   for   payment   of   workers'   compensation 

because they were "project owners"   as   defined in AS 23.30.045 and thus liable for 

securing workers' compensation. Phillips filed for bankruptcy in February 2007, and the 

        4        AAA Cab was not separately served with a summons, but in March 2007 

an attorney entered an appearance on its behalf.               The cab company did not participate 
actively in the litigation. 

                                                     -4-                                                 6652 

----------------------- Page 5-----------------------

case   against   him   was   stayed   on   March   20,   2007.     A   discharge   was   entered   in   the 

bankruptcy case on May 29, 2007. 

                 The Hibberts filed their answer and simultaneously moved for summary 

judgment, arguing that AS 23.30.045 should be construed so that they did not fall within 

the   definition   of   "project   owner."     Superior   Court   Judge   Anna   Moran   denied   the 

Hibberts' summary judgment motion on July 8, 2008.                    Relying on legislative history, 

Judge   Moran   decided   that   "[t]he   term   'project   owners'   was   intended   to   include   all 

business entities, including investment groups, limited liability companies (LLCs), and 

other    groups     with   no  regular    employees."       She    thought    that  Trudell's    proposed 

interpretation of "project owner" was consistent with the statute and decided that there 

was "a question of fact as to whether [the Hibberts] were hiring [Trudell] to perform 

repairs and renovations while engaged in the course of their cab business." 

                 After receiving additional discovery, Trudell filed an amended complaint, 

alleging     in  the   alternative   that   he   was   the   Hibberts'   employee    when   the   accident 

happened because, in addition to their cab company, the Hibberts also ran a property 

rental business.     The Hibberts denied the new allegations. 

                 The parties stipulated that the trial would be   solely on the issue of the 

Hibberts' status as project owners or employers, and, if Trudell were successful, the case 

would then go before the Board for a determination of workers' compensation benefits. 
Based on Benson v. City of Nenana,5 the superior court ordered a bench trial. 

         5       725   P.2d   490,   492   (Alaska   1986)   (holding   that   worker   injured   while 

working   on   city   project   not   entitled   to   jury   trial   on   issue   of   whether   he   was   a   city 
employee or independent contractor under workers' compensation act). 

                                                    -5-                                                 6652 

----------------------- Page 6-----------------------

                The case went to trial in November   2008 before Superior Court Judge 
Charles T. Huguelet.6      Trudell and the Hibberts were the only witnesses.  The court also 

visited the cab company's office. Trudell testified about his relationship with Phillips, 

stating that he began working for Phillips sometime in November 2005.  The following 

month another worker fell and broke his leg and ankle.              Phillips did not have workers' 

compensation insurance at the time.  Phillips did not pay Trudell regularly, and Trudell 

was living off his savings part of the time he worked for Phillips.  Trudell estimated that 

Phillips owed him about $30,000 in wages and said that Phillips paid him about $2,000 

from the money the Hibberts paid Phillips.            Phillips "hinted" to Trudell that he would 

make Trudell a business partner at some point but never did.   Trudell said that he never 

made an investment in Phillips and considered himself Phillips's employee even though 

Phillips was not paying him regularly. 

                In   early   2006   Phillips   drew   up   paperwork   to   have   Trudell   become   an 

independent contractor, but the papers were never filed.  According to Trudell, Phillips 

told him that Phillips would get workers' compensation coverage. Phillips secured some 

type of insurance that paid a small part of Trudell's hospitalization after the accident. 

At   least   two   other   people   besides   Trudell   and   Phillips   worked   for   Phillips   on   the 

Hibberts' job. 

                Trudell also testified about the contract between Phillips and the Hibberts. 

He indicated that the Hibberts agreed to pay cash in exchange for a discount on the job 
and gave Phillips more than $10,000 in cash in one payment.7                  Trudell described the 

        6       The case was assigned to Judge Huguelet sometime after the denial   of 

summary judgment. 

        7       In his deposition, Brent Hibbert testified that the cash for the repair work 

came from his "savings" but that it was not withdrawn from any account. There was thus 
                                                                                        (continued...) 

                                                  -6-                                             6652
 

----------------------- Page 7-----------------------

nature of the work performed for the Hibberts, which included redoing the foundation 

underneath the office area in the house.           Phillips also repaired the roof of the entire 

structure, including installation of an ice and water shield. Trudell described the accident 

and his resulting injuries. 

                Debra Hibbert testified about how she used the office space in the house. 

She also testified about the couple's property rentals, indicating that even though they 

owned   and   rented   several   pieces   of   property,   they   never   bought   property   with   the 

intention    of  renting   it  out.   She   testified  that  the  cab   company      carried  workers' 

compensation insurance when it had other office employees but did not carry workers' 
compensation insurance to cover the Hibberts.8           The cab company did not have workers' 

compensation coverage in 2006. 

                Debra   Hibbert   was   also   the   bookkeeper   for   the   cab   company,   and   she 

testified about its income and rent payments.             She testified that the cab company had 

gross receipts of $613,000 in 2006, with a net income of $138,212.                  The cab company 

paid her and her husband together $84,856 in salaries in 2006.              She agreed that the cab 

company paid them $15,563 in rent in 2006 and that this amount of rent was "just a few 

cents off" of the amount they paid for the home mortgage.               She testified that when the 

couple contracted with Phillips, they were doing so in their individual capacity and not 

as the cab company. She also testified that the issue of workers' compensation insurance 

was not discussed with Phillips before the accident. 

        7       (...continued) 

apparently no way to trace the source of the money. 

        8       AS 23.30.240(a) permits the executive officers of a corporation to waive 

workers' compensation coverage, subject to approval of the director of the division of 
workers' compensation.  Taxicab drivers with certain types of contracts are not covered 
by workers' compensation.         AS 23.30.230(a)(7). 

                                                  -7-                                             6652
 

----------------------- Page 8-----------------------

                Brent Hibbert testified that he was the president of AAA Cab and described 

his duties in the cab business. He testified that he occasionally did minor repair work on 

the couple's   rental units and had once or twice hired others to repair the buildings. 

According to Brent Hibbert, the repair work done by Phillips was part of a series of 

property improvements on the office-residence that began in 2005 and ended in 2007. 

Brent Hibbert said that Phillips introduced Trudell as his partner.  Brent Hibbert testified 

that he had solicited other bids for the job but chose Phillips because the other bidders 

could   not do the necessary foundation work under the office.                Both of the Hibberts 

testified that Phillips offered them a discount on the construction job if they paid cash, 

which they agreed to do. 

                In his decision Judge Huguelet found that the Hibberts were not project 

owners or employers and therefore not liable for workers' compensation payments to 

Trudell. Judge Huguelet "respectfully disagree[d]" with Judge Moran's construction of 

AS 23.30.045, although he said that the differences in interpretation of the statute would 

not affect the outcome of Trudell's case.          Judge Huguelet wrote that "[p]roject owner 

liability   must   be   viewed   in   a   manner   that   [was]   consistent   with   the   body   of   Alaska 
workers' compensation law."  Quoting Gaede v. Saunders,9   he wrote that "[t]he project 

owner's business must be a 'profit-making enterprise which ought to bear the costs of 

injuries incurred in the business' to fall within the [Alaska Workers' Compensation] 

Act."   He also said that "[a]nalysis of project owner liability should reflect principles 

used to determine if there is an employer under the Act."  He decided that what he called 

the Larson test ("project owner liability requires finding that a business has contracted 

out its usual work to others") was "reasonable and consistent with Alaska law."  The 

court found that the construction project was mainly a home improvement project and 

        9       53 P.3d 1126, 1127 (Alaska 2002). 

