15-005281 Department Of Financial Services, Division Of Workers&Apos; Compensation vs. Perez Concrete, Inc. Status: Closed Recommended Order on Tuesday, April 5, 2016.

Summary: Petitioner failed to prove that Respondent should be assessed a fine for failing to secure payment of workers' compensation insurance where Respondent, a subcontractor, had secured and maintained insurance through the statutory employer.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF FINANCIAL

SERVICES, DIVISION OF WORKERS '

COMPENSATION,

Petitioner,

vs. Case No. 15 - 5281

PEREZ CONCRETE, INC.,

Respondent,

and

K C CURB, INC.,

Intervenor.

___________________________ ____/

RECOMMENDED ORDER

A hearing was conducted in this case pursuant to sections

120.569 and 120.57(1), Florida Statutes (2015), before Robert L.

Kilbride, an Administrative Law Judge ( " ALJ " ) of the Division of

Administrative H earings ( " DOAH " ). The final hearing took place

on January 26, 201 6 , in Orlando, Florida.

APPEARANCES

For Petitioner: Trevor S. Suter, Esquire

Thomas Nemecek, Esquire

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399

For Respondent and Intervenor:

Patrick Charles Crowell, Esquire

Patrick C. Crowell, P.A.

4853 South Orange Avenue, Suite B

Orlando, Florida 32806

STATEMENT OF THE ISSUE

The issue in this case is whether Petitioner proved that

Respondent violated chapter 440, Florida Statutes (2014), 1/ by

failing to secure the payment of workers ' compensation coverage

as alleged in the Stop - Work Order and Amended Order of Penalty

Assessment.

PRELIMINARY STATEMENT

On August 19, 2015, Petitioner, Department of Financial

Services, Division of Workers ' Compensation, issued a Stop - Work

Order, ordering Respondent, Perez Concrete , Inc. ( " Respondent " or

" Perez Concrete " ) , to cease business operations. Petitioner

alleged that Respondent failed to secure payment of workers '

compensation coverage meeting the requirements of chapter 440 and

the Insurance Code.

Petitioner issued an Amended Order of Penalt y Assessment on

September 30, 2015, assessing a penalty of $11,902.20. Respondent

requested an administrative hearing to contest the penalty

assessed.

The matter was referred to DOAH for the assignment of an ALJ

to conduct a hearing pursuant to sections 1 20.569 and 120.57(1).

On m otion, and by Order dated December 2, 2015, the

undersigned permitted KC Curb , Inc. ( " KC Curb " ) , to intervene in

this proceeding.

The final hearing was held on January 26, 2016. Petitioner

presented the testimony of several witne sses as reflected in the

record. Petitioner ' s Exhibits 1 through 9 were admitted into

evidence without objection. Respondent presented the testimony of

several witnesses as reflected in the record. Respondent ' s

Exhibits A through N were admitted into ev idence. Respondent ' s

Exhibit O was offered, but upon objection, the undersigned

sustained the objection , and it was not admitted.

The Transcript of the final hearing was filed with DOAH on

March 7, 2016. The parties timely filed their p roposed

r ecommende d o rders. The proposed recommended orders were reviewed

and given due consideration in preparing this Recommended Order.

FINDING S OF FACT

The undersigned makes the following findings of material and

relevant facts:

The Parties

1. Petitioner is the state agency responsible for enforcing

the requirement in chapter 440 that employers in the state of

Florida secure the payment of workers ' compensation insurance

benefits covering their employees.

2. Perez Concrete is a subcontractor/corporation registered

to do business in Florida. Its principal business address is

6632 Willow Street , Mount Dora, Florida.

3. Intervenor, KC Curb, is a contractor/corporation

registered to do business in Florida. Its principal business

address is 4975 Patch Road , Orlando, Flor ida.

4. A representative of the FFVA Mut ual Ins urance Co mpany

(FFVA) testified. FFVA is a mutual insurance company in Florida

which provides, among other things, workers ' compensation

insurance coverage. The witness was an underwriting supervisor.

5. I n general, workers ' compensation policies go through a

yearly review and renewal process handled by the underwriter.

6. KC Curb had been a client of FFVA since 2006.

7. Perez Concrete has never been a client of FFVA, and Perez

Concrete is not a named ins ured on the workers ' compensation

insurance policy held by KC Curb from 2013 through 2015.

8. There have been occasions when KC Curb picks up employees

of subcontractors and includes them in its self - audits. Under

those circumstances, KC Curb pays the pr emium for those particular

subcontract or employees.

9. If KC Curb pays a premium that includes the payroll for a

subcontractor ' s employee, his or her workers ' compensation

benefits are covered by the KC Curb w orkers ' c ompensation policy.

10. FFVA perform s an audit each year on all of the workers '

compensation policies it writes. The final audit is performed, in

part, to determine the final premium due on the account for that

year.

11. During a final audit, FFVA reviews any payroll paid to

subcontractors . If those subcontractors did not have a

certificate of insurance, then FFVA would include the payroll paid

to that subcontractor to calculate the final premium due from the

general contractor.

12. If FFVA identified that there were certain subcontract or

employees during the audit that worked for Perez Concrete, who

were doing work on the subcontract with KC Curb, the premium would

be calculated based upon those additional Perez Concrete

employees.

