10-002332 Department Of Financial Services, Division Of Workers&Apos; Compensation vs. Caldwell Tanks, Inc. Status: Closed Recommended Order on Wednesday, December 8, 2010.

Summary: Respondent is subject to an administrative fine because it failed to provide workers' compensation coverage to its employees working in Florida.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF FINANCIAL )

SERVICES, DIVISION OF WORKERSÓ )

COMPENSATION , )

)

Petitioner , )

)

vs. ) Case No. 10 - 2332

)

CALDWELL TANKS, INC. , )

)

Respondent . )

)

RECOMMENDED ORDER

A formal hearing was cond ucted in this case on

September 29, 2010, in Tallahassee, Florida, before Suzanne F.

Hood, Administrative Law Judge with the Division of

Administrative Hearings.

APPEARANCES

For Petitioner: Jamila Georgette Gooden, Esquire

Department of Financial Services

Division of WorkersÓ Compensation

200 East Gaines Street

Tallahassee, Florida 32399 - 4229

For Respondent: Claude M. Harden, Esquire

Carr Allison

305 South Gadsden Street

Tallahassee, Florida 32301

STATEMENT OF THE ISSUES

The issues are whether Respondent conducted business

operations in Fl orida without obtaining workersÓ compensation

coverage that met the requirements of Chapter 440, Florida

Statutes (2009), for its employees, and if so, what penalty

should be assessed.

PRELIMINARY STATEMENT

On March 5, 2010, Petitioner , Department of Financia l

Services, Division of WorkersÓ Compensation (Petitioner) , issued

a Stop - Work Order and Order of Penalty Assessment to Respondent

Caldwell Tanks, Inc. (Respondent). That same day, Petitioner

issued a Request for Production of Business Records for Penalty

Assessment Calculation.

On March 23, 2010, Petitioner issued an Amended Order of

Penalty Assessment. The amended orde r assessed a total penalty

of $122,242.23. On March 24, 2010, Petitioner and Respondent

executed a Payment Agreement Schedule for Periodic Payment of

Penalty. Petitioner also entered an Order of Conditional

Release from Stop - Work Order.

On April 9, 20 10, Respondent filed a Petition for Hearing.

Respondent referred the case to the Division of Administrative

Hearings on April 27, 2010.

The parties filed a Joint Response to Initial Order on

Ma y 5, 2010. A Notice of Hearing dated May 6, 2010, scheduled

the hearing for July 1, 2010.

On June 18, 2010, Petitioner filed an opposed Motion for

Continuance of Administrative Hearing. On June 21, 2010, the

undersigned issued an Order Denying Continuance of Final

Hearing.

On June 25, 2 010, the parties filed a J oint M otion for

Continuance of Administrative Hearing. An Order Granting

Continuance was issued on June 29, 2010.

The parties filed a Joint Status Report on July 9, 2010.

The parties requested a hearing date at the end of August 2010.

The parties filed an Amende d Joint Status Report on

August 6, 2010. An Order Re - scheduling Hearing was issued that

same day. The O rder scheduled the hearing for September 9,

2010.

On September 1, 2010, the parties filed a Joint Motion for

Continuance. An Order Re - scheduling Hearing, dated September 2,

2010, rescheduled the hearing for September 29, 2010.

During the hearing, Petitioner presented the testimony of

three witnesses. Petitioner introduced 11 exhibits into

evidence.

Respondent presented the testim ony of two witnesses.

Respondent introduced three exhibits into evidence.

The T ranscript of the hearing was filed on October 13, 2010. On

October 21, 2010, Respondent filed an unopposed Motion for

Extension of Time to File Proposed Recommended Order. An Order

Granting Extension of Time was issued on October 25, 2010. The

parties filed Proposed Recommended Orders on November 3, 2010.

Except as otherwise noted, references hereinafter shall be to

Florida Statutes (2009).

FINDINGS OF FACT

1. Petitioner is the state agency that is responsible for

enforcing Chapter 440, Florida Statutes, which requires

employers t o secure the payment of workersÓ compensation for the

benefit of their employees.

2. Respondent is a Louisville, Kentucky - based corporation

t hat is engaged in the construction, maintenance, and painting

of elevated water tanks. Respondent has a second fabrication

facility located in Newnan, Georgia. RespondentÓ s work

constitutes construction.

