07-004428
U.S. Builders, L.P. vs.
Department Of Financial Services, Division Of Workers' Compensation
Status: Closed
Recommended Order on Wednesday, January 14, 2009.
Recommended Order on Wednesday, January 14, 2009.
1STATE OF FLORIDA
4DIVISION OF ADMINISTRATIVE HEARINGS
8U.S. BUILDERS, L.P., )
12)
13Petitioner, )
15)
16vs. ) Case No. 07-4428
21)
22DEPARTMENT OF FINANCIAL )
26SERVICES, DIVISION OF WORKERS )
31COMPENSATION, )
33)
34Respondent. )
36)
37RECOMMENDED ORDER
39A duly-noticed final hearing was held in this case by
49Administrative Law Judge T. Kent Wetherell, II, on September 24
59and November 17, 2008, by video teleconference between sites in
69Tallahassee and Jacksonville, Florida.
73APPEARANCES
74For Petitioner: William H. Andrews, Esquire
80Gray Robinson, P.A.
8350 North Laura Street, Suite 1100
89Jacksonville, Florida 32202
92For Respondent: Kristian E. Dunn, Esquire
98Justin Faulkner, Esquire
101Department of Financial Services
105Division of Workers Compensation
109200 East Gaines Street
113Tallahassee, Florida 32399-4229
116STATEMENT OF THE ISSUE
120The issue is whether Petitioner had the workers
128compensation insurance coverage required by Florida law, and if
137not, what penalty should be imposed.
143PRELIMINARY STATEMENT
145On June 18, 2007, the Department of Financial Services
154(Department) issued an Order of Penalty Assessment imposing a
163penalty of $14,983.96 on Petitioner for its failure to have the
175workers compensation insurance coverage required by Florida
182law. On August 23, 2007, Petitioner filed a Petition for
192Hearing challenging the penalty assessment.
197On September 25, 2007, the Department referred this matter
206to the Division of Administrative Hearings (DOAH) for the
215limited purpose of determining whether Petitioner should be
223afforded a hearing on its petition based upon the doctrine of
234equitable tolling. The referral was received by DOAH on
243September 26, 2007, and the case was assigned to Administrative
253Law Judge Don W. Davis.
258Judge Davis scheduled the hearing on the equitable tolling
267issue for November 19, 2007. The hearing was rescheduled
276several times at the request of the parties, and was ultimately
287held on February 29, 2008.
292On April 30, 2008, Judge Davis issued a Recommended Order
302finding that equitable tolling applied and recommending that the
311Department afford Petitioner a hearing on the merits of its
321petition. On June 25, 2008, the Department issued a Final Order
332DOAH for further proceedings.
336The Final Order was filed with DOAH on July 1, 2008, and
348DOAHs file in this case was re-opened on July 3, 2008. The
360case was assigned to the undersigned as a result of Judge Davis
372retirement.
373The final hearing was convened on September 24, 2008. At
383the outset of the hearing, the undersigned granted the parties
393ore tenus motion to continue the hearing to allow them to take
405the depositions of two witnesses in Texas who had been impacted
416by Hurricane Ike. The hearing reconvened on November 17, 2008.
426At the final hearing, the Department presented the
434testimony of Robert Lambert, and the parties jointly presented
443the deposition testimony of Teresa Quenemoen, Nancy Bingham, and
452Norman Adams. Joint Exhibits 1 through 4 were received into
462evidence. Official recognition was taken of Sections 440.10,
470440.107, and 440.38, Florida Statutes (2007), 1 / and Florida
480Administrative Code Rules 69L-6.019 and 69L-6.030.
486The Transcript of the final hearing was filed with DOAH on
497December 9, 2008. The parties were given 21 days from that date
509to file proposed recommended orders (PROs). The PROs were
518timely filed and have been given due consideration.
526FINDINGS OF FACT
5291. Petitioner is a Texas corporation that provides general
538contracting services.
5402. Petitioner has had employees working in Florida since
549at least October 1, 2006.