13. As a result, those Perez Concrete employees would be

covered under the KC Curb workers ' compensation insurance policy

and entitled to benefits if injured on the job. KC Curb ' s final

premium would be based on the final yearly audit including any

subcontract or employees of Perez Concrete. The subcontract or

employees would be covered for any injuries on the job that might

have occurred during the year audited.

14. The premium ultimately charged to the general contractor

is based solely on the payroll, and not on named employees.

15. KC Curb also does a mont hly self - audit which only

includes its payroll. The company makes a monthly premium payment

based on what is shown in its monthly audit.

16. If KC Curb picks up or includes an employee of a

subcontractor on its monthly self - audit and reports pay going to

that person, then that subcontract or employee is covered for

w orker s ' c ompensation benefits.

17. When end - of - the - year audits are performed, the reports

provided by KC Curb contains names of its own employees or a

description of employees. This report wo uld list the employees of

KC Curb, but it would not list the employees of any

subcontractors, only the amount of payroll for those

subcontractors.

18. The owner of Perez Concrete is Agustin Osorio, who

testified.

19. Perez Concrete builds concrete sidewa lks, driveways,

curbs , and inlets. It also does the framing and finishes the

concrete.

20. Perez Concrete had a w orker s ' c ompensation insurance

policy providing benefit to its employees in place from

August 2013 through April 2015, with Madison Ins urance Co mpany .

See , generally , Resp . Ex hs. B - D.

21. Perez Concrete ' s policy was canceled for late payments

on April 10, 2015. Apparently, Perez Concrete was late with two

payments , and the Madison Ins urance Co mpany canceled Perez

Concrete ' s workers ' compensa tion policy.

22. Perez Concrete had two employees, in addition to Osorio,

in July 2015 , when it was first visited by Petitioner ' s compliance

investigator , Stephanie Scarton.

23. Scarton stopped by while the employees were performing a

small sidewalk fini shed job in Rockledge , Florida , for KC Curb.

24 . During this first meeting , Osorio told Scarton that the

KC Curb ' s worker s ' compensation policy " was covering me. " Osorio

testified that she responded " everything was all right. "

25. Upon questioning by th e undersigned, Osorio clarified

that the first visit of the investigator was in the middle of July

2015 at a work location in Rockledge , Florida. After discussing

his operations and telling the investigator about the KC Curb

policy coverage, she left. Os orio testified that Scarton called

KC Curb that same day to confirm his comments, and then she told

him that everything was " all right. "

26. Osorio testified that the same investigator visited

again on August 19, 2015. That day , she gave him the Stop - Wor k

Order. Osorio testified that it was during the August 19 , 2015,

visit that she changed her previous response and said that Perez

Concrete was not covered under the KC Curb policy.

27. As the owner, Osorio had a valid exemption for himself

from worker s ' compensation coverage from January 2014 through

January 2016. Resp . Exh . E.

28. Osorio had a conversation with " Robin " from KC Curb

(date not specified). When he asked her whether Perez Concrete

was covered, she told him that his company would be cover ed under

KC Curb ' s worke r s ' compensation policy.

29. Osorio testified that Perez Concrete pays KC Curb seven

percent of the weekly revenue derived from working for KC Curb, in

order to be included on KC Curbs worker s ' compensation policy.

Perez Concrete pays an additional one percent to KC Curb to be

included on its general liability insurance policy.

30. Perez Concrete had bought its own w orker s ' c ompensation

policy in 2013 and in 2014. Resp. Exh s. B - D.

31. When Perez Concrete ' s policy was canceled by Madison

Ins urance Co mpany on April 10, 2015 , Osorio contacted KC Curb

about the insurance. Osorio understood that by doing so , he had

secured the payment of workers ' compensation insurance coverage

for his employees.

32. When Osorio contacted the KC Cur b representatives , he

told them that he wanted to continue working with them and asked

them about the insurance coverage.

33. Petitioner ' s compliance investigator, Scarton ,

testified. She has held that position since approximately

April 2013.

34. She co nducts random site visits to verify that companies

have worker s ' compensation coverage. She conducts approximately

80 compliance investigations per month.

35. On July 6, 2015 , she conducted a random visit at a

construction site where concrete work was be ing performed by Perez

Concrete.

36. She spoke with Osorio who told her that he did not have

worker s ' compensation insurance coverage, but that he was covered

through another company. In checking her CCAS automated data

system, she confirmed that Perez C oncrete did not carry its own

worker s ' compensation policy. 2/

37. After speaking with Osorio and getting his explanation,

she contacted KC Curb and spoke with Robin Sempier. She was

informed that KC Curb paid the worker s ' compensation coverage for

Perez Concrete.

38. Sempier told the investigator that KC Curb w as allowed

to proceed in that fashion with its subcontractors under an

arrangement from a previous compliance case handled by

Petitioner. 3/

3 9 . After speaking with Sempier about Perez Concrete ' s

s ituation , Scarton contacted her supervisor, Robert Serrone. He

directed her to refer the case involving Perez Concrete to

Petitioner's fraud unit and to let them handle the investigation.

40 . Scarton ' s next involvement was in August 2015 , when she

was co ntacted by her supervisor and directed to issue a s top - w ork

o rder to Perez Concrete. She obtained the Stop - Work Order , and

served it on Perez Concrete on August 19, 2015.

4 1 . Petitioner also served Perez Concrete with a business

records request. Perez C oncrete did not comply with the request,

nor did it submit any business records to Petitioner .