                                                  -8-                                               6652 

----------------------- Page 9-----------------------

that "[a]ny effect on the Hibberts' taxicab or rental business was incidental - not a factor 

in   the   decision   to   upgrade   the   home." Acknowledging   that   Trudell was   "in   a   very 

difficult position," the trial court decided that the Hibberts were "also blameless" and that 

"holding them liable for [Trudell's] considerable injuries would be unjust and contrary 

to workers' compensation law." 

                The Hibberts then moved for an award of Alaska Civil Rule 82 attorney's 

fees as the prevailing party.  Trudell opposed on the ground that under Alaska workers' 

compensation law, costs and attorney's fees generally cannot be awarded against an 

injured   worker.    The   court   awarded   the   Hibberts   the   Rule   82   attorney's   fees   they 

requested, as well as costs, for a total judgment of $16,081.49.           Trudell appeals. 

III.    STANDARD OF REVIEW 
                We interpret a statute using our independent judgment.10             We interpret a 

statute "according to reason, practicality, and common sense, taking into account the 
plain meaning and purpose of the law as well as the intent of the drafters."11              Our goal 

in interpreting a statute is "to give effect to the legislature's intent, with due regard for 
the meaning the statutory language conveys to others."12  "We may apply a legal doctrine 

to undisputed facts without giving deference to the superior court."13 

        10      Nickels v. Napolilli, 29 P.3d 242, 246-47 (Alaska 2001) (citing Cook v. 

Botelho, 921 P.2d 1126, 1129 (Alaska 1996)). 

        11      Grimm v. Wagoner, 77 P.3d 423, 427 (Alaska 2003) (quoting Native Vill. 

of Elim v. State, 990 P.2d 1, 5 (Alaska 1999)). 

        12      Muller v. BP Exploration (Alaska) Inc., 923 P.2d 783, 787 (Alaska 1996) 

(quoting  Tesoro   Alaska   Petroleum,   Co.   v.   Kenai   Pipe   Line   Co., 746 P.2d 896,   905 
(Alaska 1987)). 

        13      Guttchen v. Gabriel,  49 P.3d 223, 225 (Alaska 2002) (citing Foss Alaska 

Line, Inc. v. Northland Servs., Inc., 724 P.2d 523, 526 (Alaska 1986)). 

                                                  -9-                                           6652
 

----------------------- Page 10-----------------------

IV.     DISCUSSION 

        A.      The Usual Business Rule Does Not Limit Project Owner Status. 

                The central issue in this case is the interpretation of "project owner" in 

AS 23.30.045(f)(2).       The legislature amended the Alaska Workers' Compensation Act 

in   2004,    adding    project   owners     to  the  entities   potentially    liable  for  workers' 
compensation benefits and extending the exclusive liability provision of the act to them.14 

In Schiel v. Union Oil Co. of California,15 we held that those amendments did not violate 

an    injured   worker's     equal   protection    or   due   process    rights   under   the   Alaska 
Constitution.16   InAnderson v. Alyeska Pipeline Service Co.,17 we refused to construe the 

phrase "project owner" according to common usage and held that Alyeska fell within the 
definition of "project owner" in the statute.18      In this case we consider whether the phrase 

"in the course of the person's business" in the statutory definition of "project owner" 

limits project owner liability to instances when a business contracts out its usual work 

to others.   We hold that it does not. 

                Alaska Statute 23.30.045 provides in pertinent part: 

                (a) An employer is liable for and shall secure the payment to 
                employees of the compensation payable under AS 23.30.041, 
                23.30.050, 23.30.095, 23.30.145, and 23.30.180 - 23.30.215. 
                If   the   employer   is   a   subcontractor   and   fails   to   secure   the 
                payment of compensation to its employees, the contractor is 
                liable for and shall secure the payment of the compensation 

        14      Ch. 80,  1-3, SLA 2004. 

        15      219 P.3d 1025 (Alaska 2009). 

        16      Id. at 1037. 

        17      234 P.3d 1282 (Alaska 2010). 

        18      Id. at 1287-88. 

                                                 -10-                                            6652
 

----------------------- Page 11-----------------------

                 to   employees   of   the   subcontractor.       If   the   employer   is   a 
                 contractor and fails to secure the payment of compensation to 
                 its employees or the employees of a subcontractor, the project 
                 owner     is  liable  for   and   shall   secure   the  payment     of   the 
                 compensation to employees of the contractor and employees 
                 of a subcontractor, as applicable. 

                 . . . . 

                 (f)     In this section, 

                 (1)     "contractor"       means     a  person    who     undertakes     by 
                 contract performance of certain work for another but does not 
                 include     a  vendor    whose     primary    business    is  the  sale   or 
                 leasing of tools, equipment, other goods, or property; 

                 (2)     "project owner" means a person who, in the course of 
                 the person's business, engages the services of a contractor 
                 and who enjoys the beneficial use of the work; 

                 (3)     "subcontractor" means a person to whom a contractor 
                 sublets all or part of the initial undertaking. 

                 Trudell   argues   that   the   plain   meaning   of   the   statute   and   the   legislative 

history show that the legislature intended to define "project owner" broadly to cover any 

business     that   engages     contractors    for   business    purposes.      Trudell     notes   that  the 

legislature only exempted two groups from coverage: homeowners and vendors that 

primarily provide goods rather than services. He claims that this was a deliberate choice 

because the legislature was concerned about uninsured employers and wanted to provide 

an incentive to project owners to make sure the contractors they hired had workers' 

compensation insurance. 

                 The Hibberts contend that the trial court properly interpreted the statute as 

limited to those situations in which an employer contracts out its own usual work to 

another.    They argue that "in the course of the person's business" limits the scope of 

project   owners   to   those   situations   in   which   a   business   contracts   out   "work   that   the 

                                                    -11-                                               6652
 

----------------------- Page 12-----------------------

business would ordinarily be expected to do itself." Like the appellant in Anderson ,19 the 

Hibberts assert that broadly construing "project owner" would have "dire consequences," 

exposing many small businesses to potential liability for workers' compensation. 

                1.      Statutory language and legislative history 

                In construing a statute, we look at the meaning of the words used and the 
legislative history.20   We interpret a statute in light of its purpose.21       If a word in a statute 

has more than one relevant meaning, we consider the context in which the word is used 
and the legislature's purpose in enacting the statute.22            "Statements made by a bill's 

sponsor during legislative deliberations are relevant evidence when the court is trying 
to determine legislative intent."23 

                Alaska Statute 23.30.045(f)(2) defines "project owner" as "a person who, 

in the course of the person's business, engages the services of a contractor and who 

enjoys the beneficial use of the work."           Unlike statutes in other states, the statutory 

language does not use the word "usual" or "regular" to limit the business to which the 
statute applies;24 it simply says "in the course of the person's business."25            The relevant 

        19      Id. at 1287-88. 

        20      Alaskans for a Common Language, Inc. v. Kritz , 170 P.3d 183, 192 (Alaska 

2007) (citing State v. Alex, 646 P.2d 203, 208 n.4 (Alaska 1982)). 