3. On March 4, 2010, PetitionerÓ s investigator ,

Lawrenc e F. Eaton, observed RespondentÓ s employees working on a

water tower in Pace, Florida. While visiting the worksite, one

of RespondentÓ s employees stated that he did not have any

information regarding if and how the men were covered by

workersÓ co mpensation. The employee gave Mr. Eaton a telephone

number for Respondent.

4. Next, Mr. Eaton consulted the Kentucky Secretary of

State website to find information concerning the corporate

status of Respondent. The website indicated that Respondent w as

incorporated in 1892 and that it had three corporate officers.

5. Mr. Eaton then consulted PetitionerÓ s Coverage and

Compliance Automated System (CCAS) d atabase. CCAS contains

workersÓ compensation policy information for each employer that

has a Fl orida policy and information relative to workersÓ

compensation exemptions that have been applied for and issued to

individuals by Petitioner.

6. Mr. Eaton was unable to find any indication on CCAS

that Respo ndent had secured workersÓ compensation cover age by

purchasing a Florida policy. CCAS also provided no evidence

that Respondent had entered into an arrangement with an employee

lea sing company to provide workersÓ compensation coverage to its

employees. Additionally, CCAS did not show that Responden t had

obtained exemptions for its corporate officers.

7. Mr. Eaton subsequent ly spoke with one of RespondentÓ s

representatives. Mr. Eaton was informed that Responde nt was

self - insured for workersÓ compensation in Kentucky. Mr. Eaton

also learned tha t Respondent had another workersÓ c ompensation

policy. RespondentÓ s representative indicated that she would

send Mr. Eaton the policy paperwork.

8. When he received the paperwork from Petitioner,

Mr. Eaton determined that the insurance coverage did no t comply

w ith the requirements of FloridaÓ s workers Ó compensation law.

The paperwork inclu ded an excess policy of workersÓ com pensation

and a Georgia workersÓ compensation policy.

9. On March 5, 2010, Mr. Eaton issued a Stop - Work Order

and Order of Penalty Assessment against Respondent.

Specifically, the Stop - Work Order states that Respondent was not

in compliance with Chapter 440, Florida Statutes, because

Resp ondent failed to ob tain workersÓ compensation coverage for

its employees.

10. On March 5, 2010, Mr. Eaton issued a Request for

Production of Business Records for Penalty Assessment

Calculation to Respondent.

11. On March 8, 2010, Respondent provided Mr . Eaton with

ad ditional workersÓ compensation policy information. The

information included the declarations page for Chartis Company

Policy No. WC 005 - 73 - 7942.

12. The Chartis policy is a WorkersÓ Compensation and

Employers Liability Policy. In Item 3A, the policy lists the

states that are covered, in Part One of the policy, pursuant to

each stateÓs workersÓ compensation law. Georgia is named as a

covered state in Item 3A.

13. In Item 3C, the Chartis policy lists the states that

are covered, in Part Three of th e policy, as "other states

insurance." Florida is listed only in Item 3C.

14. Item 4 of the Chartis policy states that "[t]he

premium of this policy will be determined by our Manuals of

Rules, Classifications, Rates and Rating Plans. All information

required below is subject to verification and change by audit."

15. In response to the request for business record s ,

Respondent provided Petitioner with pay roll information for work

it had performed in Florida between September 2007 and February

2010. After receiving this inform ation, RespondentÓ s Penalty

Calculator, Robert McAullife, calculated a penalty. Because

Respondent had not provided all of the requested business

records, M r. McAullife imputed RespondentÓ s payroll for a

portion of the relevant time period.

16. In calculating the penalty, Mr. McAullife first sought

to determine the amount of premium that Respondent would have

paid had it been properly insured for the relevant three - year

period. Mr. McAullife assigned a cl ass code for each o f

RespondentÓ s employees, reflectin g the work they performed.

Mr. McAullife then took 1/100th of the payroll and multiplied

that figure by the approved manual rate applicable to each class

code.

17. Mr. McAullife then took the previously obtained

prod uct and multiplied it by 1.5 to find a penalty in the amount

of $122,242.23. This penalty is based on Respondent having

$382,146.90 in Florida payroll that would have required

$81,494.66 in workersÓ compensation premium. There are no

errors in Mr. McAull ifeÓ s penalty calculation.