4 2 . Upon inquiry by the undersigned, the parties stipulated

on the record that the appropriate amount of the penalty would be

$11,902.20, should a violation be proven.

4 3 . The investigator asked the KC Curb representative to

send her documentation confirming that KC Curb pays the worker s '

compensation coverage for Perez Concrete.

4 4 . The investigator opined on cross - examination that the

employees of Perez Concr ete were not covered by KC Curb . Scarton

concluded that " in accordance with the investigations that we

conduct, Perez Concrete would need to carry the coverage. " Tr.,

p. 139, line 7. She later stated that on July 6, 2015 , she could

not confirm insurance coverage " one way or another. " Tr ., p. 140,

line s 6 and 13.

4 5 . Prof essor Joseph W. Little of Gainesville, Florida , was

called to testify as an expert on behalf of Perez Concrete and KC

Curb. He is currently employed as an adjunct fac u lty member at

the University of Florida, College of Law. He is also Prof essor

of Law Emeritus at the University of Florida , College of Law. He

had been employed as a professor at the University of Florida ,

College of Law , since 1967, teaching worker s ' compensation law.

Little is unquestionably an expert in the field of W orker s '

Compensation Law.

4 6 . Little also authored the legal hornbook entitled

" Worker s ' Compensation , " a publication of the West Publishing

Company.

4 7 . Little reviewed the facts of the case by reviewi ng the

documentation provided by counsel who retained him. This included

the Stop - Work Order, the p etition , an a mended p etition, motions ,

and orders issued in the case. He also studied the applicable

statutes and administrative rules of Petitioner as wel l as

decisional law that he felt was relevant. 4/

48. Little testified, and the undersigned considered, that

he was not aware of any decisional law in the s tate of Florida

interpreting the word " secure " to mean " buy " or " must buy, " so

long as there was an agreement between the subcontractor and the

prime contractor that one or the other would purchase the

insurance. Tr ., p. 180, line 4.

49. Little testified that the concept of the " statutory

employer " found in chapter 440 has remained in place and steady

throughout the history of the statute. He pointed out other

relevant statutes in c hapter 440 that needed to be read in pari

materia with one another.

50. An insurance agent from Bouchard Ins urance , John Manis,

also testified. Bouchard Ins urance is a com mercial insurance

agency which sells worker s ' compensation insurance. Bouchard

Insurance represents FFVA and sells worker s ' compensation

insurance as an agent for that company.

51. Manis had worked on the KC Curb account since 2005. He

is familiar with how KC Curb and FFVA conduct their worker s '

compensation business together, including the payment of premiums.

When a worker s ' comp ensation policy is written, the business will

give its payrolls to the agent who determines the class codes that

are applied and used in the policy.

52. At the end of each year, an audit is conducted on those

payrolls to determine whether or not the business owes money to

FFVA, or if a refund from FFVA is in order.

53. Some companies, like KC Curb, do a monthly audit - - during

which they input their payroll and are told what premium is due

for the month.

54. When a subcontractor of KC Curb declines or fails to

obtain its own insurance policy, the subcontractor ' s employee

become s " like an employee of KC Curb , " and FFVA will char ge KC

Curb for those employees, as if they were its own.

55. The names of actual subcontract or employees are provided

at audit time, not during the year. Apparently, this is a common

practice in the industry.

56. The office manager for KC Curb is Sempie r. She

testified that KC Curb is a concrete curb construction company

that has been in business for 22 years in the Orlando area. It

perform s concrete construction services using a combination of in -

house crews and subcontractors.

57. One of Sempier ' s d uties is to monitor subcontractor

compliance with the Workers ' Compensation L aws. She characterized

KC Curb as being " very on top of that . "

58. Subcontractors are required to provide KC Curb with

certificates of insurance before they start any work.

Sub contractors are required to produce a certificate of worker s '

compensation insurance, or they go under the KC Curb policy as an

uninsured subcontractor.

59. Although KC Curb requires subcontractors to get their

own insurance because this is much less expe nsive, some of them

cannot or do n o t secure their own, so KC Curb secures it. The

subcontractor is back - charged for this coverage.

60. In monthly worker s ' compensation self - audits, Sempier

includes a sheet that shows payroll for KC Curb ' s uninsured

contr actors and its own employees. Those numbers are combined

together along with other clerical classes and the insurance

premium payment is calculated. Tr ., p. 221, line 3. Although not

required by the FFVA, KC Curb includes payroll numbers for its

uninsur ed subcontractors in each monthly self - audit. Tr .,

p. 221, line 11 .

61. Respondent ' s Exhibit J, entitled " Self - Reported

Payroll , " was explained by the witness. The document, prepared

and issued by KC Curb for 2015, includes an entry reflecting the

total payroll paid each month for KC Curb. This included both KC

Curb ' s own W - 2 employees and employees of subcontractors. Tr .,

p. 227, line 19 .

62. The second page of Respondent ' s Exhibit J (with

information regarding other subcontractors redacted) shows th at

the payroll for employees of Perez Concrete was included beginning

April 2, 2015. Tr ., p . 224, line 16. Respondent ' s Exhibit J

indicates, bottom right, the number of employees that were picked

up from Perez Concrete. 5/

6 3 . Monthly p remiums are paid b y KC Curb instantaneously

" on - line " and are based on the total payroll numbers listed in

Respondent ' s Exhibit J, beginning with page 2. The payment comes

directly out a KC Curb ' s checking account.