5543. On May 30, 2007, Department investigator Teresa
562Quenemoen initiated a workers compensation compliance
568investigation at a job-site in Jacksonville where Petitioners
576employees were supervising the construction of a retail shopping
585facility.
5864. At the time of Ms. Quenemoens investigation,
594Petitioner had a Workers Compensation and Employers Liability
602Insurance Policy (the policy) that covered the period of
611October 1, 2006, to October 1, 2007.
6185. The policy was issued by EMC Insurance Companies (EMC),
628which is authorized to issue workers compensation insurance in
637Florida.
6386. The policy included an Information Page on National
647Council on Compensation Insurance (NCCI) Form WC7002.
6547. Item 3.A of the Information Page lists Texas as the
665only state for which the workers compensation section of the
675policy applies. Florida is not listed in Item 3.A. 2 /
6868. Item 3.C of the Information Page states that Part Three
697of the policy applies to all states except for those
707specifically excluded. Florida is not one of the excluded
716states and, therefore, is implicitly included in the coverage
725afforded by Part Three of the policy.
7329. Part Three of the policy, entitled other states
741insurance, provides in pertinent part:
747A. How This Insurance Applies
7521. This other states insurance applies
758only if one or more states are shown in Item
7683.C. of the Information Page.
7732. If you begin work in any one of those
783states after the effective date of this
790policy and are not insured or are not self
799insured for such work, all provisions of the
807policy will apply as though that state were
815listed in Item 3.A of the Information Page.
8233. We will reimburse you for the benefits
831required by the workers compensation law of
838that state if we are not permitted to pay
847the benefits directly to persons entitled to
854receive them.
8564. If you have work on the effective date
865of this policy in any state not listed in
874Item 3.A. of the Information Page, coverage
881will not be afforded for that state unless
889we are notified within thirty days.
895B. Notice
897Tell us at once if you begin work in any
907state listed in Item 3.C of the Information
915Page.
91610. Item 4 of the Information Page does not make specific
927reference to the Florida-approved classification codes, rates or
935manuals; it states that the premium for the policy will be
946determined by our manuals of rules, classifications, rates and
955rating plans.
95711. One of the class codes used to calculate the premium
968for the policy was 5606, which applies to Contractor Executive
978Supervisor or Construction Superintendent. The rate per $100
986remuneration used to calculate the premium for that class code
996was $3.85. That rate was applied to an estimated annual payroll
1007of $1 million for Petitioners employees in class code 5606.
101712. Although Petitioner had employees working in Florida
1025since at least October 1, 2006, EMC was unaware that Petitioner
1036was working in Florida until June 1, 2007, when it was contacted
1048by Ms. Quenemoen during the course of her investigation.
105713. It is questionable whether Petitioners employees
1064working in Florida would have been covered had they been injured
1075on the job site in Jacksonville. The other states insurance
1085provision of the policy quoted above states that coverage will
1095not be provided unless EMC is notified within 30 days of
1106starting work in a state not listed in the policy, and that did
1119not happen in regards to Petitioners work in Florida. However,
1129an EMC representative testified that it was her understanding
1138that coverage would, nevertheless, have been provided for
1146Petitioners employees since they were hired in Texas. 3 /
115614. A specific Florida endorsement was added to
1164Petitioners policy on or about June 19, 2007, 4 / as a direct
1177result of Ms. Quenemoens investigation. The endorsement was
1185back-dated to October 1, 2006, which was the effective date of
1196the original policy, because the policy had the other states
1206insurance provision since its inception.
121115. Petitioner paid an additional premium for the Florida
1220endorsement. The premium appears to have been calculated using
1229the Florida-approved classification code and rate. 5 /
123716. On June 18, 2007, the Department issued an Order of
1248Penalty Assessment based upon the fact that Petitioner was not
1258in compliance with Florida law at the time of Ms. Quenemoens
1269investigation.
127017. The Order of Penalty Assessment imposed a penalty of
1280$14,983.96, which is 1.5 times the workers compensation premium
1290that Petitioner should have paid on its employees working in
1300Florida between October 1, 2006, and May 30, 2007.
