18-004759 Department Of Financial Services, Division Of Workers&Apos; Compensation vs. Baldeo Enterprises, Inc. Status: Closed Recommended Order on Monday, January 7, 2019.

Summary: Respondent's workers' compensation coverage had lapsed for a week for nonpayment of premiums. Obtaining backdated coverage for the lapsed period did not bring Respondent into compliance with section 440.38, warranting a $1,000 penalty by the agency.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF FINANCIAL

SERVICES, DIVISION OF WORKERS '

COMPENSATION,

Petitioner,

vs. Case No. 18 - 4759

BALDEO ENTERPRISES, INC.,

Respondent.

_______________________________/

RE COMMENDED ORDER

A final hearing was conducted in this case on November 13,

2018, by video teleconference with si tes in Lauderdale Lakes and

Tallahassee, Florida, before Robert L. Kilbride, an

Administrative Law Judge ( " ALJ " ) of the Divisi on of

Administrat ive Hearings ( " DOAH " ).

APPEARANCES

For Petitioner: Steven Hart, Qualified Representative

Dustin William Metz, Esquire

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399 - 4229

For Respondent: Davain Baldeo

Baldeo Enterprises, Inc.

15 Northwest 5th Avenue

Hallandale, Florida 33009

STATEMENT OF THE ISSUE S

The primary issue to be decided in this p rocee ding is

whether Respondent ' s back dated, retroactive workers ' compensation

policy complied w ith the requirements of chapter 440, Florida

Statutes. If not, was the penalty properly assessed.

PRELIMINARY STATEMENT

On March 16, 2018, Petitioner, Department of Financia l

Services, Division of Workers ' Compensation ( " Department " ),

served a Request for Production of Business Records on Baldeo

Enterprises, Inc. ( " Respondent " .) 1/

On April 19, 2018, Respondent also received a Request for

Production of Business Reco rds for P enalty Assessment Calculation

( " BRR " .)

On August 7, 2018, the Department served Respondent with a n

Order of Penalty Assessment ( " OPA " ) reflecting a total penalty of

$1,000.00. 2/

Taking exception to the assessment and conclusions reached

by the Department, Respondent requested an administrative

hearing. On August 17, 2018, the Department referred the matter

to DOAH for a final hearing, where the case was assigned to the

undersigned.

A final hearing was initially scheduled for October 23,

2018 . However, on October 17, 2018, the parties filed an Agreed

Motion to Continue Final Hearing, which was granted. The final

hearing was reset and held on November 13, 2018.

During the final hearing, Petitio ner presented the testimony

of C omplianc e I nv est igator Emily Metzenheim and Penalty A uditor

Christopher Collins. Petitioner offered Exhibits 1 through 14,

all of which were accepted into evidence without objection.

Respondent presented the testimon y of Davian Baldeo and

offered four exhibits that were accepted into evidence without

objection.

The h earing Transcript was filed wi th DOAH on December 4,

2018. Petitioner filed its Proposed Recommended Order on

December 13, 2018, which was reviewed and considered by the

undersigned. Respondent did not fil e a proposed recommended

o rder. The 2018 version of the Florida Statutes applies, unless

otherwise noted.

FINDING S OF FACT

The undersigned makes the following findings of fact:

1. Petitioner is the state agency responsible for enforcing

the statutory re quirement that employers secure the payment of

workers ' compensation for th e benefit of their employees.

§ 440.107, Fla. Stat.; Pet . Exs. 1, 2, 3 .

2. Resp ondent is a corporation in the S tate of Florida an d

was formed on March 6, 1996. Pet . Ex. 4 .

3. R espondent operates a preschoo l located at 15 Northwest

5th Avenue, Hallandale, Florida 33309, known as Hallandale

Academy. Pet . Ex. 13 at 4:11 - 25, 5:1 - 5 .

4. Respondent obtained a workers ' compensation policy

AWC1098385 through Associated Industries Insu rance Company, an

insurance carrier authorized to write workers ' compensation

policies in the S tate of Florida. Respondent ' s workers '

compensation policy was effective from February 5, 2018, to

March 11, 2018. Pet . Exs. 9 and 14 .

5. On or about February 28, 2018, Respondent received

notification of cancellation of its policy from its insurance

carrier. § 440.42(3), Fla. Stat.; Pet . Ex. 9 .

6. Respondent ' s workers ' compensation policy was cancelled

by Associated Industries Insurance Company on March 11 , 2018, at

12:01 a.m. due to non payment of the premium . Pet . Exs. 8, 9, 10,

and 11 .