64. Sempier testified that once payment was made, all

emp loyees included in the payroll amounts are covered by KC Curb ' s

worker s ' compensation policy, including the Perez Concrete

employee number listed. Tr ., p. 224, line 23 , and p . 253,

line 14 . See Resp. Ex. J, p. 2, bottom right.

6 5 . Work orders are receiv ed from the subcontractors for KC

Curb. Those work orders are supposed to list the names of the

subcontractor ' s employees. In this manner, KC Curb is able to

determine how many employees are going to be covered by insurance

for a particular subcontractor .

6 6 . When KC Curb was informed that the policy of insurance

for Perez Concrete had been canceled, KC Curb called Perez

Concrete ' s insurance agent to get the exact date of cancellation.

6 7 . When Perez Concrete ' s workers ' compensation insurance

cancellati on was confirmed, KC Curb notified Perez Concrete in

writing that it needed to promptly provide new certificates of

insurance. See Resp. Exh. H. Perez Concrete was likewise

notified in writing of KC Curb ' s requirements for " KC Curb to

provide Workers ' Co mpensation Insurance for your Company . " See

Resp. Exh . I .

6 8 . Osorio testified that Perez Concrete chose to have KC

Curb secure the insurance for Perez Concrete after April 10, 2015 ,

and he signed Respondent ' s Exhibit I agreeing to follow the

guidelines for worker s ' compensation insurance.

69 . Thereafter, KC Curb began to pick up and include Perez

Concrete ' s employees on its monthly self - audits. Likewise, it

started to pay a premium amount for insurance which included

payroll related to Perez Concrete ' s employees.

70 . Sempier was contacted by Petitioner ' s investigator,

Scarton. When she informed the investigator that KC Curb w as

compliant with the law and w as following a procedure previously

permitted, the investigator called back that same day and ask ed

for her to get something from her agent verifying that Perez

Concrete was covered. Sempier testified that she promptly

obtained a letter from KC Curb ' s insurance confirming coverage for

Perez Concrete and thought she attached it with her email back to

the investigator. Tr ., p. 256, line 18 .

71 . She subsequently learned that she attached the wrong

document to the email , and the investigator did not receive the

confirmation letter. 6/

7 2 . The evidence indicated that in the year 2015 , KC Curb

provided wo rkers ' compensation insurance coverage as a " statutory

employer " for the employees of approximately seven of its

subcontractors.

CONCLUSIONS OF LAW

7 3. DOAH has jurisdiction over the parties and subject

matter of this proceeding. §§ 120.569 and 120.57(1) , Fla. Stat.

(2015).

Burden of Proof

74 . This is a penal proceeding brought by Petitioner to

enforce the workers ' compensation coverage requirements found in

c hapter 440, by levying a sizeable monetary fine of $11,902.20

against Respondent. As a result, Petitioner has the burden of

proof to show, by clear and convincing evidence, that Respondent

committed the violation(s) alleged in the Amended Order of Penalty

Assessment. Dep ' t of Banking & Fin. v. Osborne Stern & Co. , 670

So. 2d 932, 935 (Fla. 1996); Ferris v. Turlington , 510 So. 2d 292

(Fla. 1987).

7 5. The clear and convincing evidence standard of proof has

been described by the Florida Supreme Court as follows:

Clear and convincing evidence requires that

the evidence must be found to be credible; th e

facts to which 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 t rier of fact a

firm belief or conviction, without hesitancy,

as to the truth of the allegations sought to

be established.

In re Davey , 645 So. 2d 398, 404 (Fla. 1994) (quoting Slomowitz v.

Walker , 429 So. 2d 797, 800 (Fla. 4th DCA 1983)).

Applicable Case Law

76. Workers ' compensation is a branch of law which is

entirely statutory in origin. Shaw v. Cambridge Integrated

Servs. Grp . , Inc. , 888 So. 2d 58, 61 (Fla. 4th DCA 2004). Its

creation " involved a legislative balancing of competing

interests, creatin g a system of shared benefits and burdens for

its participants. " Sun Bank/S . Fla., N.A. v. Baker , 632 So. 2d

669, 672 (Fla. 4th DCA 1994). Workers ' compensation " was unknown

to the common law. " Shaw , 888 So. 2d at 61.

77. Since workers ' compensation is created and governed by

statute, the statute must be strictly construed. See Summit

Claims Mgmt. v. Lawyers Express Trucking, Inc. , 913 So. 2d 1182

(Fla. 4th DCA 2005); Dep ' t of Fin. Servs. v. L & I Consol.

Servs., Inc. , Case No. 08 - 5911 (Fla. DOAH May 2 8, 2009; Fla. DFS

July 2, 2009) .

78. In light of its historical and purely statutory origin,

it is reasonable to conclude that the only rights available to,

or obligations required of, employers and carriers are those

specifically delineated in the statut e. See , generally , Fid. &

Cas. Co. of N.Y. v. Bedingfield , 60 So. 2d 489, 495 (Fla. 1952) ;

and Summit Claims Mgmt. , supra . Similarly, in order to avail

itself of the benefits conferred by statute, an affected party

must comply with the rules and conditio ns stated therein. Cont ' l

Ins. Co. v. Indus. Fire & Cas. Ins. Co. , 427 So. 2d 792, 793

(Fla. 3d DCA 1983).

