04-002524 Triple M Enterprises, Inc. vs. Department Of Financial Services, Division Of Workers' Compensation Status: Closed Recommended Order on Thursday, January 13, 2005.

Summary: Petitioner failed to obtain workers` compensation coverage for its employees which met the requirements of Chapter 440, Florida Statutes. Respondent properly issued the stop-work order. Recommend that Petitioner pay a penalty of $36,521.61.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

TRIPLE M ENTERPRISES, INC., )

)

Petitioner, )

)

vs. ) Case No. 04 - 2524

)

DEPARTMENT OF FINANCIAL )

SERVICES, DIVISION OF WORKERS' )

COMPENSATION, )

)

Respondent. )

)

RECOMMENDED ORDER

This cause came on for formal hearing before Harry L.

Hooper, Administrative Law Judge with the Division of

Administrative Hearings, on November 9, 2004, in Pensacola,

Florida.

APPEARANCES

For Petitioner: Dwain Sand ers, Corporate Representative

Celina Sanders, Corporate Representative

Triple M Enterprises, Inc.

24393 North 71

Robertsdale, Alabama 36567

For Respondent: Joe Thompson, Esquire

Department of Financial Services

Divi sion of Workers' Compensation

200 East Gaines Street

Tallahassee, Florida 32399

STATEMENT OF THE ISSUE

The issue is whether Petitioner, Triple M Enterprises,

Inc., employed persons in the State of Florida without obtaining

workers' compensa tion insurance meeting the requirements of

Chapter 440, Florida Statutes. If Petitioner did not obtain the

required insurance, the subsequent issue is the amount of any

penalty.

PRELIMINARY STATEMENT

The event giving rise to this hearing occurred on Jun e 4,

2004, when a Stop - Work Order was issued to Petitioner by

Respondent Division of Workers' Compensation Insurance

(Division). On June 25, 2004, Petitioner Triple M Enterprises,

Inc. (Triple M), filed a petition for a formal administrative

hearing. The matter was forwarded to the Division of

Administrative Hearings on July 19, 2004.

The case was set for hearing on September 9, 2004, in

Pensacola, Florida. Pursuant to a Motion for Continuance filed

by the Division, the case was rescheduled for Novemb er 9, 2004,

and was heard as scheduled.

At the hearing the Division presented the testimony of

Patricia Jean Krossman and had eight exhibits admitted into

evidence. The Division's exhibits were considered by the

Administrative Law Judge in the preparat ion of this Recommended

Orderiple M presented the testimony of Dwain and Celina

Sanders, and offered one exhibit into evidenceiple M's

exhibit was admitted and considered by the Administrative Law

Judge in the preparation of this Recommended Orde r.

A Transcript was filed on December 7, 2004. After the

hearing, Triple M filed a letter dated November 17, 2004, which

was in the nature of Proposed Findings of Fact and Conclusions

of Law and which was considered in the preparation of this

Recommende d Order. The Division requested an enlargement of

time in which to present its Proposed Findings of Fact and

Conclusions of Law, which was granted. The Division's Proposed

Findings of Fact and Conclusions of Law were eventually filed on

December 29, 2004 , and were considered in the preparation of

this Recommended Order.

References to statutes are to Florida Statutes (2004)

unless otherwise noted.

FINDINGS OF FACT

1. The Division is charged with the regulation of workers'

compensation insurance in the State of Florida and is

responsible for enforcing the statutory requirement that

employers secure workers' compensation insurance for the benefit

of their employees.

iple M, is a corporation located at 24393 North 71,

Robertsdale, Alabama, and is a framing and drywall contractor.

3. Dwain Sanders and Celina Sanders are principals of

Triple M.

4. On June 4, 2004, Triple M was engaged as a

subcontractor in the construction of a building on the premises

located at 334 Gulf Breeze Parkway, Gulf Br eeze, Florida.

5. On June 4, 2004, Patricia Jean Krossman was an

investigator employed by the Division. Her duties include

ensuring that the employers in the state are in compliance with

the requirements of the Workers' Compensation Law. More

specifica lly, she visits work sites, and determines if the

workers are covered by workers' compensation insurance.

6. The morning of the aforementioned date, Ms. Krossman

visited 334 Gulf Breeze Parkway, in Gulf Breeze, Florida, and

observed four men engaged in construction activities, including

framing a building.