7. On or about March 11, 2018, Associated Industries

Insurance Company notified the Department of the cancelled

policy. § 440.185(6), Fla. Stat.; Pet . Ex. 14 .

8. On Mar ch 1 6, 2018, W orkers ' Compensation C ompliance

I nvestigators Faline Moeses ("Moeses") and Emily Metzenheim

("Metz en heim") conducted a routine workers ' compensation

compliance investigation of Respondent ' s preschool . Pet . Ex. 8 .

9. Moeses confirmed that Re spondent had no workers '

compensation coverage through the Department ' s internal database,

Coverage a nd Compliance Automated System ( " CCAS " .) 3/ Pet . Exs. 8

and 14 .

10. Moeses confirmed that her findings in CCAS matched the

information found on the Nati onal Council on Compensation

Insurance ( " NCCI " ) website. 4/ Pet. Ex . 8 .

11. Both CCAS and NCCI confirmed that Respondent did not

have an active workers ' compens ation insurance policy on

March 16, 2018, when Moeses visited. Pet . Ex . 8 .

12. On March 16, 2018, while at Respondent ' s place of

business, Moeses called Respondent ' s insurance carrier,

Associated Industries Insurance Company, and received additional

confirmation that Respondent ' s workers ' compensation insurance

policy had been cancelled a nd was not in effect due to non payment

of premium. Pet . Exs. 8 and 9 .

13. Moeses contact ed Respondent ' s corporate officer, Davai n

Baldeo ( " Mr. Baldeo " ), by phone. He identified himself as the

own er of Baldeo Enterprises, Inc. Pet . Ex . 8 .

14. Moeses provided information to Mr. Baldeo about the

purpose of the investigation. Pet . Ex. 8 . Moeses requested to

meet with Mr. Baldeo in person to discuss the investigation.

15. Mr. Bal deo refused the request to meet and asked that

Moeses cease speaking with his emp loyees and send all

communications by mail. 5/ Pet . Exs. 8 .

16. On March 19, 2018, a Request for Production of Business

Records was sent via certified mail to Respondent. Pet . Exs. 1

and 8 .

17. The Request for Production of Business Records

reque sted several categories of business records from Respondent

for the period of December 15, 2017, through March 16, 2018. See

Pet itioner's Ex hibit 1 for a detailed descr iption of the records

requested .

18. Respondent submitted sufficient business record s to the

Department in response to the Request for Production of Business

Records, to allow it to complete its investigation. Pet . Ex. 5 .

The records submitted by Respondent confirmed that Respondent

employed four or more regular and customary employees during the

period of December 15, 2017, through March 16, 2018. Pet . Exs. 5

and 8 .

19. On March 19, 2018, Associated Industries Insurance

Company, reinstated Respondent ' s workers ' compensation policy and

it back dated the policy to March 11, 2018. Pet. E xs. 8, 9, 10,

and 11 .

20. On April 6, 2018, the Request for Production of

Business Records was converted into a BRR based on the lapse in

Respondent ' s workers ' compensation insurance coverage between

March 11 and March 19, 2018. Pet . Ex . 2 .

21. On Ap ril 19, 2018, the BRR was served on Respondent.

Pet . Ex. 8 .

22. Respondent did not provide any additional doc uments in

response to the BRR. Pet . Ex. 8 .

23. Department A uditor Christopher Collins was assigned to

calculate a penalty for Respondent ' s non compliance with Florida ' s

Workers ' Compensation Law. Pet . Ex. 8 .

24. Respondent ' s business records were sufficient for the

Department to determine Respondent ' s payroll for the audit review

period. The Department assessed a penalty against Respondent for

its noncompliance with chapter 440 , Florida Statutes . Pet . Ex. 3

and 5 .

25. The Department served Respondent with an Order of

Penalty Assessment totaling $1,000.00. Pet . Exs. 3 and 11 .

26. Respondent ' s period of noncompliance was March 11

through March 18, 2018, as Respondent failed to secure workers '

compensation insurance coverage for this period. Pet . Exs. 8, 9,

10, and 11 .

27. Based on Respondent ' s records, the Department

determined Respondent ' s gross payroll during the period of

non complia nce was $3,423.99. Pet . Ex. 11 .

28. Respondent ' s unsecured gross payroll was then divided

by 100 so that it could be multiplied by the approved manual rate

in order to determine the premium due. Pet . Ex. 11 .

29. The approved manual rates are drafte d by NCCI and then

approved by the Florida Office of Insura nce Regulation.

§ 627.091(4) , Fla. Stat . The approved manual rates represent the

risk factor assoc iated with each NCCI class code and are critical

to calculating a premium. Pet . Ex. 7 .