79. The term " secure payment of compensation " does not

impose an automatic duty to actually pay benefits, but only

requires that payment be insured " with any stock company or mutual

company or association or exchange, authorized to do business in

the State . " Mena v. J.I.L. Constr. Group Corp. , 79 So. 3d 219

(Fla. 4th DCA 2012).

80. In this case, Petitioner has taken the position that

Respondent mus t secure payment of compensation by purchasing and

maintaining its own policy of w orkers ' c ompensation insurance.

Several district court of appeal cases touch upon what the phrase

means.

81. The First District Court of Appeal' s opinion

in Limerock Indus t ries , Inc. v. Pridgeon , 743 So. 2d 176 ( Fla. 1 st

DCA 1999) , is instructive. In Pridgeon , the trial court concluded

that the appellant had failed to secure payment of compensation as

required by the workers ' compensation law and disallowed the

appellant ' s claim of immunity from suit. The trial court agreed

with the appellee who claimed that the appellant was not immune

since it had " misclassified " Pridgeon as an independent

contractor , and the insurance carrier had, therefore, not

considered Pridgeon ' s ris k factors and salary in comput ing the

amount of the appellant ' s premium.

82. On appeal, the appellant argued that it had fulfilled

its obligation, regardless of the misclassification issue, where a

workers ' compensation policy covering the employee was, i n fact,

in place when the employee was injured.

83. The First District Court of Appeal agreed that the

appellant was in compliance with the statute and held:

The issue before us is resolved by section

440.38 (1), which provides that " every

employer shall secure the payment of

compensation under this chapter . . . . By

insuring and keeping insured the payment of

such compensation with any stock company or

mutual company or association or exchange,

authorized to do business in the state. " It

is undisputed that the appellant had in place

at the time of the accident a policy of

worker s ' compensation insurance that covered

all employees of the appellant. Although

erroneously classified as an independent

contractor, Mr. Pridgeon was an employee of

the appellan t and was accordingly covered

under the policy. We therefore conclude that

the appellant did " secure payment of

compensation " within the meaning of section

440.11 (1).

In short, the Court concluded that since coverage was in place

protecting the employee s of Limerock Industries , Inc. , that was

sufficient to comply with the statute .

84. Likewise, the Fourth District Court of Appeal in Mena v.

J.I.L. Constr. Group Corp. , 79 So. 3d 219 (Fla. 4 th DCA 2012) ,

addressed the definition of the phrase " secure paym ent of

compensation , " where it stated:

The statutory language " secure payment of

compensation " means " insuring and keeping

insured the payment of such compensation with

any stock company or mutual company or

association or exchange, authorized to do

busine ss in the State. " § 440.38(1)(a) ,

Florida statutes (2004); Limerock Indus., Inc.

v. Pridgeon , 743 So. 2d 176 (1st DCA 1999).

We therefore reject Mena ' s argument that the

term imposes an automatic duty to actually pay

benefits wherever it is used in the s tatute.

85. Finally, and in a more wide - ranging definition of the

term, the phrase to " secure payment " was explained by Florida ' s

Third District Court of Appeal as follows, " The liability imposed

on employers to ' secure payment ' of compensation requires only

that an employer insure and keep insured the payment of those

workers ' compensation benefits guaranteed by section 440.10(1)(a);

it does not impose a duty to actually pay benefits to an

employee. " VMS , Inc. v. Alfonso , 147 So. 3d. 1071 ( Fla. 3d DCA

2 014 )(e n b anc ) .

86. What is clear and significant is that the First, Third ,

and Fourth District Courts of Appeal apply a fairly broad and

pragmatic definition of what constitutes compliance with the

requirement to " secure payment . " 7/

87. The Florida Supre me Court ' s opinion in Deen v. Quantum

Res ources , 750 So. 2d 616 (Fla. 1999), also sheds some light on

" how " an employer may satisfy its obligation to secure the payment

of workers ' compensation benefits to its employees. The Court

reviewed, in part, the s tatutory list of the " ways " an employer

can secure coverage found in section 440.38(1). The Court

commented that " this section [ section 1 ] is only an authorization

as to how workers ' compensation coverage may be secured and is not

a grant of immunity as r equired by our Jones decision. " Id.

a t 619.

88. Although the Deen case addresses other issues, it

suggests that compliance by an employer with any subsection from

the list of coverage options outlined in section 440.38(1) would

suffice.

89. To that poin t, the first subsection (a) of section

440.38(1) describes one of the options:

(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, authorized to do business in the

state. [8/]

90. As previously noted, the correct outcome of this case

hinges, in part, on the proper definition of the phrase " secure

payment " . This analysis requires not only a careful review of the

applicable workers ' compensation case law, but also a brief

analysis of the statutes and cases on statutory interpretation.

Applicable Statutes

91 . Pursuant to sections 440.10, 440.107(2), and 440.38,

every employer is required to se cure workers ' compensation

insurance coverage for the benefit of its employees unless

exempted or otherwise excluded under chapter 440.

92 . Under c hapter 440 , securing the payment of workers '

compensation means obtaining coverage that meets the requiremen ts

of chapter 440 and the Florida Insurance Code. § 404.107(2) , Fla.

Stat .