7. Dwain Sanders, who was at the site, identified himself

as the owner and president of Triple M, which was the employer

of the four men who were working at the site. Ms. Krossman

requested that Mr . Sanders provide her with proof that he had

workers' compensation coverage effective in Florida.

8. Mr. Sanders made an immediate effort to supply the

requested proof. Pursuant to Mr. Sanders' request, his

insurance agent in Montgomery, Alabama faxed a portion of Triple

M's policy to the Division's Pensacola office. The documents

received by Ms. Krossman caused her to conclude that Triple M

had not complied with Florida law because she believed the

document did not demonstrate that Florida premium rat es were

paid, or that Florida class codes were used, or that there was a

Florida endorsement in place.

9. Ms. Krossman conducted a database search of the

Coverage and Compliance Automated System database and the

National Council on Compensation Insuran ce database. The search

did not demonstrate that Triple M had a policy then effective in

Florida. Having concluded that the documents produced by

Triple M failed to demonstrate coverage in accordance with

Chapter 440, Florida Statutes, and after noting the absence of

policy information in the databases, Ms. Krossman issued a Stop -

Work Order to Triple M on June 4, 2004.

10. The portion of Triple M's policy, provided by Triple

M's insurance agent by facsimile, number 748 - 36 - 79, which was

issued by the Ame rican Home Assurance Company to Triple M, had a

classifications of operations page which related solely to work

to be performed in Alabama. This page provided class codes, the

rates, and the premium basis which provided the total estimated

annual premium that Triple M was required to pay, based on

Alabama law.

11. The faxed document included a policy information page

that provided in Item 2, that the policy period ran from

January 1, 2004 until January 1, 2005. It provided in Item 3A,

as follows: " Workers Compensation Insurance: Part One of the

policy applies to the Workers' Compensation Law of the states

listed here: AL."

12. The policy information page provided in Item 3C that,

"Part Three of the policy applies to the states, if any, listed

he re:" and lists 44 states, including Florida.

13. The policy provides in Item 4, "Classifications of

Operation," a statement of the rating group, and the "total

classification premium increase limits," under the heading,

"State of Alabama Totals."

14. On June 25, 2004, Ms. Krossman received via facsimile

machine, an endorsement to policy no. WC 748 - 36 - 79. This was

the first time Ms. Krossman had seen this endorsement. It

purported to add Florida coverage using Florida premium rates

and class codes. It also purported to add the Gulf Breeze

Parkway work - site where Ms. Krossman found Triple M engaged in

construction activities. The base policy, on its face,

indicated a date of January 1, 2004. The issue date of the

endorsement was June 16, 2004. This endorsement was not in

effect on June 4, 2004, the date of the Stop Work Order.

15. Ms. Krossman served Triple M a "Request for Production

of Business Records for Penalty Assessment Calculation." The

Division has the statutory authority to request pay roll records

from an employer working in Florida and the "Request for

Production of Business Records for Penalty Assessment

Calculation" is the vehicle through which those records are

sought. The payroll records provide the data required to

calculate any penalties for failure to maintain required

coverage.

16. Penalties are calculated by determining the premium

amount the employer would have paid based on his or her Florida

payroll, and multiplying by a factor of 1.5.

17. In response to the "Re quest for Production of Business

Records for Penalty Assessment Calculation," Triple M provided

payroll records. The records indicated that Triple M had

employed workers in Florida in 2001, 2002, 2003, and 2004.

Using the records provided by Triple M, th e penalty was

calculated by Ms. Krossman. After some interaction with

Ms. Celina Sanders, of Triple M, she eventually determined that

the proper penalty to be assessed was $36,521.61.

18. The penalty was calculated using Florida premium rates

and class codes in accordance with the dictates of

Section 440.38, Florida Statutes. The penalty is correct.

iple M depends on its agent, the Goff Group, of

Montgomery, Alabama, to provide proper insurance coverage.

20. As noted above, Item 3.A of the policy listed the

primary state of coverage as being Alabama. The policy plainly

states at "Part Three - Other States Insurance, How This

Insurance Applies," in paragraph 1, that "This other states

insurance applies only if one or more states are shown in

Item 3.C of the Information Page." One of the other states

shown is Florida.

