09-002321 Department Of Financial Services, Division Of Workers&Apos; Compensation vs. David Bumgarner Status: Closed Recommended Order on Wednesday, September 9, 2009.

Summary: Respondent's workers' compensation coverage failed to meet Florida requirements.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF FINANCIAL )

SERVICES, DIVISION OF WORKERS’ )

COMPENSATION, )

)

Petitioner, )

)

vs. ) Case No. 09-2321

)

DAVID BUMGARNER, )

)

Respondent. )

)

RECOMMENDED ORDER

On July 21, 2009, an administrative hearing in this case

was conducted by William F. Quattlebaum, Administrative Law

Judge, for the Division of Administrative Hearings.

APPEARANCES

For Petitioner: Justin H. Faulkner, Esquire

Paige B. Shoemaker, Esquire

Department of Financial Services

Division of Legal Services

200 East Gaines Street

Tallahassee, Florida 32399

For Respondent: (No appearance)

STATEMENT OF THE ISSUE

The issue in the case is whether David Bumgarner

(Respondent) should be assessed a penalty for an alleged failure

to obtain workers' compensation coverage for his employees.

PRELIMINARY STATEMENT

On February 25, 2009, the Department of Financial Services,

Division of Workers' Compensation (Petitioner), issued a Stop

Work Order and Order of Penalty Assessment against the

Respondent, asserting that the Respondent failed to "secure the

payment of workers' compensation in violation of sections

440.10(1), 440.38(1), and 440.107(2), Florida Statutes,"

specifically by his "failure to obtain coverage that meets the

requirements of Chapter 440 F.S. and the Insurance Code." The

Petitioner issued an Amended Order of Penalty Assessment on

March 31, 2009, identifying the amount of the proposed penalty

as $1,764,643.98.

The Respondent disputed the alleged violations and

requested a formal hearing. The Petitioner forwarded the

request to the Division of Administrative Hearings.

At the hearing, the Petitioner presented the testimony of

two witnesses and had Exhibits 1 through 9 admitted into

evidence. The Respondent did not appear at the hearing and had

no witnesses or exhibits presented on his behalf.

A Transcript of the hearing was filed on August 6, 2009.

The Petitioner filed a Proposed Recommended Order on August 17,

2009.

FINDINGS OF FACT

1. The Petitioner is the state agency designated to

enforce the provisions of Chapter 440, Florida Statutes (2008), 1

which requires that employers in Florida obtain workers'

compensation coverage for their employees.

2. The Respondent is a sole proprietor based in North

Carolina and doing business as "Builders and Assemblers."

3. On February 25, 2009, Ira Bender, an investigator

employed by the Petitioner, observed ten men assembling the

iron-and-steel frame for a single story storage building being

constructed at 7253 Gasparilla Road, Port Charlotte, Florida.

4. The Respondent was present at the time Mr. Bender

observed the workers, and Mr. Bender asked the Respondent about

the project. The Respondent advised Mr. Bender that he was the

owner of the company constructing the building, that the ten men

erecting the building frame were his employees, and that they

were being paid $10.00 per hour.

5. Mr. Bender, accompanied by the Respondent, then spoke

to each of the ten men at the work site and obtained their names

and other relevant information.

6. The Respondent provided to Mr. Bender a copy of a

certificate of insurance from "Acord" bearing policy

number BNUWC0108275.

7. Mr. Bender reviewed the Petitioner's "Coverage and

Compliance Automated System" (CCAS) database and information

contained on the National Council on Compensation Insurance

("NCCI") website. Both sources are routinely used to monitor

and review workers' compensation coverage.

8. Neither the CCAS database nor the NCCI website

indicated that the Respondent had workers' compensation coverage

valid within Florida for any of the ten employees at the work

site or that the Respondent had a valid exemption from coverage

for any employee.

9. After discussing the collected information with his

supervisor, Mr. Bender issued a Stop Work Order and Order of

Penalty Assessment dated February 25, 2009.