93. Interestingly enough, at section 440.107(2), the statute

also defines what does not constitute securing payment of workers '

compensation:

However, if at any time an employer m aterially

understates or conceals payroll, materially

misrepresents or conceals employee duties so

as to avoid proper classification for premium

calculations, or materially misrepresents or

conceals information pertinent to the

computation and application of an experience

rating modification factor, such employer

shall be deemed to have failed to secure

payment of workers ' compensation and shall be

subject to the sanctions set forth in this

section . (emphasis added).

§ 440.107 , Fla. Stat.

94. There was n o allegation or proof in this case to show

that the proposed penalty was levied for an understatement,

concealment , or misrepresentation. Rather, Petitioner concluded

that Respondent had not secured workers ' compensat ion coverage for

its employees.

Applic able Principles of Statutory Construction

95. The Legislature has provided some guidance regarding the

proper interpretation of the phrase " secure payment . " This

includes the following excerpt from section 440.015 , entitled

" Legislative Intent , " which pr ovides:

It is the intent of the Legislature that

the Workers ' Compensation Law be interpreted

so as to assure the quick and efficient

delivery of disability and medical benefits to

an injured worker and to facilitate the

worker ' s return to gainful reemploy ment at a

reasonable cost to the employer . . . . and

the laws pertaining to workers ' compensation

are to be construed in accordance with the

basic principles of statutory construction and

not liberally in favor of either employee or

employer . It is the i ntent of the Legislature

to ensure the prompt delivery of benefits to

the injured worker . ( e mphasis added ) .

As a result, decisional law related to the rules of statutory

construction should be consulted.

96. When interpreting a statute and attempting to discern

legislative intent, courts must first look to the actual language

used in the statute. Joshua v. City of Gainesville , 768 So. 2d

432, 435 (Fla. 2000); Moonlit Waters Apartments, Inc. v. Cauley ,

666 So. 2d 898, 900 (Fla. 1996).

97. When interpret ing a statute, the plain and ordinary

meaning of the words of the statute must control. Fla. Dep ' t of

Env tl . Prot . v. Contract Point Fla . Parks , LLC , 986 So. 2d 1260

(Fla. 2008); Marrero v. State , 71 So. 3d 881 (Fla. 2011) .

98 . It is also axiomatic that an administrative rule cannot

enlarge, modify, or contravene provisions of a statute. Dep ' t of

Bus. Reg. v. Salvation, Ltd. , 452 So. 2d 65, 66 (Fla. 1st DCA

1984); Seitz v. Duval Cnty . Sch . Bd . , 366 So. 2d 119, 121 (Fla.

1st DCA 1979); State Dep ' t of HRS v. McTigue , 387 So. 2d 454 (Fla.

1st DCA 1980). A rule which purports to do so constitutes an

invalid exercise of delegated legislative authority. Nicholas v.

Wainwright , 152 So. 2d 458, 460 (Fla. 1963).

99 . In sum, courts must not defer to an agency ' s

construction or application of a statute if the agency ' s

interpretation conflicts with the plain and ordinary meaning of

the statute. State Farm Fla. Ins. Co. v. Unlimited Restoration

Specialists, Inc. , 84 So. 3d 390 (Fla. 5th DCA 2012 ) ; Fla . Hosp.

v. Ag . for Health Care Admin. , 823 So. 2d 844, 848 (Fla. 1st DCA

2002).

10 0 . " Even where a court is convinced that the Legislature

really meant and intended something not expressed in the

phraseology of the act, it will not deem itself authorized to

depart from the plain meaning of the language which is free from

ambiguity. " Forsythe , 604 So. 2d at 452, 454 (quoting Van Pelt

v. Hilliard , 75 Fla. 792, 78 So. 693, 694 - 95 (Fla. 1918)).

10 1 . A court does not have the authority to strike a clause

or word where such a revision would substantively change the

entire meaning of the statute in a manner contrary to its plain

meaning. Under fundamental principles of separation of powers,

courts cannot judicially alter the wording of a statute where the

Legislature clearly has not done so. A court ' s function is to

interpret statutes as they are written and give effect to each

word in the statute. Fla. Dep ' t of Rev . v. Fla. Mun. Power Ag . ,

789 So. 2d 320 (Fla. 2001) .

10 2 . As previously discussed, at all times during the

p enalty period, Respondent was required to secure workers '

compensation coverage for its employees. § 440.10(1)(a), Fla.

Stat.; § 440.02(17)(b)2., Fla. Stat.

10 3 . Additionally, Intervenor was obligated to secure and

maintain workers ' compensation coverage for subcontractors, such

as Respondent , who did not have or hold valid certificates of

exemption or workers ' compensation coverage during the penalty

period. Under this arrangement, Intervenor is considered to be

the " statutory employer " of Respondent ' s employees. More

specifically, section 440.10(1)(b) states , in pertinent part:

(b) In case a contractor sublets any part or

parts of his or her contract work to a

subcontractor or subcontractors, all of the

employees of such contractor and subcontractor

o r subcontractors engaged on such contract

work shall be deemed to be employed in one and

the same business or establishment, and the

contractor shall be liable for, and shall

secure, the payment of compensation to all

such employees, except to employees of a

subcontractor who has secured such payment.