        21      Beck   v.   State,   Dep't   of   Transp.   &   Pub.   Facilities,   837   P.2d   105,   117 

(Alaska 1992) (citing Vail v. Coffman Eng'rs, Inc., 778 P.2d 211 (Alaska 1989)). 

        22      See Alaskans for Efficient Gov't, Inc. v. Knowles, 91 P.3d 273, 276 (Alaska 

2004) (citing State, 646 P.2d at 208). 

        23      Beck, 837 P.2d at 117 (citingMadison v. Alaska Dep't of Fish & Game, 696 

P.2d 168, 176 (Alaska 1985)). 

        24      Cf. MO.ANN . STAT.  287.040(1) (West 2005) (classifying as an employer 

                                                                                        (continued...) 

                                                  -12-                                            6652
 

----------------------- Page 13-----------------------

dictionary   definitions   of   "course"   could   support   either   party's   interpretation   of   the 

statute.   One definition is "[m]ovement in time: DURATION" while another is "[a] typical 
or   normal    manner     of  proceeding:     regular   development."26      Because      the  statute  is 

ambiguous, we look to the purpose of the project owner amendment and its legislative 
history to discern the scope of coverage.27 

                The legislative history contains some discussion of the meaning of "project 

owner."     As   initially   introduced,   Senate   Bill   323   did   not   change   the   definition   of 

"contractor" in AS 23.30.045 and defined "project owner" as "a person who, in the 

course of the person's business engages the services of a contractor for the performance 
of certain work and who enjoys the beneficial use of the work."28              The bill was amended 

in the Senate Judiciary Committee to change the definitions of both "project owner" and 
"contractor."29    Senator Ralph Seekins, the bill's sponsor, said that the amendment was 

made to "clarif[y] who is a contractor and who is   a   project owner."30                According to 

        24      (...continued) 

"[a]ny person who has work done under contract on or about his premises which is an 
operation of the usual business which he there carries on"); 77 PA . CONS. STAT. ANN .  
52   (West   2002)   (imposing   compensation   liability   when   owner   permits   entry   on   his 
premises for work that is part of employer's regular business). 

        25      AS 23.30.045(f)(2). 

        26      WEBSTER 'S II NEW  COLLEGE DICTIONARY 266 (3d ed. 2005). 

        27      Alyeska Pipeline Serv. Co. v. DeShong , 77 P.3d 1227, 1234 (Alaska 2003). 

        28      Senate Bill (S.B.) 323, 23d Leg., 2d Sess. (2004). 

        29      Committee Substitute for Senate Bill (C.S.S.B.) 323, 23d Leg., 2d Sess. 

(2004). 

        30      Minutes, Sen. Judiciary Comm. Hearing on S.B. 323, 23d Leg., 2d Sess. 19 

                                                                                         (continued...) 

                                                  -13-                                             6652
 

----------------------- Page 14-----------------------

Pamela   LaBolle,   president   of   the   Alaska   Chamber   of   Commerce,   the   Chamber   of 
Commerce "suggested the amendments   . . . for the purpose of clarification."31                     The 

amendment        removed     the  phrase    "for  the  performance      of  certain   work"    from    the 

definition of "project owner" and added to the definition of "contractor" the limitation 

that a contractor "does not include a vendor whose primary business is the sale or leasing 
of tools, equipment, other goods, or property."32 

                There was no further discussion of the definition of "project owner" at that 

time, but Senator Scott Ogan asked how the bill "affect[ed] a homeowner building his 
own house who has a sub-contractor do a few things."33                 Jack Miller, attorney for the 

Chamber of Commerce, answered that "it exclude[d] anyone who is a project owner who 
[was]   not   engaged   in   business."34    In   a   later   hearing,   Miller   said   "that   a   residential 

homeowner, not as a business, who hires an individual to do renovations in his or her 

        30      (...continued) 

(Apr. 2, 2004) (statement of Sen. Ralph Seekins). 

        31      Id. (statement of Pamela Labolle). 

        32      C.S.S.B. 323 (JUD). 

        33      Minutes, Sen. Judiciary Comm. Hearing on S.B. 323, 23d Leg., 2d Sess. 19 

(Apr. 2, 2004) (statement of Sen. Scott Ogan). 

        34      Id. (testimony of Jack Miller).  Senator Seekins occasionally asked Miller 

to   answer   questions   about   the   legislation.   Legislators   appeared   to   rely   on   Miller's 
testimony to understand the legislation, so we give Miller's testimony more weight in 
interpreting the statute than we would an ordinary witness.               Nelson v. Municipality of 
Anchorage, ___P.3d___, Op. No. 6630 at 9, 2011 WL 6450910 at *4 (Alaska, Dec. 23, 
2011) (giving testimony of Miller on this legislation "greater weight" than the average 
witness). 

                                                  -14-                                             6652
 

----------------------- Page 15-----------------------

home retains no liability under the current law or this proposed legislation."35    According 

to Senator Seekins, homeowners were excluded from liability as project owners because 

"they shouldn't have to rise to the same level of professional responsibility as a project 
owner."36   These comments demonstrate that the legislature thought the law would apply 

to any business that hired contractors to remodel or renovate structures. 

               Nothing in the legislative history of the project owner amendments shows 

that the legislature intended to limit its application to cases where the injured worker was 
performing the usual business of the project owner.37         The overriding concern of the 

legislature was to ensure that all workers were covered by workers' compensation and 

that workers' compensation was the exclusive remedy available to injured workers.  We 
observed in Schiel v. Union Oil Co. of California38 that the legislative goals of the project 

owner amendment included the following: "to ensure or expand workers' compensation 

coverage for workers, to increase workplace safety, to prevent 'double dipping,' and to 

provide protection from tort liability to those who [were] potentially liable for securing 
workers' compensation coverage."39 

       35      Minutes, House Labor & Commerce Comm. Hearing on S.B. 323, 23d 

Leg., 2d Sess. 18 (Apr. 27, 2004) (testimony of Jack Miller). 

       36      Minutes, Sen. Labor & Commerce Comm. Hearing on S.B. 323, 23d Leg., 

2d Sess. 14 (Mar. 9, 2004) (statement of Sen. Ralph Seekins). 

       37      Neither does the legislative history show an intent to exclude those cases. 

See Anderson v. Alyeska Pipeline Serv. Co., 234 P.3d 1282, 1289 (Alaska 2010) (noting 
that legislative history contained examples of "the oil and gas industry's use of contract 
labor"). 

       38      219 P.3d 1025 (Alaska 2009). 

