04-002965 Department Of Financial Services, Division Of Workers&Apos; Compensation vs. H.R. Electric, Inc. Status: Closed Recommended Order on Thursday, June 8, 2006.

Summary: The penalty is assessed against Respondent, a Georgia Company, for performing work in Florida without proper workers` compensation insurance is appropriate.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF FINANCIAL )

SERVICES, DIVISION OF WORKERS' )

COMPENSATION , )

)

Petitioner , )

)

vs. ) Case No. 04 - 2965

)

H.R. ELECTRIC, INC. , )

)

Respondent . )

)

RECOMMENDED ORDER

Pursuant to n otice, this cause was heard by Linda M. Rigot,

the assigned Administrative Law Judge of the Division of

Administrative Hearings, on March 13, 2006, in Tallahassee,

Florida.

APPEARANCES

For Petitioner: Colin M. Roopnarine, Esquire

Douglas D. Dolan, Esquire

Department of Financial Services

Division of Legal Services

200 East Gaines Street

Tallahassee, Florida 32399 - 4229

For Respondent: Did not appear and was not represented

STATEMENT OF THE ISSUES

The issues presented are (1) whether Respondent properly

secured the payment of workers’ compensation insurance coverage

and, if not, what penalty is warranted for such failure; and (2)

whether Respondent conducted business operations in violat ion of

a stop - work order and, if so, what penalty is warranted for such

violation.

PRELIMINARY STATEMENT

On July 7, 2004, Petitioner issued and served Stop Work

Order and Order of Penalty Assessment Number 04 - 416 - D1 on

Respondent, alleging that Respondent failed to abide by the

requirements of Florida's Workers' Compensation Law. The Order

required Respondent to cease all business operations.

Respondent timely requested an administrative hearing regarding

the allegations in that Order, and this cause wa s transferred to

the Division of Administrative Hearings to conduct the

evidentiary proceeding.

An Amended Order of Penalty Assessment was subsequently

served on Respondent and was amended twice thereafter. On

October 7, 2005, the fourth Amended Order of Penalty Assessment

was served on Respondent, and that Order was the subject of the

final hearing in this cause.

Petitioner presented the testimony of its investigator

Katina Renee Johnson. Petitioner’s Exhibits numbered 1 through

24 were admitted in evidence. In addition, official recognition

was granted for Sections 440.02, 440.021, 440.05, 440.06,

440.10, 440.107, and 440.38, Florida Statutes, and for Chapter

69L - 6, Florida Administrative Code.

A transcript of the hearing was filed on April 12, 2 006,

and Petitioner filed its proposed recommended order on April 21,

2006. No pleading or other document has been filed post - hearing

by the Respondent.

FINDINGS OF FACT

1. Respondent is a corporation domiciled in Georgia and

engaged in the business of electrical work, which is a

construction activity.

2. On July 2, 2004, Petitioner's investigator

Katina Johnson visited 6347 Collins Road, Jacksonville, Florida,

on a random job site visit.

3. Investigator Johnson inquired of Respondent's

superintende nt at the job site whether Respondent had secured

the payment of workers’ compensation coverage. She was informed

that Respondent had done so and was subsequently provided with a

Certificate of Liability Insurance from Respondent’s agent in

Georgia, the C owart Insurance Agency, Inc.

4. Investigator Johnson also obtained a copy of

Respondent’s workers’ compensation insurance policy which had a

policy period of September 23, 2003, to September 23, 2004. The

policy and the information contained in the Cert ificate of

Liability Insurance were not consistent. Keith Cowart,

Respondent’s insurance underwriter in Georgia, testified in

deposition that the certificate of insurance is not correct

because it conflicts with Respondent’s workers’ compensation

policy, 01 - WC - 975384 - 20, which does not have a Florida

endorsement.

5. Subsequent to the site visit, Investigator Johnson

continued the investigation of Respondent utilizing the

Department’s Coverage and Compliance Automated System (“CCAS”)

database that contain s information to show proof of coverage.

She determined that Respondent did not have a Florida workers'

compensation insurance policy. Johnson also checked the

National Council for Compensation Insurance (“NCCI”) database

and further confirmed that Respo ndent did not have a workers’

compensation insurance policy for the State of Florida.

6. Petitioner also maintains a database of all workers’

compensation exemptions in the State of Florida. In consulting

that database, Johnson did not find any current, valid

exemptions for Respondent.

7. Florida law requires that an employer who has employees

engaged in work in Florida must obtain a Florida workers’

compensation policy or endorsement for such employees utilizing

Florida class codes, rates, rules, and manuals to be in

compliance. Further, any policy or endorsement used by an

employer to prove the fact of workers' compensation coverage for

employees engaged in Florida work must be issued by an insurer

that holds a valid certificate of authority in the State of

Florida.