10 4 . This law introduces a purely statutory concept and

imputes employment of the subcontractor ' s employees to the

contractor for purposes of securing workers ' compensation

coverage. Thus, if a subcontracto r has secured its own coverage ,

then the general contractor is not liable for securing workers '

compensation for that subcontractor. However, if the

subcontractor has not secured workers ' compensation coverage, or

loses it, then the general contractor is liable for securing

workers ' compensation coverage for that subcontractor. See ,

generally , Mena v. J.I.L. Constr. Grp . Corp. , 79 So. 3d 219 (Fla.

4th DCA 2012) ( " where a subcontractor performing part of the work

of a contractor fails to secure payment of compensation, the

contractor is liable for the same " ).

10 5 . Here, it is undisputed that Intervenor contracted with

Respondent to perform cement work and services. It is further

undisputed that Respondent lost and did not have valid workers '

compensation insurance coverage beginning in April 2015.

10 6 . Accordingly, Intervenor was liable, under section

440.10, to secure workers ' compensation coverage for Respondent ' s

employees.

10 7 . The evidence was undisputed that Intervenor did, in

fact, obtain and main tain workers ' compensation coverage for

Respondent ' s employees during the penalty period. See Resp .

Exh . L.

1 08 . In the absence of any case, rule , or statutory

provision which explicitly requires a subcontractor to actually

buy and maintain its own separ ate policy of workers ' compensation

insurance, the undersigned cannot recommend engrafting such a

requirement onto the statute.

1 09 . Further, the undersigned believes that it is

significant that the Legislature used the broader, more all -

encompassing word s " secure " and " obtain coverage " to define an

employer ' s obligation. It could have, but did not use, the phrase

" must buy " or " must maintain " its own " separate policy " of

insurance.

11 0 . The undersigned concludes that this was an intentional

choice of wo rds, and cannot, by way of this Recommended Order,

ascribe a different interpretation. 9/

11 1 . The undersigned ' s conclusion and reasoning is also

supported by other provisions of c hapter 440 and the Florida

Administrative Code which should be read in pari materia with

sections 440.107(2) and 440.38. For instance, section 440.10(d)

envisions that there may be situations where a contractor may

provide or secures coverage for one of its subcontractors, it

reads:

(d)1. If a contractor becomes liable for the

p ayment of compensation to the employees of a

subcontractor who has failed to secure such

payment in violation of s. 440.38, the

contractor or other third - party payor shall be

entitled to recover from the subcontractor all

benefits paid or payable plus inte rest unless

the contractor and subcontractor have agreed

in writing that the contractor will provide

coverage . ( e mphasis added ) .

§ 440.10., Fla. Stat.

11 2 . Likewise, Florida Administrative Code Rule 69L -

6.015(9)(a) contemplates the same:

(9) Workers ' compensation insurance and

certificates of election to be exempt.

(a) Every employer shall maintain all

workers ' compensation insurance policies

obtained by the employer or on the employer ' s

behalf and all endorsements, declaration

pages, certificates of workers ' compensation

insurance, notices of cancellation, notices of

non - renewal, or notices of reinstatement of

such policies. ( e mphasis added ) .

11 3 . Finally, Petitioner bore the ultimate burden of proving

by clear and convincing evidence that Respond ent violated the

statute. This burden rested with Petitioner throughout the

proceedings.

11 4 . In many respects, this case boils down to whether or

not the undersigned has " a firm belief or conviction, without

hesitancy, as to the truth of the allegations sought to be

established. " In re Davey , 645 So. 2d 398, 404 (Fla. 1994)

(quoting Slomowitz v. Walker , 429 So. 2d 797, 800 (Fla. 4th DCA

1983 ) ) . At the end of the day, Petitioner has not met this

burden.

11 5 . To that point, Petitioner has suggested in i ts

Memorandum that if Respondent worked at other job sites for other

contractors during the penalty period (April 10, 2015 , through

August 19, 2015), then Respondent's workers would not be covered

under Intervenor's policy while on those other jobs , and th is

would violate the statute because there would or may be a gap in

the coverage.

11 6 . Irrespective, after reviewing the testimony and

documents in this case , there was no evidence presented to prove

that Respondent did, in fact, work on other projects fo r other

contractors. It was Petitioner ' s burden to prove this point to

advance that argument.

11 7 . Furthermore, there was no proof from Petitioner to show

what the details of Intervenor' s insurance policy were, nor was

the policy admitted into evidence. The testimony from multiple

witnesses reinforced the factual conclusion that Respondent ' s

employees were, in fact, covered under Intervenor ' s policy of

insurance during the entire penalty period. Again, the burden

fell on Petitioner to prove that the pol icy fell short or did not

cover Respondent ' s employees.

1 18 . As a result, Petitioner ' s argument concerning a

potential gap or lapse in coverage is speculative and unavailing.

The only proof presented, and the reasonable inferences drawn from

that proof, is that Respondent ' s work during the penalty period

from April 10, 2015 , through August 19, 2015, was on Intervenor's

projects.