       39      Id. at 1032. 

                                             -15-                                         6652
 

----------------------- Page 16-----------------------

                Senator Seekins, the sponsor of S.B. 323, highlighted the broad scope of 

coverage when he stated at an early hearing on the bill, "The intent here is to say that 
everyone is covered and you have an exclusive remedy."40              In the sponsor statement, he 

wrote   that   the   legislation   would   extend   the   rights   of   injured   workers   and   "allow[] 

recourse for the payment of compensation benefits against project owners , as well as 
against contractors and subcontractors."41        In response to concerns that the bill took away 

rights from workers and gave them nothing in return, Senator Seekins indicated that the 

legislation gave injured workers additional recourse because project owners would be 

responsible     for  workers'     compensation      benefits   if  neither  the  contractor    nor   the 
subcontractor had coverage.42        At a later hearing, Senator Seekins told Senator Hollis 

French that workers benefitted from the legislation because a project owner would "have 

to make sure that work[ers'] compensation exist[ed] because if [he did] not, the project 
owner ha[d] to provide it."43      Senator Seekins discussed the problem of employers who 

said that all of their employees were subcontractors, "the idea being that they don't want 

to have to pay workers' compensation insurance" and said that S.B. 323 "absolutely 
makes that impossible to happen."44   In an email to Senator Seekins, Jack Miller wrote 

that S.B. 323 would 

        40      Minutes, Sen. Labor & Commerce Comm. Hearing on S.B. 323, 23d Leg., 

2d Sess. 27-28 (Mar. 4, 2004) (statement of Sen. Ralph Seekins) (emphasis added). 

        41      S.B. 323 Sponsor Statement, Sen. Ralph Seekins (emphasis in original). 

        42      Minutes, Sen. Labor & Commerce Comm. Hearing on S.B. 323, 23d Leg., 

2d Sess. 16 (Mar. 9, 2004) (statement of Sen. Ralph Seekins). 

        43      Minutes, Sen. Judiciary Comm. Hearing on S.B. 323, 23d Leg., 2d Sess. 20 

(Apr. 2, 2004) (statement of Sen. Ralph Seekins). 

        44      Minutes, Sen. Labor & Commerce Comm. Hearing on S.B. 323, 23d Leg., 

2d Sess. 27 (Mar. 4, 2004) (statement of Sen. Ralph Seekins). 

                                                 -16-                                            6652
 

----------------------- Page 17-----------------------

                have    a  positive   impact   for  both   workers    and   employers 
                because it will emphasize the importance of confirming that 
                all   parties  in  the  chain   of   contracting  have   the  required 
                insurance in place.  That, in turn, will force project owners to 
                use    only    qualified   and    fully   insured   contractors     and 
                subcontractors on their projects.        If they fail to do so and a 
                contractor     or  subcontractor     does   not   have   the  required 
                insurance     the  claim   would    be  covered    under   the  project 
                owner's policy.[45] 

 Senator Seekins stated that the legislation "mean[t] that the project owner, before he can 

hire that subcontractor or contractor has to make sure that those people are covered or 
carry that coverage, themselves"46 and that "everyone [up] the chain must make sure that 

every worker on the job is covered no matter who they work for."47 

                The legislature discussed whether the project owner amendments expanded 

the   requirement   for   businesses   to   purchase   workers'   compensation   insurance.         The 

discussion showed that legislators understood that project owners would likely not need 
to purchase additional workers' compensation insurance.48                But legislators noted that 

project owners risked liability if they did not require contractors to provide proof of 

        45      Email from Jack Miller, Att'y, Alaska Chamber of Commerce, to Sen. 

Ralph Seekins (Mar. 8, 2004, 16:56 AKST). 

        46      Minutes, Sen. Labor & Commerce Comm. Hearing on S.B. 323, 23d Leg., 

2d Sess. 22 (Mar. 4, 2004) (statement of Sen. Ralph Seekins). 

        47      Id. at 21. 

        48      Minutes, Sen. Judiciary Comm. Hearing on S.B. 323, 23d Leg., 2d Sess. 20 

(Apr. 2, 2004) (statement of Sen. Hollis French); Minutes, Sen. Labor & Commerce 
Comm. Hearing on S.B. 323, 23d Leg., 2d Sess. 16 (Mar. 9, 2004) (statements of Sen. 
Ralph Seekins & Sen. Hollis French); Minutes, Sen. Labor & Commerce Comm. Hearing 
on S.B. 323, 23d Leg., 2d Sess. 23 (Mar. 4, 2004) (statement of Sen. Con Bunde). 

                                                 -17-                                            6652
 

----------------------- Page 18-----------------------

workers' compensation coverage.49            According to Senator Seekins, project owners only 

had   to   require   proof   of   workers'   compensation   coverage   "[t]hrough   certificates   of 
insurance" from a contractor in order to protect themselves from liability.50               Senator Con 

Bunde      thought    "that   project   owners   should    want   to   have   some   kind    of   workers' 

compensation        coverage     as   well,   in  the   event   someone      was    fraudulent    in   their 
representation."51      At   a   later   hearing,   Senator   Ogan   said   that   the   legislation   would 

"require due diligence on the part of a project owner" and noted that the bill might 

"motivate contractors and subcontractors to 'skate' more because they will not be liable 
in the end."52 

                 The    legislature   understood      that  businesses     that  usually   did   not  have 

workers' compensation coverage would need to be sure their contractors had it or get it 

themselves.     According to Jack Miller, 

                 this   legislation    [did  not]   require    the  procurement       of  a 
                workers' compensation policy when a group of people, say 
                 an   investment      group,    organize    without    any    employees. 
                 However, when a building contractor is hired a certificate of 
                 insurance would need to be obtained in order to ensure that 

        49       Minutes, Sen. Judiciary Comm. Hearing on S.B. 323, 23d Leg., 2d Sess. 11 

(Apr. 16, 2004) (testimony of Jack Miller). 

        50       Minutes, Sen. Labor & Commerce Comm. Hearing on S.B. 323, 23d Leg., 

2d Sess. 23 (Mar. 4, 2004) (statement of Sen. Ralph Seekins). 

        51      Id. at 25. 

        52       Minutes, Sen. Judiciary Comm. Hearing on S.B. 323, 23d Leg., 2d Sess. 35 

(Apr. 14, 2004) (statement of Sen. Scott Ogan).              Senator Ogan expressed concern that 
the   State,   as   "the   largest   project   owner   in  the   state,   could  be   liable   for   workers' 
compensation if someone doesn't do their homework."  Id. at 34.  Mr. Miller explained 
that AS 23.30.045 already permitted the State to withhold contractual payments to pay 
for   workers'   compensation   insurance   if   a   contractor   did   not   maintain   its   workers' 
compensation coverage.  Id. at 35. 

                                                   -18-                                              6652
 

----------------------- Page 19-----------------------

                the contractor has a workers' compensation policy. . . .  If the 
                contractor didn't have a workers' compensation policy, the 
                contractor still has the independent obligation to secure the 
                workers'     compensation      benefit   payments     to  its  injured 
                workers.  If all of the aforementioned fails, the project owner 
                would have liability for the workers' compensation payments 
                and    simultaneously      couldn't    be   the  subject    of  a  tort 
                remedy. . . .[53] 

Miller also said that "[i]n the event of bankruptcy and no workers' compensation policy 

by   the   contractor,   the  remedy    against   the  project   owner    would    be  for  workers' 
compensation benefits."54      In sum, the statutory language and legislative history support 

Trudell's position that the legislature intended the project owner amendments to apply 

broadly, to ensure both that workers received workers' compensation benefits and that 

those who were potentially liable for those benefits would be protected against a lawsuit 

in tort by the exclusive remedy provision of the act. 

                2.      The usual business rule 

                In the course of trying to determine the proper interpretation of "project 

owner," the superior court applied the Larson test - "project owner liability requires 

finding that a business has contracted out its usual work to others" - because it was 

"reasonable and consistent with Alaska law."             The court determined that "[a] nexus 

between the claimant's work and the project owner's business [or] product must be 

proven in order to impose liability."  Concluding that there was no connection between 

Trudell's     construction    activities   -    which    the  court   characterized     as  "a  home 

improvement project" - and the Hibberts' taxicab or property management businesses, 

the superior court ruled against the plaintiff. 