130918. The penalty was calculated using the payroll
1317information provided by Petitioner to Ms. Quenemoen and the
1326Florida-approved class code and rate for construction
1333supervisors.
133419. Petitioner does not dispute the calculation of the
1343penalty.
1344CONCLUSIONS OF LAW
134720. DOAH has jurisdiction over the parties to and subject
1357matter of this proceeding pursuant to Sections 120.569 and
1366120.57(1), Florida Statutes (2008).
137021. The Department is the state agency responsible for
1379enforcing the coverage requirements of the Workers Compensation
1387Law. See § 440.107, Fla. Stat.
139322. The Department has the burden of proof in this case
1404even though it is designated as the Respondent. See
1413Departments PRO, at ¶ 20; Chapman Ti, Inc. v. Dept. of
1424Financial Servs. , Case No. 07-2463, 2007 Fla. Div. Adm. Hear.
1434LEXIS 474, at ¶ 25 (DOAH Aug. 22, 2007; DFS Nov. 9, 2007). The
1448applicable standard of proof is clear and convincing evidence.
1457Id.
145823. The Department met its burden of proof, as discussed
1468below.
146924. Section 440.10(1)(g), Florida Statutes, provides in
1476pertinent part:
1478Subject to s. 440.38, any employer who has
1486employees engaged in work in this state
1493shall obtain a Florida policy or endorsement
1500for such employees which utilizes Florida
1506class codes, rates, rules, and manuals that
1513are in compliance with and approved under
1520the provisions of this chapter and the
1527Florida Insurance Code. . . . .
153425. Section 440.38(7), Florida Statutes, provides:
1540Any employer who meets the requirements of
1547subsection (1) through a policy of insurance
1554issued outside of this state must at all
1562times, with respect to all employees working
1569in this state, maintain the required
1575coverage under a Florida endorsement using
1581Florida rates and rules pursuant to payroll
1588reporting that accurately reflects the work
1594performed in this state by such employees.
160126. Florida Administrative Code Rule 69L-6.019 provides in
1609pertinent part:
1611(1) Every employer who is required to
1618provide workers compensation coverage for
1623employees engaged in work in this state
1630shall obtain a Florida policy or endorsement
1637for such employees that utilizes Florida
1643class codes, rates, rules and manuals that
1650are in compliance with and approved under
1657the provisions of Chapter 440, F.S., and the
1665Florida Insurance Code, pursuant to Sections
1671440.10(1)(g) and 440.38(7), F.S.
1675* * *
1678(3) In order to comply with Sections
1685440.10(1)(g) and 440.38(7), F.S., for any
1691workers compensation policy or endorsement
1696presented by an employer as proof of
1703workers compensation coverage for employees
1708engaged in work in this state:
1714(a) The policy information page (NCCI
1720form number WC 00 00 01 A) must list
1729Florida in Item 3.A. and use Florida
1736approved classification codes, rates, and
1741estimated payroll in Item 4.
1746(b) The policy information page
1751endorsement (NCCI form number WC 89 06 00 B)
1760must list Florida in Item 3.A. and use
1768Florida approved classification codes,
1772rates, and estimated payroll in Item 4.
1779(4) A workers compensation policy that
1785lists Florida in Item 3.C. of the policy
1793information page (NCCI form number WC 00 00
180101 A) does not meet the requirements of
1809Sections 440.10(1)(g) and 440.38(7), F.S.,
1814and is not valid proof of workers
1821compensation coverage for employees engaged
1826in work in this state.
183127. The evidence clearly and convincingly establishes that
1839the policy maintained by Petitioner failed to comply with the
1849requirements of Florida Administrative Code Rule 69L-6.019 from
1857October 1, 2006, to June 18, 2007. First, Florida was not
1868listed in Item 3.A of the Information Page as required by
1879paragraphs (3)(a) and (3)(b) of the rule. Second, even though
1889Florida was included in the other states coverage provided
1898for in Item 3.C. of the Information Page, that is insufficient
1909as a matter of law under subsection (4) of the rule. Third,
1921Florida-approved classification codes, rates, and estimated
1927payroll were not used to calculate the premium in Item 4 of the
1940the rule, even though the premium paid by Petitioner appears to
1951have been calculated using a higher rate than the Florida rate.