18. Mr. Eaton issued an Amended Order of Penalty

Assessment on March 23, 2010. On March 24, 2010, Respondent and

Petitioner entered into a Payment Agreement Schedule for

Periodic Payment of Penalty that required ten percent of the

penalty to be paid in advance and the remainder to be paid in 60

interest - free monthly payments. Respondent also produced a

policy that provided coverage in compliance with Florida law

with an effective date of March 12, 2010. As a result,

Petitio ner issued an Order of Conditional Release, permitting

Respondent to return to work.

19. During the hearing, Respondent presented evidence that

it is a registered self - insured company in Kentucky for t he

first $500,000.00 of workersÓ compensation. Add itionally,

Respondent has e xcess insurance for any workersÓ compensation

claims that exceed the $500,000.00 threshold.

20. Because it is self - insured in Kentucky, Respondent

must purchase letters of credit on an annual basis. Respondent

paid the follo wing for its recent letters of credit: (a) 2007,

$26,755.54; (b) 2008, $32,438.48 ; (c) 2009, $33,626.38; and

(d) 2010 to date, $8,931.39.

21. The State of Kentucky assesses qualified self - insureds

a six and one half percent tax based on an annual simu lated

premium. The amount of the simulated premium represents what a

qualified self - insured would pay for a " first dollar" policy of

workersÓ comp ensation insurance. RespondentÓ s recent simulated

premiums are as follows: (a) 2007, $453.440.00; (b) 2008,

$480,637.00; (c) 2009, $623,940.00; and (d) 2010, $1,006,243.00.

22. Respondent also m aintains a "high dollar" deducti ble

policy of insurance that provides workersÓ compensation coverage

for its Georgia employees. RespondentÓ s Georgia policy, Chartis

Company Policy No. WC 005 - 73 - 7942, which includes Florida as

part of "all other states" in Item 3C of the declarations page,

also requires the payment of premiums. Respondent recently paid

the following premiums for this insurance: (a) 2007,

$124,736.78 ; (b) 2008, $125,950.08; and (c) 2009, $64,465.28.

23. The premiums paid by Respondent for the Chartis

Company Policy No. WC 005 - 73 - 7942 are not based on Florida

rates.

24. From 2007 to 20 10, Respondent provided workersÓ

compensation benefits for at least four different workers that

were injured while performing work for Resp ondent in Florida.

The workersÓ compensation benefits paid by Respondent on the se

claims totaled $147,958.25.

CONCLUSIONS OF LAW

25. The Division of Administrative Hearings has

jurisdiction over the subject matter and the parties to this

action in accordance with Sections 120.569 and 120.57(1),

Florida Statutes (2010).

26. Chapter 440, Florida Sta tutes, is known as the

"WorkersÓ Compensation Law ." See § 440.01, Fla. Stat.

27. Because administrative fines are penal in nature,

Petitioner has the burden of proving its case by clear and

convincing evidence. See DepÓ t. of Banking and Fin. v . Osborne

Stern and Co. , 670 So. 2d 932, 935 (Fla. 1996). To meet this

burden, Petitioner must prove that Respondent was requ ired to

comply with the WorkersÓ Compensation Law, that Respondent

failed to comply with that law, and that the penalty assessed by

Petitioner is appropriate. Petitioner has met its burde n.

28. Section 440.03, Florida Statu t es, states that Ð every

employer and employee as defined in s. 440.02 shall be bound by

the provisions of this chapter.Ñ

29. An employer is defined, in pertinent part, as Ð every

per son carrying on any employment.Ñ S ee § 440.02(16)(a), Fla.

Stat.

30. Ð Employment . . . means any service performed by an

employee for the person employing him or herÑ and includes Ð with

respect to the construction industry, all private employment in

which one or more employees are employed by the same employer. Ñ

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

defined, in pertinent part, as Ð any person who receives

remuneration from an employer for the performance of any work or

service while en gaged in any employment . . . .Ñ See

§ 440.02(15)(a), Fla. Stat.

31. Respondent did not contest the following:

(a) Respondent was an ÐemployerÑ ; (b) Respondent conducted

construction - industry business operations in Florida; and

(c) Respondent paid remuneration to individua ls to perform work

in Florida. Because Respondent is an Ðemployer,Ñ it is requ ired

to comply with the WorkersÓ Compensation Law.