10. The Respondent subsequently provided a copy of his

workers' compensation policy to the Petitioner. The policy

information page attached to the policy is an NCCI-issued form

identified as "WC 00 00 01 A."

11. The Respondent's policy's information page provides,

in relevant part, as follows:

3.A. Workers Compensation Insurance: Part

One of the policy applied to the Workers

Compensation Law of the states listed here:

NC

* * *

C. Other States Insurance: Part Three of

the policy applies to the states, if any

listed here: All states and U.S.

territories except North Dakota, Ohio,

Washington, Wyoming, Puerto Rico, and the

U.S. Virgin islands, and states designated

in Item 3.A. of the Information Page.

12. Administrative rules adopted by the Petitioner and

referenced elsewhere herein explicitly state that the coverage

identified in the Respondent's policy information page is not

valid within the State of Florida.

13. Mr. Bender also issued a Request for Production of

Business Records on February 25, 2009. Other than the

previously referenced insurance certificate and policy, no

further business records were provided to the Petitioner by the

Respondent.

14. Mr. Bender subsequently forwarded the case to Lynn

Murcia, the Petitioner's penalty calculator.

15. Because the Respondent failed to provide business

records sufficient to enable computation of a penalty,

Ms. Murcia computed the penalty based on an imputed payroll as

provided by Florida law.

16. The NCCI publishes the "SCOPES Manual," which contains

a commonly-used system of occupational classifications used to

determine workers' compensation requirements. In Florida, the

SCOPES Manual has been adopted by incorporation into the Florida

Administrative Code.

17. The SCOPES Manual identifies the erection of steel or

iron frames for buildings not in excess of two stories under

classification code 5059. The Respondent's employees were

engaged in such activities, and Ms. Murcia therefore properly

classified the Respondent's employees under code 5059.

18. Ms. Murcia utilized the SCOPES classification in

determining the imputed payroll applicable to this case and,

thereafter, computed the penalty according to a worksheet that

has been adopted as an administrative rule by the Petitioner.

The worksheet is routinely used to calculate penalties

applicable to employers who fail to obtain workers' compensation

coverage for employees.

19. Based on Ms. Murcia's calculations, the penalty was

identified as $1,764,643.98, as was set forth in an Amended

Order of Penalty Assessment issued on March 31, 2009.

20. Ms. Murcia's calculation of the applicable penalty,

including her reliance on the applicable SCOPES classification

codes and the imputation of the Respondent's payroll, was not

disputed at the hearing. Her testimony has been fully credited.

CONCLUSIONS OF LAW

21. The Division of Administrative Hearings has

jurisdiction over the parties to and subject matter of this

proceeding. §§ 120.569 and 120.57, Fla. Stat. (2009).

22. The administrative fine at issue in this proceeding is

penal in nature. In order to prevail, the Respondent must

demonstrate by clear and convincing evidence that the Petitioner

was required to be in compliance with the applicable statutes on

the referenced date, that he failed to meet the requirements,

and that the proposed penalty is appropriate. Department of

Banking and Finance v. Osborne Stern and Company , 670 So. 2d 932

(Fla. 1996); Ferris v. Turlington , 510 So. 2d 292 (Fla. 1987).

As stated in Slomowitz v. Walker , 429 So. 2d 797, 800 (Fla. 4th

DCA 1983), the "clear and convincing" standard requires:

[T]hat the evidence must be found to be

credible; the facts to which the witnesses

testify must be distinctly remembered; the

testimony must be precise and explicit and

the witnesses must be lacking in confusion

as to the facts in issue. The evidence must

be of such weight that it produces in the

mind of the trier of fact a firm belief or

conviction, without hesitancy, as to the

truth of the allegations sought to be

established.