196228. The fact that Petitioners employees working in
1970Florida may have been covered by virtue of the other states
1981insurance provision of the policy is immaterial under the
1990Departments rules. Coverage and compliance are separate
1997concepts. See Dept. of Financial Servs. v. Raylin Steel
2006Erectors, Inc. , Case No. 05-2289, 2005 Fla. Div. Adm. Hear.
2016other states insurance coverage was no longer sufficient to
2025meet the requirements of Florida law after the 2003 amendments
2035to Section 440.38(7), Florida Statutes), adopted in pertinent
2043part , Case No. 78712-05-WC (DFS Jan. 19, 2006); Triple M
2053Enterprises, Inc. v. Dept. of Financial Servs. , Case No. 04-
20632524, 2004 Fla. Div. Adm. Hear. LEXIS 2509 (DOAH Jan. 13, 2005)
2075(concluding that the employer failed to comply with Florida law
2085even though employees would have received benefits under an
2094other states insurance provision nearly identical to the one
2103at issue in this case).
210829. The fact that EMC issued Petitioner a Florida
2117endorsement in June 2007, and back-dated it to October 1,
21272006, is also immaterial. The endorsement was not in place at
2138the time of the Departments investigation, and Florida law does
2148not recognize retroactive compliance or coverage. See Dept. of
2157Labor & Employment Security v Eastern Personnel Services, Inc. ,
2166Case No. 99-2048, 1999 Fla. Div. Adm. Hear. LEXIS 5569, at ¶ 33
2179(DOAH Oct. 12, 1999).
218330. The Department is authorized, but not required to
2192issue a Stop-Work Order when it determines that an employer
2202subject to the Workers Compensation Law has failed to secure
2212the required workers compensation insurance coverage. See
2219§ 440.107(7)(a), Fla. Stat.
222331. The Department is, however, required to impose a
2232penalty on an employer who has failed to secure the required
2243workers compensation insurance coverage. See
2248§ 440.107(7)(d)1., Fla. Stat. ([T]he department shall assess
2256against any employer who has failed to secure the payment of
2267compensation as required by this chapter a penalty equal to 1.5
2278times the amount the employer would have paid in premium when
2289applying approved manual rates to the employer's payroll during
2298periods for which it failed to secure the payment of workers'
2309compensation required by this chapter within the preceding
23173-year period or $1,000, whichever is greater.) (emphasis
2326supplied); Fla. Admin. Code R. 69L-6.030(1) (stating that an
2335employer who comes into compliance with the workers
2343compensation coverage requirements prior to the issuance of a
2352stop work order shall be assessed a penalty pursuant to Section
2364issued) (emphasis supplied).
236732. It is undisputed that the application of the statutory
2377formula in this case results in a penalty of $14,983.96.
238833. The undersigned is sympathetic to Petitioners
2395argument in its PRO that the imposition of the statutory penalty
2406is excessively harsh under the circumstances of this case, but
2416based upon the mandatory language in Section 440.107(7)(d)1.,
2424Florida Statutes, the Department has no discretion to not impose
2434a penalty, nor does it (or the undersigned) have any discretion
2445to deviate from the penalty calculated pursuant to the statutory
2455formula. See Chapman Ti , supra , at ¶ 32.
2463RECOMMENDATION
2464Based upon the foregoing Findings of Fact and Conclusions
2473of Law, it is
2477RECOMMENDED that the Department issue a final order
2485assessing Petitioner a penalty of $14,983.96 for its failure to
2496comply with the requirements of Florida law concerning workers
2505compensation insurance coverage between October 1, 2006, and
2513June 18, 2007.
2516DONE AND ENTERED this 14th day of January, 2009, in
2526Tallahassee, Leon County, Florida.