        53      Minutes, House Labor & Commerce Comm. Hearing on S.B. 323, 23d 

Leg., 2d Sess. 24-25 (Apr. 27, 2004) (statement of Jack Miller). 

        54      Id. at 25 

                                                 -19-                                             6652 

----------------------- Page 20-----------------------

                We disagree with the superior court's conclusion that the usual business 

rule is relevant to determining the meaning of "project owner." The superior court, faced 

with two theories of liability - project owner liability and employer liability - used 

principles from the latter to decide the former.   We declined to apply the usual business 
rule in construing an earlier version of AS 23.30.045 in Thorsheim v. State.55               Thorsheim 

involved a claim for death benefits on behalf of a widow whose husband was killed in 

a   plane   crash   while   flying   a   Department   of   Fish   and   Game   employee   on   a   stream 
survey.56   The decedent's employer, who did not have workers' compensation coverage, 

had contracted with the State to provide flying services.57          Evidence in the record showed 

that the Department of Fish and Game "maintained its own fleet of airplanes" but at 
times "this fleet was inadequate to meet the total demands" of the department.58                     As a 

result, "a portion of [the] flying work had been contracted out to private carriers."59                At 

that time "contractor" and "subcontractor" were not defined in AS 23.30.045.60                        We 

declined to follow cases from states where statutes defining coverage referred to work 

that was "in the line of [the employer's] usual business"; instead, we adopted alternate 
definitions of "contractor" and "subcontractor."61            We held that the Department of Fish 

        55      469 P.2d 383, 387-88 (Alaska 1970).
 

        56      Id. at 384-85.
 

        57      Id. at 385.
 

        58      Id.
 

        59      Id.
 

        60      Id. at 387. 

        61      Id. at 387-89 (quoting Evans v. Hawkins, 150 S.E.2d 324, 326 (Ga. App. 

1966)). 

                                                   -20-                                             6652
 

----------------------- Page 21-----------------------

and Game and the Department of Administration were not contractors but "acted as an 
integral   part   of   the   State   of   Alaska"   in   contracting  with   Thorsheim's   employer.62 

Because the State was not a contractor, it was not a statutory employer, and Thorsheim's 
widow was denied benefits.63 

                 The legislature adopted the definitions of "contractor" and "subcontractor" 
used   in  Thorsheim  when   it   amended   section   .045   in   1972.64       Before   passage   of   the 

project   owner   amendment,   a   business   owner   did   not   come   within   the   scope   of   the 

statutory-employer         definition    unless    the   business    owner     was    a  contractor     who 
subcontracted part of the contract.65 

                 The    Larsons'     treatise   identifies    two   purposes     of  statutory-employer 

legislation: (1) "to protect employees of irresponsible and uninsured subcontractors by 

imposing ultimate liability on the presumably responsible principal contractor, which has 

it within its power, in choosing subcontractors, to pass upon their responsibility and 
insist upon appropriate compensation protection for their workers"66 and (2) "to forestall 

        62       Id. at 389. 

        63       Id. at 390. 

        64       See  ch.   166,      3,   SLA   1972   (defining   "contractor"   as   "a   person   who 

undertakes by contract performance of certain work for another" and "subcontractor" as 
"a person to whom a contractor sublets all or part of his initial undertaking").                    At the 
same   time   the   legislature   prohibited   the   State   from   entering   into   a   contract   with   a 
business unless the business provided proof of workers' compensation insurance and 
made the State liable for workers' compensation benefits if the contractor did not in fact 
have coverage.  Id. 

        65       Everette v. Alyeska Pipeline Serv. Co., 614 P.2d 1341, 1346 (Alaska 1980) 

(citing Thorsheim, 469 P.2d at 389-90). 

        66       4    ARTHUR      LARSON       &     LEX    K.    LARSON,       LARSON 'S     WORKERS ' 

                                                                                           (continued...) 

                                                    -21-                                              6652
 

----------------------- Page 22-----------------------

evasion of the act by those who might be tempted to subdivide their regular operations 

among subcontractors, thus escaping direct employment relations with the workers and 

relegating them for compensation protection to small contractors who fail to carry . . . 
compensation insurance."67        The usual business rule addresses the second purpose, but 

the legislative history of the project owner amendment suggests that the legislature was 

concerned more with the first purpose and wanted those who hired contractors to ensure 

that the contractors and subcontractors had workers' compensation coverage or be liable 

themselves. 

                We also note that application of the usual business rule in other states does 
not   always   extend   the   workers'   compensation   exclusivity   shield   to   owners.68       The 

Hibberts   assert   that   Idaho's   definition   of   a   statutory   employer   "plainly   attempts   to 

capture the same concept as Alaska's 'project owner.' "              Yet in applying its statutory- 

employer statute, the Idaho Supreme Court permitted a negligence suit to go forward 

against   the   owner   of   a   construction   site,   even   though   the   injured   worker   received 
workers' compensation benefits from his direct employer, a subcontractor on the job.69 

        66      (...continued) 

COMPENSATION LAW  70.04 (2008) (footnotes omitted). 

        67      Id.   at    70.05   (footnotes   omitted).    Some     state  statutes   reflect  these 

alternative bases for statutory-employer status. See, e.g., IDAHO CODE ANN .  72-223(1) 
(2006)     (protecting     from   third-party    liability   (1)  employers      of  contractors     and 
subcontractors who have complied with workers' compensation laws                     and (2) persons 
who are "virtual proprietors or operators").           The Idaho Supreme Court labeled them 
"category one" and "category two" statutory employers. See Pierce v. Sch. Dist. No. 21, 
164 P.3d 817, 819 (Idaho 2007). 

        68      Robison v. Bateman-Hall, Inc., 76 P.3d 951, 956 (Idaho 2003); Zizza v. 

Dresher Mech. Contractors, Inc., 518 A.2d 302, 305 (Pa. Super. 1986). 

        69      Robison, 76 P.3d at 952-53, 957. 

                                                  -22-                                            6652
 

----------------------- Page 23-----------------------

The Idaho court applied the usual business rule and decided that the usual business of the 
owner, a retail store, did not include building construction or roof installation.70                The 

legislative history of the Alaska project owner amendment mandates a different result: 

The legislature clearly stated its intent to extend liability for workers' compensation and 

protection   from   negligence   suits   up   the   contracting   chain   to   business   owners   who 
engaged general contractors on construction projects.71 

                The superior court also wrote that "[a]nalysis of project owner liability 

should   reflect   principles   used   to   determine   if   there   is   an   employer   under   the   Act. 

Relative nature of the work analysis is also helpful." But we explicitly rejected using the 

relative nature of the work test to establish a statutory-employer relationship in Everette 
v.Alyeska Pipeline Service Co.72        There, we stated that the relative nature of the work test 

was not "useful" to determine whether the injured worker was a statutory employee of 
Alyeska during pipeline construction.73          Because the project owner amendment extends 

statutory-employer liability up the contracting chain to owners, the relative nature of the 

work test does not determine project-owner status. 