32. Respondent did no t secure the payment of workersÓ

compensation coverage for its employees that met the

requirements of Chapter 440, Florida Statutes, and the Florida

Insurance Code. Section 440.10(1)(a), Florida Statutes,

requires that every employer coming within the provisions of

Chap ter 440, Florida Statutes, is liab le for and shall secure

workersÓ compensation insura nce for its employees.

33. Section 440.10(1)(g), Florida Statutes, states as

follows in relevant part:

(g) 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 emplo yees 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.

* * *

1. For employees of non - construction -

industry employers who have the ir

headquarters outside of Florida and also

operate in Florida and who are routinely

crossing state lines, but usually return to

their homes each night, the employee shall

be assigned to the headquartersÓ state.

However, the construction industry employee s

performing new construction or alteration in

Florida shall be assigned to Florida even if

the employees return to their home state

each night.

* * *

3. For construction contractors who

maintain a permanent staff of employees and

superintendents, if any of these employees

or superintendents are assigned to a j ob

that is locat ed in Florida, either for the

duration of the job or any portion thereof,

their payroll shall be assigned to Flori da

rather than the headquartersÓ state.

4. Employees who are h ired for a specific

project in Florida shall be assigned to

Florida.

34. Similarly, Section 440.38, Florida Statutes, states as

follows in relevant part:

(7) Any employer who meets the requirements

of subsection (1) through a policy of

insurance issued out side 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 the state by such employee.

35. Respondent promulgated Florida Administrative Code

Rule 69L - 6.019, which states as follows:

(1) Every employer who is required to

provide workersÓ compensation coverage for

employees e ngaged 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 provision of Chapter 440, F.S., and the

Florida Insu rance Code, pursuant to Section

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 workersÓ 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 Section

440.10(1)(g) and 4 40.38(7), F.S., for any

workersÓ compensation policy or endorsement

presented by a n employer as proof of

workersÓ 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

ÐFloridaÑ in Item 3.A. and use Florida

approved classification codes, rates, and

estimated payroll in Item 4.

(4) A workersÓ compensatio n 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(a)(g) and 440.38(7), F.S.,

and is not valid proof of workers'

compensation coverage for employees e ngaged

in work in this state.

5. Workers Ó Compensation and Employers

Liability Insurance Policy - Information

Page, NCCI form numbers WC 00 00 01 A (rev.

May 1, 1988) and WorkersÓ Compensation and

Employers Liability Insurance Policy -

Policy Informatio n Page Endorsement, WC 89

06 00B (rev. July, 2001) are hereby adopted

and incorporated herein by reference. These

forms can be obtained from the Florida

Department of Financia l Services, Division

of WorkersÓ Compensation, 200 East Gaines

Street, Tallahass ee, FL 32399 - 4228.

(6) An employee of a construction industry

employer headquartered outside the state of

Florida is "engaged in work" in Florida if

he or she participates in any one of the

following activities in the state of

Florida:

(a) The employee engaged in new

construction, alterations, or any job or any

construction activities involving any form

of the building, clearing, filling,

excavation or improvement in the size of use

of any structure or the appearance of any

land as defined in Section 44 0.02(8), F.S.,

or performs any job duties or activities

which would be subject to those contracting

classifications identified in the

Contracting Classification Premium

Adjustment Program contained in the Florida

State Special pages of the Basic Manual (as

incorporated in Rule 69L - 6.021, F.A.C.)

within the borders of the state of Florida,

regardless of whether an employee returns to

his or her home state each night, or

(b) If the employer maintains a permanent

staff of employees or superintendents and

the staff employee or superintendent is

assigned to construction activities in

Florida for the duration of the job or any

portion thereof, or

(c) If the employer hires employees in

Florida for the specific purpose of

completing all or any portion of

construct ion contract work and related

construction activities in the state of

Florida.

36. Resp ondent admits that neither its Ðall other statesÑ

policy nor its Kentucky excess policy contained a Florida

endorsement in Item 3.A. of the information page or had premiums

based on Florida rates. Respondent also admits t hat it was not

Ðself - insuredÑ in Florida. Respondent cont ends, however, that

the workersÓ compensation benefits bestowed upon its workers as

a result of its self - insured status under the laws of Ke ntucky,

its excess workersÓ compensation insurance policy, and its Ðall

other statesÑ policy are equivalent to the benefits that would

flow from a policy purchased in Florida. Therefore, Respondent

asserts that it should not be penalized for non - complianc e.