2530T. KENT WETHERELL, II
2534Administrative Law Judge
2537Division of Administrative Hearings
2541The DeSoto Building
25441230 Apalachee Parkway
2547Tallahassee, Florida 32399-3060
2550(850) 488-9675
2552Fax Filing (850) 921-6847
2556www.doah.state.fl.us
2557Filed with the Clerk of the
2563Division of Administrative Hearings
2567this 14th day of January, 2009.
2573ENDNOTES
25741 / Unless otherwise indicated, all statutory references are to
2584the 2007 version of the Florida Statutes officially recognized
2593at the request of the parties.
25992 / See Joint Exhibit 3, at page 53. Unlike the copy of the
2613policy received into evidence, the copy that Ms. Quenemoen was
2623initially sent by Petitioners Texas insurance agent had FL
2632printed in Item 3.A of the Information Page. Ms. Quenemoen
2642subsequently learned from EMC that Florida was not on the
2652policy, and the agent acknowledged that he just typed FL onto
2663the information page before sending it to Ms. Quenemoen. A
2673Florida endorsement was later properly added to the policy. See
2683Findings of Fact 14 and 15.
26893 / See Joint Exhibit 2 (testimony of Nancy Bingham):
2699When we had issued the policy in May, I was
2709aware that they had employees hired in
2716Texas. And I knew at the time that those
2725employees could go anywhere in the United
2732States depending upon where they had a job.
2740And they had the All States endorsement on
2748there, which as long as the employees were
2756hired in Texas, it was our understanding
2763that they could go into other states to
2771perform work and we would provide coverage
2778for them in the event of a claim.
2786Id. at 11. See also Joint Exhibit 4, at 6, 8-9, 13, 14, 15, 18
2801(testimony of Norman Adams, the Texas insurance agent who sold
2811the policy, that Petitioners employees would have been covered
2820under Florida law by virtue of the other states insurance
2830provision of the policy).
28344 / This was the date of issue reflected on the endorsement.
2846See Joint Exhibit 1, at Exhibit 2C. See also Joint Exhibit 2,
2858at 14 (testimony of Ms. Bingham that the separate policy needed
2869to add Florida to Petitioners original policy was issued on
2879June 18th, I believe).
28835 / The premium was calculated using classification code 5606
2893(Contractors Executive Supervisor or Construction
2898See Joint Exhibit 1, at Exhibit 2C. The same code and rate were
2911used in the penalty calculation. Id. at Exhibit 5.
2920COPIES FURNISHED :
2923Kristian E. Dunn, Esquire
2927Department of Financial Services
2931Division of Workers Compensation
2935200 East Gaines Street
2939Tallahassee, Florida 32399-4229
2942William H. Andrews, Esquire
2946Gray Robinson, P.A.
294950 North Laura Street Suite 1100
2955Jacksonville, Florida 32202
2958Honorable Alex Sink
2961Chief Financial Officer
2964Department of Financial Services
2968The Capitol, Plaza Level 11
2973Tallahassee, Florida 32399-0300
2976Daniel Sumner, General Counsel
2980Department of Financial Services
2984The Capitol, Plaza Level 11
2989Tallahassee, Florida 32399-0300
2992NOTICE OF RIGHT TO SUBMIT EXCEPTIONS
2998All parties have the right to submit written exceptions within
300815 days from the date of this Recommended Order. Any exceptions
3019to this Recommended Order should be filed with the agency that
3030will issue the Final Order in this case.
- Date
- Proceedings
- PDF:
- Date: 01/14/2009
- Proceedings: Recommended Order cover letter identifying the hearing record referred to the Agency.
- PDF:
- Date: 01/14/2009
- Proceedings: Recommended Order (hearing held September 24 and November 17, 2008). CASE CLOSED.
- PDF:
- Date: 12/30/2008
- Proceedings: Department of Financial Services` Proposed Recommended Order filed.
- Date: 12/09/2008
- Proceedings: Transcript of Proceedings filed.
- Date: 11/17/2008
- Proceedings: CASE STATUS: Hearing Held.