        70      Id. at 956-57. 

        71      Minutes, House Labor & Commerce Comm. Hearing on S.B. 323, 23d 

Leg., 2d Sess. 11 (Apr. 27, 2004) (statement of Sen. Ralph Seekins); Minutes, Sen. 
Judiciary Comm. Hearing on S.B. 323, 23d Leg., 2d Sess. 35 (Apr. 14, 2004) (testimony 
of Jack Miller); Minutes, Sen. Judiciary Comm. Hearing on S.B. 323, 23d Leg., 2d Sess. 
20 (Apr. 2, 2004) (statement of Sen. Ralph Seekins); Minutes, Sen. Labor & Commerce 
Comm. Hearing on S.B. 323, 23d Leg., 2d Sess. 15 (Mar. 9, 2004) (statement of Sen. 
Con Bunde); Minutes, Sen. Labor & Commerce Comm. Hearing on S.B. 323, 23d Leg., 
2d Sess. 20-21 (Mar. 4, 2004) (statement of Sen. Ralph Seekins). 

        72      614 P.2d 1341, 1346 n.5 (Alaska 1980). 

        73      Id. 

                                                  -23-                                             6652
 

----------------------- Page 24-----------------------

                We conclude that it was error to incorporate the usual business rule into the 

definition of "project owner" in AS 23.30.045(f)(2).              Even if the statutory language is 

ambiguous, the legislative history demonstrates the intent to cover many more situations 

than are covered by the usual business rule. 

        C.      The Hibberts Were Project Owners As Defined In AS 23.30.045. 

                Having determined that the usual business rule does not limit project owner 

status,   we   turn   to   the   question   whether   the   Hibberts   were   "project   owners"   under 

AS 23.30.045.       For even if the usual business rule is not a limit on the definition of 
"project owner," a project owner must still be a business.74           Although the superior court 

stated that "[t]he analysis [of project owner liability] should not end with a business or 

residential determination" but should include an evaluation of "the nexus between the 

contractor's activities and the project owner's business," the superior court considered 

whether the Hibberts were acting as homeowners when they hired Phillips to repair their 

office-residence.        The   court   found    that  "the   Hibberts    were   engaged     in  a  home 

improvement project that lasted three summers" and that "[a]ny effect on the Hibberts' 

taxicab or rental businesses was incidental - not a factor in the decision to upgrade the 

home."    The court determined that "[t]he roofing and siding project was not related to 

the   Hibberts'    profit-making      businesses";    it  called  the  Hibberts    "homeowners       and 

consumers." 

                In interpreting the definition of "project owner" the superior court said that 

"[t]he project owner's business must be a 'profit-making enterprise which ought to bear 

the   costs   of   injuries   incurred   in   the   business'   to   fall   within   the   Act." The   quoted 

language   is   from   a test we adopted to determine when someone is an employer for 

        74      AS 23.30.045(f)(2). 

                                                  -24-                                               6652 

----------------------- Page 25-----------------------

purposes      of  the  Workers'     Compensation       Act   rather   than  a  consumer.75      The    test 

elaborates   on   the   "business   or   industry"   definition   of   "employer"   in   the   Workers' 
Compensation   Act.76        We   have   noted   that   the   distinction   between   productive   and 

consumptive uses is based in part on a business's ability to pass on to consumers the cost 
of workers' compensation insurance.77           We agree with the superior court that this test is 

useful to differentiate businesses from homeowners for purposes of the project owner 

amendments. But we disagree with the superior court's application of the test to the facts 

of this case. 

                The Hibberts have two profit-making businesses that are able to pass on the 
cost of workers' compensation insurance to consumers - their cab business78 and their 

property rental business.79      The Hibberts did not take a home-office deduction for a part 

of   their   home   used   exclusively   for   business.80   Instead,   the   Hibberts   entered   into   a 

commercial lease with the cab company.              The cab company rented its shop and office 

from the Hibberts, and, as the trial court found, the rent paid by the cab company was the 

        75       Gaede v. Saunders, 53 P.3d 1126, 1127 (Alaska 2002) (quoting Kroll v. 

Reeser, 655 P.2d 753, 757 (Alaska 1982)). 

        76      Id. at 1126-27. 

        77      Nickels v. Napolilli, 29 P.3d 242, 253 (Alaska 2001). 

        78      The cab business had gross receipts of $613,000 in 2006, with a net income 

of   $138,212   after   paying   the   Hibberts   $84,856   in   salaries,   paying   $15,563   in   rent, 
(which covered all of the house mortgage) and paying all of the utilities (septic, electric, 
gas,   and   sanitation),   telephone,   property      taxes,   and  non-liability    insurance    on  the 
property, collectively totaling over $14,500. 

        79      The property rental business reported a profit of $15,923 in 2006. 

        80      See Tilman v. United States, 644 F. Supp.2d 391, 399-400 (S.D. N.Y. 2009) 

(citing Weissman v. Comm'r, 751 F.2d 512, 514 (2d Cir. 1984)) (discussing home-office 
deduction). 

                                                   -25-                                             6652
 

----------------------- Page 26-----------------------

full amount of the home mortgage.81         The lease agreement between the Hibberts and the 

cab company also made the cab company responsible for all utilities, insurance, and 

taxes, and it required that "any damage to the building and supplies will be fixed or 

repaired by tenant."  Debra Hibbert testified that the cab company paid the expenses of 

the properties it was associated with rather than paying a rent check to the Hibberts.  The 

Hibberts reported the rent they received from the cab company as income to their rental 
business and took depreciation on the shop as a deduction against that income.82  The cab 

company in turn deducted the rent it paid the Hibberts - the amount of the mortgage - 

as a business expense.      Even though the Hibberts and the cab company did not engage 

in arms-length negotiations to establish a rental amount, they nonetheless engaged in a 

commercial transaction when they signed the lease. 

                The   Hibberts'   contract   with   Phillips   and   the   work   performed   under   it 

arguably had both business and personal purposes.               Brent Hibbert testified about other 

work that was done on the office-residence in the years before and after the foundation 

and roof repair, emphasizing non-business aspects of that work.  Debra Hibbert testified 

that the renovations on which Trudell worked were not intended "primarily" to benefit 

the business.    The superior court focused its analysis on the reasons the Hibberts gave 

for the roof and foundation repair, finding that "[a]ny effect on the Hibberts' taxicab or 

rental businesses was incidental - not a factor in the decision to upgrade the home." 

        81      The lease did not specify that the cab company was leasing only a small 

part   of   the   office-residence.  It   said   that   the   cab   company   "lease[d]   the   shop   (1380 
Nighthawk Ln) and office (1385 Nighthawk Ln) space" from the Hibberts. 

        82      Even though the lease required the cab company to pay utilities and Debra 

Hibbert testified that the cab company paid the expenses of the properties, the Hibberts 
took a deduction for utility payments from the rent they reported receiving on the office 
and shop on their personal income tax returns. 

                                                  -26-                                            6652
 

----------------------- Page 27-----------------------

              The proper inquiry to determine whether the project was business-related 

is not the intent of the property owner, but the benefit to the business from the project. 

If intent alone determined project-owner status, a business owner could always evade 

responsibility in a situation that might have both business and personal purposes by 

saying that the primary intent was personal.  A more appropriate inquiry is the extent to 

which the business benefitted from the work and what connection there was between the 
repair work and the business.83 

              Here, the Hibberts' two profit-making businesses, the cab company and the 
rental business, both gained from the remodel work.84     The cab business benefitted from 

the repairs because they shored up the foundation under its office, provided a new door 
for the office, and repaired the office roof.85   The Hibberts' rental business benefitted 

because it had improved property to rent. 