37. RespondentÓ s argument misapprehends the fact that

there is a recognized difference between coverage - i.e., what

an insurer may ultimately cover under a policy - and compliance

with Florida law. See U.S. Builders, L.P. v. Department of

Financia l Services, Division of WorkersÓ Compensation , Case No.

07 - 4428 ( Fla. DOAH Jan . 14, 2009 ; DFS Feb. 23, 2009 ); Department

of Financial Services v. Raylin Steel Erectors, Inc. , Case No.

05 - 2289 ( Fla. DOAH Oct . 19, 2005 ; DFS Jan. 2006 ). Even if

RespondentÓ s contentions about its out - of - state coverage are

taken as true, there is no provision in Chapter 440, Florida

Statutes , that would allow for such a consideration. As a

matter of law, Respondent did not have a workers Ó compensation

policy with a proper Fl orida endorsement, and therefore,

Respondent was not in compliance with FloridaÓs WorkersÓ

Compensation Law.

38 . The penalty assessed against Respondent is appropriate

because the penalty was assessed pursuant to PetitionerÓ s

statutory authority and ca lculated in conformity with statutory

requirements.

39. Pursuant to Section 440.107, Florida Statutes,

Petitioner has the duty of enforcing an employerÓ s compliance

with the requirements of the WorkersÓ Compensation Law. To that

end, Petitioner is empow ered to examine and copy the business

records of any employer conducting business in Florida to

determine whether the employer is in compliance with the law.

See § 440.107(3), Fla. Stat.

40. Petitioner is further required to assess a penalty as

set fo rth in Section 440.107(7)(d)1., Florida Statutes, which

states as follows:

(d)1. 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 a s

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

requi red by this chapter within the

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

is greater.

41. Moreover, Petitioner is required to impute the payroll

of any employer that is out of compliance and fails to provide

business records sufficient to allow Petit i oner to determine the

employerÓ s payroll. See § 440.107(e), Fla. Stat. The imputed

payroll is equal to 1.5 times the statewide average weekly wage.

See § 440.107(e), Fl a . Stat .

42. The statewide average weekly wage is the wage

determined by the Agen cy for Workforce Innovation to be Ð 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 qua rters ending each

June 30 . . .Ñ . See § 440.12(2), Fla. Stat.

43. Respondent contends that Petitioner should offset the

penalty assessed by the costs incurred by Respondent for

securing its self - insured status and its excess workersÓ

compensation insurance policy. Alternatively, Responde nt

contends that Petitioner should offset the penalty by using the

simulated premium payments calculated by Kentucky. However, the

law is explicit and gives no room for compromise or adjustment.

There is no statutory authority for Petitioner to reduce th e

penalty by giv ing credit for coverage that does not comply with

Florida law.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is

RECOMMEN D ED:

That the Department of Financia l Services, Division of

WorkersÓ Compensation, enter a final order, finding that

Caldwell Tanks, Inc. , failed to comply with Chapter 440, Florida

Statutes, and imposing a penalty in the amount of $122, 224.22.

DONE AND ENT ERED this 8th day of December , 2010 , in

Tallahassee, Leon County, F lorida.

S

SUZANNE F. HOOD

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399 - 3060

(850) 488 - 9675

Fax Filing (850) 921 - 6847

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 8th day of December , 2010 .

COPIES FURNISHED :

Claude M. Harden, III , Esquire

Carr Allison

305 South Gadsden Street

Tallahassee, Florida 32301

Jamila Georgette Gooden, Esquire

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399

Julie Jones, Agency Clerk

Department of Financial Services

Division of Legal Services

200 East Gaines Street

Tallahassee, Florida 32399 - 0390

Benjamin Diamond, General Counsel

Department of Financial Services

The Capitol, Plaza Level 11

Tallahassee, Florida 32399 - 0390

Honorable Alex Sink

Chief Financial Officer

The Capitol, Plaza Level 11

Tallahassee, Florida 32399 - 0390

NOTICE OF RIGHT T O 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.