- PDF:
- Date: 11/05/2008
- Proceedings: Department of Financial Services` Notice of Filing Witness List filed.
- PDF:
- Date: 10/29/2008
- Proceedings: Amended Notice of Hearing by Video Teleconference (hearing set for November 17, 2008; 9:00 a.m.; Jacksonville and Tallahassee, FL; amended as to Date).
- PDF:
- Date: 10/23/2008
- Proceedings: Notice of Hearing by Video Teleconference (hearing set for November 24, 2008; 9:00 a.m.; Jacksonville and Tallahassee, FL).
- PDF:
- Date: 09/24/2008
- Proceedings: Order Granting Continuance (parties to advise status by October 10, 2008).
- Date: 09/24/2008
- Proceedings: CASE STATUS: Hearing Partially Held; continued to date uncertain
- PDF:
- Date: 09/10/2008
- Proceedings: Amended Notice of Taking Telephonic Depositions (J. Fulton, N. Adams) filed.
- PDF:
- Date: 08/25/2008
- Proceedings: U.S. Builders, L.P.`s Answers to Respondent`s Interlocking DIscovery Request filed.
- PDF:
- Date: 07/31/2008
- Proceedings: Notice of Taking Telephonic Depositions (J. Fulton, N. Adams) filed.
- PDF:
- Date: 07/31/2008
- Proceedings: Order (Motion for a Party and Witnesses to Appear by Telephone is denied).
- Date: 07/29/2008
- Proceedings: CASE STATUS: Motion Hearing Held.
- PDF:
- Date: 07/16/2008
- Proceedings: Notice of Hearing by Video Teleconference (hearing set for September 24, 2008; 9:00 a.m.; Jacksonville and Tallahassee, FL).
- PDF:
- Date: 05/23/2008
- Proceedings: Petitioner`s Reply Brief to Department of Financial Services, Division of Workers` Compensation`s Exceptions to Recommended Order filed.
- PDF:
- Date: 04/30/2008
- Proceedings: Recommended Order cover letter identifying the hearing record referred to the Agency.
- PDF:
- Date: 04/04/2008
- Proceedings: Department of Financial Services` Proposed Recommended Order filed.
- PDF:
- Date: 03/27/2008
- Proceedings: Order Granting Extension of Time (Order Granting Extension of Time for Submission of Proposed Recommended Order to be filed by April 4, 2008).
- Date: 03/19/2008
- Proceedings: Transcript filed.
- Date: 02/29/2008
- Proceedings: CASE STATUS: Hearing Held.
- PDF:
- Date: 02/28/2008
- Proceedings: Department`s Motion in Limine to Prohibit Introduction of Certain Testimony filed.
- PDF:
- Date: 12/14/2007
- Proceedings: Order Granting Continuance and Re-scheduling Hearing (hearing set for February 29, 2008; 9:30 a.m.; Tallahassee, FL).
- PDF:
- Date: 12/10/2007
- Proceedings: Order Re-scheduling Hearing (hearing set for February 27, 2008; 09:30 a.m.; Tallahassee, FL).
- PDF:
- Date: 11/06/2007
- Proceedings: Order Granting Continuance and Placing Case in Abeyance (parties to advise status by December 6, 2007).
- PDF:
- Date: 10/04/2007
- Proceedings: Notice of Hearing (hearing set for November 19, 2007; 9:30 a.m.; Tallahassee, FL).
- PDF:
- Date: 09/26/2007
- Proceedings: Letter to J. Fulton from T. Quenemoen regarding attached copy of the Order of Penalty Assessment filed.
Case Information
- Judge:
- T. KENT WETHERELL, II
- Date Filed:
- 09/26/2007
- Date Assignment:
- 07/03/2008
- Last Docket Entry:
- 02/25/2009
- Location:
- Jacksonville, Florida
- District:
- Northern
- Agency:
- ADOPTED IN TOTO
Counsels
-
William H. Andrews, Esquire
Address of Record -
Kristian Eiler Dunn, Esquire
Address of Record