              The Hibberts assert that their contract with Phillips was a personal expense 

rather than a business one because they paid cash for it; according to the Hibberts, they 

paid all business expenses with checks.      But the business and personal expenses and 

payments     were   commingled     to  such  an  extent  here  that  the  Hibberts'  claim  is 

problematic.    For example, the lease agreement required the cab company to pay taxes 

on the property it rented, yet the records showed that it paid all the taxes on the entire 

       83      Cf. Bartoo v. Buell, 662 N.E.2d 1068, 1070 (N.Y. 1996) (holding that to 

qualify for exemption for one- and two-family dwellings under New York scaffolding 
law, work must directly relate to residential use of the home). 

       84     The Hibberts' rental business was not limited to their lease agreement with 

the cab company.     They owned five pieces of property, including what Debra Hibbert 
conceded was "valuable commercial property," and rented out at least three of them. 

       85     Indeed, Brent Hibbert testified that Phillips was chosen from among several 

bidders because the others could not do the necessary foundation work under the office. 
Even the choice of contractor benefitted the cab company. 

                                            -27-                                        6652
 

----------------------- Page 28-----------------------

parcel and the Hibberts took a home-mortgage deduction on their personal income tax 

return.  The 2005 profit/loss statement for the cab company shows "land" expenses, that 

are different from the rental payments, but the cab company did not own land.  And the 

cash payments for the remodel made it impossible to determine who actually paid for the 

repairs. 

               The Hibberts contend that if they are found liable as project owners, any 

person with a home office who gets repair work done on his or her home could face 

liability for workers' compensation.       The Hibberts' office is not a typical home-office 

situation:  Their home also served as an office for two businesses, one of which was a 

putatively separate corporation that entered into a commercial lease for the office space, 

paid all of the expenses of the home and generated income in the hundreds of thousands 

of   dollars.  In   any   event,  the  legislature  wanted    project  owners    to  employ   only 

contractors   who    had   workers'   compensation;   it   recognized   that   the   project   owner 

amendments would require "due diligence" on the part of project owners and that project 

owners     might   choose   to  buy   their  own  workers'    compensation     policy   to  protect 
themselves.86   The Hibberts were sophisticated business owners who were familiar with 

sales tax and workers' compensation requirements.   Although the trial court considered 

the   Hibberts   "blameless,"    they  failed  to  inquire  as  to  the  workers'  compensation 

coverage for employees working on their premises; they also willingly agreed to pay 

cash for a large remodel project and to accept a job that charged $25 in sales tax on a bid 

of approximately $28,000.       The cab company at times carried workers' compensation 

        86     Minutes, Sen. Judiciary Comm. Hearing on S.B. 323, 23d Leg., 2d Sess. 35 

(Apr. 14, 2004) (statement of Sen. Scott Ogan); Minutes, Sen. Judiciary Comm. Hearing 
on S.B. 323, 23d Leg., 2d Sess. 20 (Apr. 2, 2004) (statement of Sen. Ralph Seekins); 
Minutes, Sen. Labor & Commerce Comm. Hearing on S.B. 323, 23d Leg., 2d Sess. 25 
(Mar. 4, 2004) (statement of Sen. Con Bunde). 

                                               -28-                                          6652
 

----------------------- Page 29-----------------------

insurance for office workers, so the Hibberts were aware that a business needed it for 

employees but not for owners or corporate officers. They could have inquired of Phillips 

about     his  workers'    compensation       coverage     before    the  accident,    as  the  legislature 
envisioned.87 

                 We agree with Trudell that this case is analogous to Suave v. Winfree.88 

There,   an   employee   of   a   corporation   was   injured   at   work;   after   receiving   workers' 
compensation   benefits,   she   sued   the   building   owner   for   negligence.89        The   building 

owner      was   a  partnership     composed      of  the   two   officers    and   shareholders     of  the 
corporation that employed the injured worker.90             The officers raised the defense that they 

were the injured worker's co-employees and thus protected by the exclusivity provision 
of the workers' compensation act.91          We noted there that "[t]he circumstance of separate 

legal entities owning the business and its premises . . . has ramifications."92              Because the 

officers   chose   "to   have   different   business   organizations   own   the   real   estate   and   the 
business," as landlords they were not the worker's co-employees.93 

                 Here, the Hibberts chose to enter into a   commercial lease with the cab 

company to rent the office-residence from them.                 In the lease agreement, they did not 

        87       Minutes, Sen. Labor & Commerce Comm. Hearing on S.B. 323, 23d Leg., 

2d Sess. 23 (Mar. 4, 2004) (statement of Sen. Ralph Seekins). 

        88       907 P.2d 7 (Alaska 1995). 

        89       Id. at 8. 

        90       Id. 

        91       Id. 

        92       Id. at 10. 

        93       Id. 

                                                    -29-                                              6652
 

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allocate a specific portion of the residence as the office of the cab company, nor did they 

prorate a part of the home mortgage as rent.             Instead, the cab company paid the full 

amount of the home mortgage.            They deducted the full amount of rent as a business 

expense of the cab company and reported the rent as income for their property business. 

They cannot disavow the commercial nature of the transaction when it does not benefit 

them.    The nature of the repairs to the office-residence and the structure of the lease 

agreement persuade us that, as a matter of law, the Hibberts were acting in their business 

capacity as commercial landlords when they contracted with Phillips. They are therefore 

project owners as defined in AS 23.30.045(f)(2). 

                Trudell's   situation   is   one   that   the   legislature   hoped   to   prevent   when   it 

enacted the project owner amendments.             The problem with uninsured contractors and 

their attempts to require employees to become independent contractors to avoid workers' 
compensation   liability   was   discussed   in   hearings   in   both   houses.94   The   legislature 

intended   that   someone   in   the   contracting   chain   would   have   workers'   compensation 

insurance; the legislation was limited to businesses, and for the most part businesses are 
required to carry workers' compensation coverage.95               As Senator Seekins said, "The 

intent here is to say everyone is covered and you have an exclusive remedy."96                Trudell, 

        94      Minutes, House Labor & Commerce Comm. Hearing on S.B. 323, 23d 

Leg., 2d Sess. 22-24 (Apr. 27, 2004)         (statement of Sen. Ralph Seekins); Minutes, Sen. 
Labor & Commerce Comm.               Hearing on S.B. 323, 23d Leg., 2d Sess. 27-28 (Mar. 4, 
2004) (testimony of Jack Miller). 

        95      Minutes, Sen. Judiciary Comm. Hearing on S.B. 323, 23d Leg., 2d Sess. 11 

(Apr. 16, 2004) (testimony of Jack Miller). 

        96      Minutes, Sen. Labor & Commerce Comm.  Hearing on S.B. 323, 23d Leg., 

2d Sess. 27-28 (Mar. 4, 2004) (statement of Sen. Ralph Seekins). 