1 19 . By securing, and thereby obtaining, insurance coverage

for its employees through the method of an agreement with the

" stat utory employer , " Intervenor , Respondent fulfilled its legal

obligation to secure worker s ' compensation insurance coverage

under c hapter 440. 10/

12 0 . Irrespective of the merits of the lively arguments

advanced by the parties for or against the use of the L aura Evans

settlement, this case stands and falls on its own " compliance "

merits. The undersigned finds that Respondent was in compliance

during the applicable penalty period by securing worker s '

compensation coverage through the statutory employer,

Inter venor . 11/

12 1 . To sustain its burden of proof and assess this penalty,

Petitioner was obligated to prove that Respondent was out of

compliance by clear and convincing evidence. In reviewing the

evidence and the applicable law, the undersigned concludes t hat it

has not done so.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is RECOMMENDED that Petitioner, Department of Financial

Services, Division of Workers ' Compensation, issue a final order

withdrawing or dismissing the proposed penalty and finding that

Respondent was in compliance with the statute during the relevant

period of time.

DONE AND ENTERED this 5 th day of April , 2016 , in

Tallahassee, Leon County, Florida.

S

ROBERT L. KILBRIDE

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 5 th day of April , 2016 .

ENDNOTE S

1/ References to the Florida Statutes are to the 2014 version,

unless otherwise indicated.

2/ On the record, the parties stipulated that Perez Concrete did

not have its own policy of insurance from April 10, 2015, through

the date of the second site visit on August 19, 2015.

3/ The investigator did not research Sempier ' s claim that this

coverage arrangement had been previously approved in a prior case

with Petitioner. On cross - examination, the investig ator stated

that she was not aware of any factual distinctions or differences

between the Perez Concrete scenario and the prior case involving

another subcontractor, Laura Evans.

4/ The undersigned ruled prior to Little ' s testimony that

testimony concern ing t h e interpretation of substantive areas of

the Workers ' Compensation Law would not be considered . Further,

the undersigned would not consider opinion testimony from Little

concerning the ultimate question of whether or not Perez Concrete

was in violat ion of chapter 440 by failing to secure workers '

compensation coverage for its employees, since these matters were

within the province of the ALJ. The undersigned agreed, however,

to consider Little ' s testimony concerning the history behind the

adoption o f the workers ' compensation statute, chapter 440, or

other areas that might assist the undersigned in a manner

permitted by the rules of evidence.

5/ Only the first page of Respondent ' s Exhibit J is sent to FFVA;

the remaining pages, entitled " Workers Co mp Backup Split, " are

maintained and kept by KC Curb for its own self - auditing purposes.

Tr., p. 227, line 14.

6/ Respondent ' s Exhibit L, a confirmation of coverage letter from

Bouchard Insurance to KC Curb dated July 6, 2015, was admitted by

the unders igned since it supplemented or explained other

admissible evidence.

7/ The undersigned has not located, and the parties have not

provided, a case directly on point interpreting the statute in

the manner suggested by Petitioner.

8/ The evidence adduced at hearing disclosed that Respondent 's

coverage through the statutory employer, KC Curb, was ultimately

with and through "any stock company or mutual company or

association or exchange, authorized to do business in the state , "

resulting in Respondent insur ing and keeping insured the payment

of worker s ' compensation for its employees.

9/ Since the disputed phrases used in chapter 440 are plain and

unambiguous, the construction of the phrases as applied in this

Recommended Order comports with the requiremen t that the statute

be strictly construed. Summit Claims Mgmt. , supra .

10/ The undersigned is not persuaded that the settlement

agreement in the Laura Evans case is determinative or binding in

this case. The parties were different, and the facts and

cir cumstances of that case were not fully vetted at the final

hearing. Further, no final order from that case was admitted by

the parties to trigger any administrative finality. Thomson v.

Dep't of Envtl. Reg. , 511 So. 2d 989 (Fla. 1987); and Delray Med.

Ct r., Inc. v. Ag. for Health Care Admin. , 5 So. 3d 26 (Fla. 4th

DCA 2009). Furthermore, the settlement agreement cannot be

considered an admission against Petitioner's interest. Mortg.

Guar. Ins. Corp. v. Stewart , 427 So. 2d 776 (Fla. 3d DCA 1983)

(settlem ents or offers of settlement have never been considered

admissions against interest binding on the parties making them.

See, e.g. , § 90.408, Fla. Stat. (1981); McCormick, HANDBOOK OF

THE LAW OF EVIDENCE § 274 (2d ed. 1972)). As a final point, even

statem ents made in a settlement letter or agreement are generally

protected. Benoit, Inc. v. Dist. Bd. of Trs. of St. Johns River

Cmty. Coll. of Fla. , 463 So. 2d 1260 hn.2 (Fla. 5th DCA 1984)

(where the court explained why such statements should not be

allowed as an admission against interest : "An inevitable effect

of this exception permitting admissions of fact to be used as

evidence is to inhibit freedom of communication with respect to

compromise, and to serve as a trap for the unwary. These

considerations account for the expansion of the rule to include

evidence of conduct or statements made in compromise

negotiations."). As a result the undersigned concludes that none

of the "Whereas" clauses or statements in the body of the Laura

Evans settlement agreeme nt should be considered.

11/ The undersigned has not been provided with any compelling

case law or statutory authority which prohibits a subcontractor

from complying with the statute in this manner.

COPIES FURNISHED:

Patrick Charles Crowell, Esquire

P atrick C. Crowell, P.A.

4853 South Orange Avenue , Suite B

Orlando, Florida 32806

(eServed)

Trevor S. Suter, Esquire

Thomas Nemecek, Esquire

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399

(eServed)

Julie Jones, CP, F RP, Agency Clerk

Division of Legal Services

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399 - 0390

(eServed)

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within

15 days fr om 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.