8. The insurance policy held by Respondent did not satisfy

these standards. First, Respondent's policy was written by

Cowart Insurance Agency, a Georgia agency which was not

authorized to write insurance in Florida. Second, the premi um

was based on a rate that was less than the Florida premium rate ;

t he policy schedule of operations page shows that Safeco

Business Insurance insured Respondent for operations under class

codes utilizing Georgia premium rates.

9. On July 6, 2004, Inves tigator Johnson received a copy

of another insurance policy declaration page from the Cowart

Insurance Agency for Respondent that still did not have Florida

listed as a covered state under Section 3A. In fact, none of

Respondent’s workers’ compensation po licies had a Florida

endorsement with Florida listed in Section 3A.

10. On July 7, 2004, after consulting with her supervisor,

Investigator Johnson issued and served on Respondent a stop - work

order and order of penalty assessment for failure to comply wi th

the requirements of Chapter 440, Florida Statutes, specifically

for failure to secure the payment of workers’ compensation based

on Florida class codes, rates, rules and manuals.

11. After the issuance of the stop - work order, Respondent

produced a c ertificate of insurance with a Florida endorsement

that would allegedly confer workers’ compensation coverage

retroactively for Respondent. Such retroactive coverage does

not satisfy Respondent’s obligation.

12. Employers on job sites in Florida are requ ired to

maintain business records that enable Petitioner to determine

whether the employer is in compliance with the workers'

compensation law.

13. Investigator Johnson issued to Respondent a request

for the production of business records on July 7, 2004 . The

request asked the employer to produce, for the preceding three

years, documents that reflected payroll and proof of insurance.

Respondent produced payroll records for a number of employees.

14. On August 2, 2004, Investigator Johnson issued a

sec ond business records request to Respondent because she

noticed that the names of the workers that she interviewed

during her site visit were not the same as the list of employees

submitted by Respondent. Respondent failed to produce the

requested records.

15. When an employer fails to provide requested business

records which the statute requires it to maintain and to make

available to the Department, effective October 1, 2003, the

Department is authorized by Section 440.107(7)(e), Florida

Statutes, to i mpute that employer's payroll using the statewide

average weekly wage multiplied by l.5. Petitioner therefore

imputed Respondent's payroll for the entire period for which the

requested business records were not produced.

16. From the payroll records p rovided by Respondent, and

through imputation of payroll from October 1, 2003, the

Department calculated a penalty for the time period of July 7,

2001, through July 7, 2004, by assigning a class code to the

type of work utilizing the SCOPES Manual. The Am ended Order of

Penalty Assessment which assessed a penalty of $115,456.14 was

served on Respondent through its attorney on September 27, 2004.

17. The Department issued and served on Respondent a

second Amended Order of Penalty Assessment on November 1 0, 2004,

with the penalty imputed back three years to July 7, 2001. The

Department assessed a penalty of $100 per day for each day prior

to October 1, 2003, for a total of $216,794.50.

18. On April 28, 2005, the Department issued to Respondent

a third A mended Order of Penalty Assessment with an assessed

penalty of $63,871.02. The reduction in the amount of penalty

was due to the Department’s determination that it did not have

the authority at the time to impute the $100 per day penalty

prior to October 1, 2003.

19. On July 7, 2005, Respondent entered into a Payment

Agreement Schedule for Periodic Payment of Penalty and was

issued an Order of Conditional Release from Stop - Work Order by

the Department. Respondent made a down payment of ten percent

of t he assessed penalty; provided proof of compliance with

Chapter 440, Florida Statutes, by obtaining a Florida

endorsement on its workers’ compensation insurance policy; and

agreed to pay the remaining penalty in sixty equal monthly

payment installments. Re spondent has since defaulted on those

payments.

20. S ection 440.107(7)(c), Florida Statutes, requires the

D epartment to assess a penalty of $1,000 per day for each day

that the employer conducts business operations in violation of a

stop - work order.

21. S everal months after issuing the stop - work order,

Investigator Johnson was informed that Respondent was conducting

business operations in Miami in violation thereof. She obtained

documentation that showed Respondent was performing electrical

work as par t of a contract it entered into with KVC

Constructors, Inc., on August 4, 2004.

22. Investigator Johnson obtained the daily sign - in sheets

of KVC Constructors, Inc., that indicated the names of each

entity that performed work on the job site for each par ticular

day. She determined from the records that Respondent had worked

187 days in violation of the stop - work order prior to entering

into the Payment Agreement Schedule and obtaining the Order of

Conditional Release from the Department.