23. In this case, the burden has been met.

24. The Respondent is an "employer" as defined at

Subsection 440.02(16)(a), Florida Statutes. The men working at

the site identified herein were the Respondent's "employees" as

defined at Subsection 440.02(15)(a), Florida Statutes. The

Respondent and his employees were engaged in the construction

industry as defined at Subsection 440.02(9), Florida Statutes.

25. Every employer is required to obtain workers'

compensation coverage for employees unless a specific exemption

or exclusion is provided by law. See §§ 440.10 and 440.38, Fla.

Stat.

26. Such coverage must meet the requirements of

Chapter 440, Florida Statutes, and the Florida Insurance Code.

§ 440.107(2), Fla. Stat.

27. Subsection 440.10(1)(g), Florida Statutes, provides as

follows:

Subject to s. 440.38, any employer who has

employees engaged in work in this state

shall obtain a Florida policy or endorsement

for such employees which utilizes Florida

class codes, rates, rules, and manuals that

are in compliance with and approved under

the provisions of this chapter and the

Florida Insurance Code. . . .

28. Subsection 440.38(7), Florida Statutes, provides as

follows:

Any employer who meets the requirements of

subsection (1) through a policy of insurance

issued outside of this state must at all

times, with respect to all employees working

in this state, maintain the required

coverage under a Florida endorsement using

Florida rates and rules pursuant to payroll

reporting that accurately reflects the work

performed in this state by such employees.

29. Florida Administrative Code Rule 69L-6.019 provides,

in relevant part, as follows:

69L-6.019 Policies and Endorsements

Covering Employees Engaged in Work in

Florida.

(1) Every employer who is required to

provide workers’ compensation coverage for

employees engaged in work in this state

shall obtain a Florida policy or endorsement

for such employees that utilizes Florida

class codes, rates, rules and manuals that

are in compliance with and approved under

the provisions of Chapter 440, F.S., and the

Florida Insurance Code, pursuant to Sections

440.10(1)(g) and 440.38(7), F.S.

(2) In order to comply with Sections

440.10(1)(g) and 440.38(7), F.S., any policy

or endorsement presented by an employer as

proof of workers’ compensation coverage for

employees engaged in work in this state must

be issued by an insurer that holds a valid

Certificate of Authority in the State of

Florida.

(3) In order to comply with Sections

440.10(1)(g) and 440.38(7), F.S., for any

workers’ compensation policy or endorsement

presented by an employer as proof of

workers’ compensation coverage for employees

engaged in work in this state:

(a) The policy information page (NCCI form

number WC 00 00 01 A) must list “Florida” in

Item 3.A . and use Florida approved

classification codes, rates, and estimated

payroll in Item 4.

(b) The policy information page endorsement

(NCCI form number WC 89 06 00 B) must list

“Florida” in Item 3.A. and use Florida

approved classification codes, rates, and

estimated payroll in Item 4.

(4) A workers’ compensation policy that

lists “Florida” in Item 3.C. of the policy

information page (NCCI form number WC 00 00

01 A) does not meet the requirements of

Sections 440.10(1)(g) and 440.38(7), F.S.,

and is not valid proof of workers’

compensation coverage for employees engaged

in work in this state. (Emphasis supplied)

30. The Respondent's policy information page does not list

"Florida" within Item 3.A. of the referenced form as required by

the rule.

31. Although Item 3.C. of the policy information page

presumably includes Florida within its reference to "all

states," the rule explicitly states that such a reference does

not meet Florida requirements and "is not valid proof of

workers' compensation coverage for employees engaged in work in

this state."

32. The evidence establishes that the Respondent was an

employer who employed workers engaged in construction activities

within Florida, that the Respondent was required to obtain

workers' compensation for his employees, and that the Respondent

failed to obtain proper workers' compensation coverage valid

within Florida for the workers observed by Mr. Bender. There is

no evidence that the Respondent's employees were exempt from

coverage.

33. When an employer who is required to obtain workers'

compensation coverage has failed to do so, the Petitioner

is directed by statute to calculate a penalty.