                                                 -30-                                            6652
 

----------------------- Page 31-----------------------

limited   to   the   exclusive   remedy,   is   entitled   to   the   compensation   that   the   legislature 
intended.97 

        97      The dissenting opinion, while agreeing that the superior court erred in its 

interpretation of AS 23.30.045, (Dissent at 33) would remand for the superior court to 
apply the proper legal test to determine whether the Hibberts are project owners. (Dissent 
at 35) But where application of the rule to the facts before the court can lead to only one 
result, we have adopted that result and have declined to remand. See Kelly v. State, Dep't 
of Corrs., 218 P.3d 295, 302-03 (Alaska 2009) (holding that prison guard had satisfied 
all elements required to show that he had suffered an injury, obviating need for remand 
on that issue, where guard showed he had received traumatic death threat constituting 
"extraordinary and unusual" stress); Guttchen v. Gabriel, 49 P.3d 223, 226-27 (Alaska 
2002) (holding that while resolution of "issue typically involv[ing] a factual component 
. . . is . . .  usually consigned to the superior court's discretion," remand unnecessary 
where facts had been fully presented at superior court level); State v. Wentz, 805 P.2d, 
967 n.7 (holding "exceptional case" aggravator needed to enhance presumptive sentence 
had been established, obviating need for remand, where man with history of assaultive 
behavior beat his particularly vulnerable wife almost to death, causing permanent brain 
damage).     This is such a case. 

                The   undisputed   facts   are   that   (1)   the   Hibberts   have   two   profit-making 
businesses run from their home; (2) these businesses enjoyed gross receipts in excess of 
$600,000 and, considering net income plus salaries, returned about $240,000 to the 
Hibberts yearly and fully paid their mortgage, all utilities, and property taxes; (3) the 
businesses are able to pass on the cost of workers' compensation   insurance to their 
customers, especially the cab business; (4) the businesses benefitted directly from the 
repair work because it provided the businesses the locales from which they operated 
(shoring up the foundations, repairing the roof, etc. of the cab company   office, and 
providing   enhanced   rental   space   for   the   rental   business);   (5)   the   lease   between   the 
Hibberts and the cab company made no allocation of a specific portion of the house as 
the cab company's office nor did it prorate a part of the mortgage as rent; rather, the cab 
company paid the full amount of the mortgage (as well as all utilities and property taxes). 
When looking at the extent to which the businesses benefitted from the work and the 
connection between the work and the business, and given the size of the businesses and 
their ability to pass on the costs of workers' compensation insurance, the only possible 
conclusion is that the Hibberts were project owners. 

                                                  -31-                                             6652
 

----------------------- Page 32-----------------------

V.     CONCLUSION 

              The   judgment    of  the  superior  court  is  REVERSED,    and  the  case  is 

REMANDED to the superior court for entry of judgment that the Hibberts are project 

owners as defined in AS 23.30.045(f)(2). 

                                            -32-                                      6652
 

----------------------- Page 33-----------------------

STOWERS, Justice, dissenting in part. 

                 The court today considers whether the phrase "in the course of the person's 

business" in the statutory definition of "project owner" limits project owner liability to 

instances when a business contracts out its usual work to others, and holds that it does 
not.1  I do not disagree with the court's legal interpretation of AS 23.30.045. 

                 The court concludes, however, that the Hibberts' contract with Trudell's 

employer and the work performed under it "arguably had both business and personal 
purposes,"2 notwithstanding that the superior court found as a matter of fact that the 

Hibberts were engaged in a home improvement project when Trudell fell and injured 

himself, and that any effect of Trudell's work on the Hibberts' taxicab or rental business 

was "incidental" and that the roofing and siding project was not related to the Hibberts' 

profit-making   business.       The   court   criticizes   the   superior   court   for   focusing   on   the 

Hibberts' intent when they contracted with Trudell's employer; the court explains that 

the proper inquiry to determine whether the project was business related is to focus on 
the benefit to the business.3       I do not disagree with this interpretive rule.          But the court 

then makes and weighs its own "findings": the court explains "the Hibberts' two profit- 

making   businesses,   the   cab   company   and   the   rental   business,   both   gained   from   the 

remodel work"; " [t]he cab business benefitted from the repairs because they shored up 

the foundation under its office, provided a new door for the office, and repaired the office 

roof"; and the Hibberts' business and personal expenses and payments were commingled 

to   the   extent   that   these   facts   rendered   "meaningless"   the   Hibberts'   claim   that   their 

        1        Slip Op. at 10. 

        2        Slip Op. at 24, 26. 

        3        Slip Op. at 27. 

                                                   -33-                                                 6652 

----------------------- Page 34-----------------------

contract with Trudell's employer was a personal expense.4                  In essence, the court finds, 

contrary   to   the   superior   court's   findings,   that   the   Hibberts'   roof   repair   project   was 

business      related;   concludes      that  the   Hibberts     are  project    owners     as  defined     in 

AS 23.30.045(f)(2); and remands for the superior court to enter judgment in favor of 

Trudell.  It is the court's unwarranted intrusion into the superior court's function as fact- 

finder that I disagree with, and I therefore respectfully dissent in part. 

                 The history of this case illustrates the basis of my disagreement with the 

court's resolution of this appeal.          After the Hibberts filed their motion for summary 

judgment - which argued that their contract with Trudell's employer did not fall within 

AS 23.30.045's definition of "project owner" - the superior court ruled correctly that 

there   was   "a   question   of   fact   as   to   whether   [the   Hibberts]   were   hiring   [Trudell]   to 
perform repairs and renovations while engaged in the course of their cab business."5  The 

case went to trial; the parties were the only witnesses, and the superior court inspected 
the Hibberts' home/cab company office.6              At the conclusion of the trial, the court made 

factual findings that the construction project was mainly a home improvement project 

and that any effect on the Hibberts' taxicab or rental businesses was "incidental - not 
a   factor   in   the   decision   to   upgrade   the   home."7   The   superior   court   made   a   legal 

conclusion   that   the   Hibberts   therefore   were   not   project   owners   or   employers,   and 
therefore not liable for workers' compensation payments to Trudell.8 

         4       Slip Op. at 27. 

         5       Slip Op. at 5. 

         6       Slip Op. at 6. 

         7       Slip Op. at 8-9. 

         8       Slip Op. at 8. 

                                                    -34-                                               6652
 

----------------------- Page 35-----------------------

                I agree with this court that the superior court's legal analysis was erroneous 

through its application of the Larson test to determine the proper meaning of "project 
owner."9     But this does not end the analysis; the question then becomes whether the 

superior court'sfactual findings  were erroneous. We review the superior court's factual 

findings for clear error, reversing only when the court is left with the definite and firm 
conviction that a mistake has been made.10            Notably, the court does not determine that 

the superior court's factual findings were clearly erroneous, nor could it in my opinion. 

Rather, the court proceeds to review and weigh the facts, emphasizing its own  findings 

as described above.       But this is not the supreme court's proper function. 

                I therefore dissent from the part of the opinion whereby the court finds that 

the Hibberts' roof repair project was business related, and the remand order for the 

superior   court   to   enter   judgment   that   the   Hibberts   are   project   owners   as   defined   in 

AS 23.30.045(f)(2).  Rather, I would reverse and remand for the superior court to apply 

the proper legal test to the facts and determine whether the Hibberts are project owners 

under the statute and the legal test established by this court's opinion. 

        9       Slip Op. at 20-21. 

        10      Shooshanian v. Dire, 237 P.3d 618, 622 (Alaska 2010) (citations omitted). 

                                                  -35-                                                6652 
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