23. On Octobe r 7, 2005, the Department issued to

Respondent a fourth Amended Order of Penalty Assessment which

assessed a penalty of $250,871.02. That amount was comprised of

the $63,871.02 from the third Amended Order plus $187,000 for

the 187 days of violation of th e stop - work order.

CONCLUSIONS OF LAW

24. The Division of Administrative Hearings has

jurisdiction over the subject matter hereof and the parties

hereto. §§ 120.569 and 120.57(1), Fla. Stat.

25. Petitioner has the burden of proof in this case and

must show by clear and convincing evidence that Respondent

violated the Workers' Compensation Law during the relevant

period and that the penalty assessments it seeks are correct.

Dept. of Banking and Finance, Div. of Securities and Investor

Protection v. Osb orne Stern and Co. , 670 So. 2d 932 (Fla. 1996).

26. Pursuant to Sections 440.10(1) and 440.38, Florida

Statutes, every "employer" is required to secure the payment of

workers’ compensation for the benefit of its employees unless

exempted or excluded unde r Chapter 440.

27. "Employer" is defined as ". . . every person carrying

on any employment . . . ." § 440.02(16), Fla. Stat. "Employment

. . . means any service performed by an employee for the person

employing him or her , " and, specifically, for the " . . . .

construction industry, all private employment in which one or

more employees are employed by the same employer."

§ 440.02(17)(a) and (b)2 . , Fla. Stat.

28. An employer who elects to secure the payment of

workers' compensation by obtaining a comme rcial insurance policy

must assure that the policy comports with Florida law. In

pertinent part, Section 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.

29. Similarly, Subsection 440.3 8(7), Florida Statutes,

provides in relevant part 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, maint ain 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.

30. Petitioner has promulgated Florida Administrative Code

Rule 69L - 6.019(3) and (4), which provides as follows:

(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 employe es

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 pag e 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

info rmation 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.

31. Respondent did not have an endorsement that listed

Florida in Item 3.A. and, thus, did not comport with the above -

quoted legal requirements. Additionally, the endorsement on the

Certificate of Liability Insurance produced on July 2, 2004,

conflicted with Respondent’s Safeco Busi ness Insurance policy.

The actual policy is the most accurate and reliable source of

information.

32. Section 440.107(7)(a), Florida Statutes, provides, in

part, as follows:

Whenever the department determines that 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 has

failed to produce the required business

records . . . such failure shall be deem ed

an immediate serious danger to public

health, safety, or welfare sufficient to

justify service by the department of a stop -

work order on the employer, requiring the

cessation of all business operations. . . .

The order shall remain in effect until the

d epartment 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 department may issue an order

of con ditional 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 agreement schedule

with the depar tment.

33. Respondent continued its business operations for a

period of 187 days when it performed work for KVC Constructors,

Inc. Respondent was, therefore, in violation of Section

440.107(7)(a), Florida Statutes, and Petitioner properly

assessed the penalty of $1000 per day for 187 days pursuant to

Section 440.107(7)(c). The penalty represents the number of

days worked by Respondent, in violation of the stop - work order,

prior to Respondent entering into the Payment Agreement Schedule

for Periodic Pay ment of Penalty and obtaining the Order of

Conditional Release from Stop - Work Order from the Department.

34. Petitioner satisfied its burden of proving that

Respondent failed to secure the payment of workers’ compensation

and correctly assessed the statu tory penalty prescribed for such

failure and for performing work in violation of the stop - work

order.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is

RECOMMENDED that Petitioner enter a Final Order imposing a

penalty ag ainst Respondent in the amount of $250,871.02 minus

the amount of payments previously made by Respondent to the

Department.

DONE AND ENTERED this 8th day of June, 2006, in

Tallahassee, Leon County, Florida.

S

LINDA M. RIG OT

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

Divisio n of Administrative Hearings

this 8th day of June, 2006.

COPIES FURNISHED :

Colin M. Roopnarine, Esquire

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399 - 4229

H.R. Electric, Inc.

c/o Mr. Jeremy Hershberger

5512 Main Str eet

Flowery Branch, Georgia 30542

Honorable Tom Gallagher

Chief Financial Officer

Department of Financial Services

The Capitol, Plaza Level 11

Tallahassee, Florida 32399 - 0300

Carlos Mu ñ iz, General Counsel

Department of Financial Services

The Capitol, Pl aza Level 11

Tallahassee, Florida 32399 - 0300

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 wi th the agency that

will issue the Final Order in this case.