21. At paragraph 2, of the section noted immediately

above, the policy states, "If you begin work in any one of those

states after the effective date of this policy and are not

insured or are not self - insured for such work, all provisions of

the policy will apply as though that state were listed in

Item 3.A of the Information Page."

22. At paragraph 3 of the policy, the following sentence

is found: "We will reimburse you for the benefits required by

the workers' compensation law of that state if we are not

permitted to pay the benefits directly to persons entitled to

them."

23. At paragraph 3, the following sentence is found: "If

you have work on the effective date of this policy in any state

not listed in Item 3.A. of the Information Page, coverage will

not be afforded for that state unless we are notified within

thirty days."

24. After that language is the following: "B. Notice.

Tell us at once if you begin work in any state listed in

Item 3.C. of the Information Page."

25. The plain language of the policy reveals that Triple

M's employees were covered by the policy, and that the employees

would receive the same benefits, in case of injury, as if it

were a Florid a Policy with Florida rates and classifications, so

long as the work at Gulf Breeze Parkway had not been going on

for more than thirty days.

26. Ms. Sanders testified under oath that she notified

Triple M's carrier within 30 days of the inception of the work

at the Gulf Breeze Parkway site. A letter to the Department of

Financial Services signed by Dwain and Celina Sanders on behalf

of Triple M, dated June 24, 2004, asserted that Triple M had

just begun working in Florida, for the first time in 2004, th e

week that Ms. Krossman entered the work site.

iple M has been in business for 22 years and has

never been bankruptiple M has 401K plans for its employees

as well as health insuranceiple M would have difficulty

paying the fine proposed by the Division.

iple M believed its workers were covered by workers'

compensation insurance and they were covered. The parties agree

that American Home Assurance Company is authorized to write

insurance in Florida.

CONCLUSIONS OF LAW

29. The Division of Administrative Hearings has

jurisdiction over the parties and subject matter of this

proceeding pursuant to Sections 120.569 and 120.57(1), Florida

Statutes.

30. The Division must prove by clear and convincing

evidence that Triple M faile d to provide its Florida employees

with workers' compensation insurance in accordance with the

requirements of Chapter 440, Florida Statutes, and that the

civil and administrative penalties assessed are correct.

Department of Banking and Finance, Div. of Securities and

Investor Protection v. Osborne Stern, Inc. , 670 So. 2d 932 (Fla.

1996).

31. The Division cites Dept. of Labor and Employment

Security, Div. Of Workers' Compensation v. Genesis Plastering

Inc. , Case No. 00 - 3749 (DOAH April 27, 2001) and De pt. of Labor

and Employment Security, Div. Of Workers' Compensation v. Bobby

Cox, Sr. d/b/a C H Well Drilling , Case No. 99 - 3854 (DOAH

March 20, 2000), for the proposition that the standard of proof

is by a preponderance of the evidence. However, nothing in

those cases, or any of the additional cases cited by the

Division, reveals why, in a case where a severe administrative

penalty may be imposed, the higher standard required by Osborne

Stern, Inc. , should not apply.

32. It is recognized that two - thirds of the penalty

represents premiums that should have been paid based on Florida

rates but were not. However, the remaining one third is pure

penalty. Upon consideration of the entire penalty scheme found

at Section 440.107(7)(c)1., Florida Statutes, which is recited

in its entirety at paragraph 36, it is found that the interests

of justice require a standard of proof of clear and convincing

evidence.

33. Section 440.10(1)(a), Florida Statutes,

provides in part as follows:

(1)(a) Every employer coming wi thin the

provisions of this chapter shall be liable

for, and shall secure, the payment to his or

her employees, or any physician, surgeon, or

pharmacist providing services under the

provisions of s. 440.13 , of the compensation

payable under ss. 440.13 , 440.15, and

440.16 . Any contractor or subcontractor who

engages in any public or private

construction in the state shall secure and

maintain compensation for his or her

employees under this chapter as provided in

s. 440.38 .

34. Section 440.107, Florida Statutes, provides in part as

follows:

440.107. Department powers to enforce

employer compliance with coverage

requirements

(1) The Legislature finds that the failure

of an employer to comply with the workers'

compensation coverage requirements under

this chapter poses an immediate danger to

public health, safety, and welfare.