Subsection 440.107(7)(d)1., Florida Statutes, provides in

relevant part as follows:

In addition to any penalty, stop-work order,

or injunction, the department shall assess

against any employer who has failed to

secure the payment of compensation as

required by this chapter a penalty equal to

1.5 times the amount the employer would have

paid in premium when applying approved

manual rates to the employer's payroll

during periods for which it failed to secure

the payment of workers' compensation

required by this chapter within the

preceding 3-year period or $1,000, whichever

is greater.

34. The Petitioner has adopted rules that specify the

records an employer is required to maintain and to produce upon

the Petitioner's request. See § 440.107(5), Fla. Stat., and

Fla. Admin. Code R. 69L-6.015. In calculating the penalty, the

Petitioner may rely on the employer's business records to

determine the payroll (and the applicable unpaid premium) which

underlies the calculation of the penalty.

35. When an employer fails to provide business records, as

occurred here, the Petitioner is required to impute the payroll

pursuant to Subsection 440.107(7)(e), Florida Statutes, which

provides as follows:

When an employer fails to provide business

records sufficient to enable the department

to determine the employer's payroll for the

period requested for the calculation of the

penalty provided in paragraph (d), for

penalty calculation purposes, the imputed

weekly payroll for each employee, corporate

officer, sole proprietor, or partner shall

be the statewide average weekly wage as

defined in s. 440.12(2) multiplied by 1.5.

36. Subsection 400.12(2), Florida Statutes, provides in

relevant part, as follows:

For the purpose of this subsection, the

"statewide average weekly wage" means the

average weekly wage paid by employers

subject to the Florida Unemployment

Compensation Law as reported to the Agency

for Workforce Innovation for the four

calendar quarters ending each June 30, which

average weekly wage shall be determined by

the Agency for Workforce Innovation on or

before November 30 of each year and shall be

used in determining the maximum weekly

compensation rate with respect to injuries

occurring in the calendar year immediately

following. The statewide average weekly wage

determined by the Agency for Workforce

Innovation shall be reported annually to the

Legislature.

37. The Petitioner has adopted Florida Administrative Code

Rule 69L-6.028, which identifies the manner in which the imputed

payroll is calculated with respect to various employees,

including corporate officers, sole proprietors, and partners

involved in a business, and which Ms. Murcia relied upon in

determining the imputed payroll in this case. In calculating

the penalty, Ms. Murcia utilized a worksheet that has been

adopted by incorporation through Florida Administrative Code

Rule 69L-6.027. Ms. Murcia's determination of the penalty

applicable to this case has been credited.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is RECOMMENDED that the Petitioner enter a final order

assessing a penalty of $1,764,643.98 against the Respondent.

DONE AND ENTERED this 9th day of September, 2009, in

Tallahassee, Leon County, Florida.

S

WILLIAM F. QUATTLEBAUM

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

[phone]

Fax Filing [phone]

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 9th day of September, 2009.

ENDNOTE

1/ Unless otherwise indicated, all references to the Florida

Statutes are to the 2008 version.

COPIES FURNISHED :

Justin H. Faulkner, Esquire

Paige B. Shoemaker, Esquire

Department of Financial Services

Division of Legal Services

200 East Gaines Street

Tallahassee, Florida 32399

David Bumgarner

21007 Pine Street

Cornelius, North Carolina 28031

Tracey Beal, Agency Clerk

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399-0390

Honorable Alex Sink

Chief Financial Officer

Department of Financial Services

The Capitol, Plaza Level 11

Tallahassee, Florida 32399-0300

Benjamin Diamond, General Counsel

Department of Financial Services

The Capitol, Plaza Level 11

Tallahassee, Florida 32399-0307

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within

15 days from the date of this Recommended Order. Any exceptions

to this Recommended Order should be filed with the agency that

will issue the Final Order in this case.