* * *

(7)(a) Whenever the department determines

tha t an employer who is required to secure

the payment to his or her employees of the

compensation provided for by this chapter

has failed to secure the payment of workers'

compensation required by this chapter or to

produce the required business records unde r

subsection (5) within 5 business days after

receipt of the written request of the

department, such failure shall be deemed an

immediate serious danger to public health,

safety, or welfare sufficient to justify

service by the department of a stop - work

ord er on the employer, requiring the

cessation of all business operations. If

the department makes such a determination,

the department shall issue a stop - work order

within 72 hours. The order shall take

effect when served upon the employer or, for

a partic ular employer worksite, when served

at that worksite. In addition to serving a

stop - work order at a particular worksite

which shall be effective immediately, the

department shall immediately proceed with

service upon the employer which shall be

effective upon all employer worksites in the

state for which the employer is not in

compliance. A stop - work order may be served

with regard to an employer's worksite by

posting a copy of the stop - work order in a

conspicuous location at the worksite. The

order shal l remain in effect until the

department issues an order releasing the

stop - work order upon a finding that the

employer has come into compliance with the

coverage requirements of this chapter and

has paid any penalty assessed under this

section. The depart ment may issue an order

of conditional release from a stop - work

order to an employer upon a finding that the

employer has complied with coverage

requirements of this chapter and has agreed

to remit periodic payments of the penalty

pursuant to a payment agr eement schedule

with the department. If an order of

conditional release is issued, failure by

the employer to meet any term or condition

of such penalty payment agreement shall

result in the immediate reinstatement of the

stop - work order and the entire un paid

balance of the penalty shall become

immediately due. The department may require

an employer who is found to have failed to

comply with the coverage requirements of s.

440.38 to file with the department, as a

condition of release from a stop - work order,

periodic reports for a probationary period

that shall not exceed 2 years that

demonstrate the employer's continued

compliance with this chapter. The

department shall by rule specify the reports

required and the time for filing under this

subsection.

35 . Section 440.38, Florida Statutes, states in part:

440.38. Security for compensation;

insura nce carriers and self - insurers

(1) Every employer shall secure the payment

of compensation under this chapter:

(a) By insuring and keeping insured the

payment of such compensation with any stock

company or mutual company or association or

exchange, aut horized to do business in the

state; . . .

* * *

(7) 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 t he 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.

* * *

(d) 1. In addition to any penalty, stop -

work order, or injunc tion, 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 t he 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.

36. Section 440.02(16)(a), Florida Statutes, defines

"em ployer" as "every person carrying on an employment...."

"Employment" is defined in Section 440.02(17)(a), Florida

Statutes, as "any service performed by an employee for the

person employing him or her." Triple M, during relevant times,

was an employer en gaged in employment activities in Florida.

37. It is found by clear and convincing evidence that

Triple M was employing persons in Florida without maintaining at

all times the required coverage under a Florida endorsement

using Florida rates and rules pur suant to payroll reporting that

accurately reflects the work performed in this state by such

employees.

38. It is found by clear and convincing evidence that

Triple M should pay a fine of $36,521.61, in accordance with the

requirements of Section 440.107( 7) (d)1., Florida Statutes.

RECOMMENDATION

Based upon the Findings of Fact and Conclusions of Law, it

is,

RECOMMENDED that the Division of Workers' Compensation

affirm the Stop - Work Order issued to Petitioner on June 4, 2004,

and assess a fine of $36, 521.61.

DONE AND ENTERED this 13th day of January, 2005, in

Tallahassee, Leon County, Florida.

S

HARRY L. HOOPER

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399 - 3060

( 850) 488 - 9675 SUNCOM 278 - 9675

Fax Filing (850) 921 - 6847

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 13th day of January, 2005.

COPIES FURNISHED :

Joe Thompson, Esquire

Department of Financial Services

Divi sion of Workers' Compensation

200 East Gaines Street

Tallahassee, Florida 32399

Dwain Sanders

Triple M Enterprises, Inc.

24393 North 71

Robertsdale, Alabama 36567

Honorable Tom Gallagher

Chief Financial Officer

Department of Financial Services

The Cap itol, Plaza Level 11

Tallahassee, Florida 32399 - 0300

Pete Dunbar, General Counsel

Department of Financial Services

The Capitol, Plaza Level 11

Tallahassee, Florida 32399 - 0300

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit w ritten 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.