30. T he calculations reveal that Respondent would have paid

$62.32 in workers ' compensation premium for its unsecured gross

payroll, had coverage been in place, and not lapse d during the

period of March 11 through March 18, 2018. Pet . Ex. 11 .

31. The Depar tment demonstrated by clear and convincing

evidence that Respondent violated Florida ' s Workers ' Compensation

Law by employing four or more employees without securing the

payment of workers ' compensation from March 11 through March 18,

2018 , or a proper exe mption. This violation required the

issuance of the BRR and OPA to Respondent.

32. Petitioner provided clear and convincing evidence that

its penalty calculation was correct.

CONCLUSIONS OF LAW

33. The Division of Administrative Hearings has

jurisdict ion over the subject matter and parties to this

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

34. Because administrative fines are penal in nature,

Petitioner is required to prove by clear and convincing evidence

that Respondent failed to secure the p ayment of workers '

compensation and that it calculated the appropriate amount of

penalty owed by Respondent. See Dep ' t of Banking & Fin. v.

Osborne Stern & Co. , 670 So. 2d 932, 935 (Fla. 1996).

35. Section 440.10(1)(a) provides that " [e]very employer

com ing within the provisions of this chapter shall be liable for,

and shall secure, the payment to his or her employees . . . of

the compensation payable under ss. 440.13, 440.15, and 440.16. "

36. Florida law defines " employer " in part as " every person

carr ying on any employment. " § 440.02(16)(a), Fla. Stat.

37. " Employment " includes " (a)ll private employments in

which four or more employees are employed by the same

employer . . . " § 44 0.02(17)(b)2., Fla. Stat .

38. Respondent ' s business records and the evidence

established that Respondent employed four or more employees in

the childcare industry, a non - construction industry. Pet . Exs. 5

and 8 .

39. Childcare services a re governed by NCCI class

code, 8869. Pet . Ex. 6 ; Fla. Admin. Code. R. 69L - 6.021(2)( aa).

40. " Employee " means any person who receives remuneration

from an employer for the performance of any work or service while

engaged in any employment. § 440.02(15)(a) , Fla. Stat .

41. The employees listed on the penalty worksheet of the

Ord er of Penalty Assessment received remuneration from Respondent

for services performed for Respondent. Pet . Ex . 5 .

42. As an employer of four or more employees, Respondent

was required to secure the payment of workers ' compensation

insurance coverage fo r its employees. § 440.02(17)(b)2. and

§ 440.03 , Fla. Stat. Respondent does not dispute that it was

required to secure the payment of workers ' compensation.

43. The primary legal issue to be decided in this case is

whether Respondent complied with the c overage requirements of

chapter 440 when, after Respondent ' s policy lapsed, it obtained a

back - dated policy for the period of March 11 through March 18,

2018.

44. " Securing the payment of workers ' compensation " means

obtaining coverage that meets the re q uirements of chapter 440 ,

and the Florida Insurance Code. § 440.107(2) , Fla. Stat .

45. Section 440.38(1) establishes five methods for

employers in the state of Florida to comply with the requirement

to secure the payment of workers ' compensation for the ir

employees.

46. Respondent elected to secure workers ' compensation

through section 440.38(1)(a), which provides that an employer may

secure workers ' compensation " [b]y 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. "

47. By failing to " keep insured " the payment of workers '

compensation with an authorized carrier between March 11 through

March 18, 2018, Respondent failed to meet its obligation to

secure the payment of workers ' compensation in accordance with

chapter 440, and was out of compliance for that period.

48. The undersigned concludes that " keeping insured " is a

specific statutor y compliance term and means to remain

continu ously insured with worker ' s compensation coverage.

49. Section 440.38(1)(a), as applied to the facts of this

case, demonstrates the concept that coverage and compliance are

often understood and applied as distinctly different concepts

under Florida ' s Work ers ' Compensation Law.

50. Although the " back - dated " policy provided coverage for

Respondent ' s employees during the period of noncompliance, such

coverage did not comply with the requirement in section

440.38(1)(a), namely that Respondent insure and kee p insured the

payment of workers ' compensation. 6/

51. In short, the cance l led policy, ev en th ough later

reinstated and back dated, nonetheless , resulted in a lapse in

coverage and a lapse in compliance with section 440.38(1).

52. As the framework to under stand this significant l egal

issue, retroactive or back dated coverage has consistently been

held not to comply with an employer ' s obligation to secure the

payment of workers ' compensation. This issue was addressed in

Dep ' t of Fin. Servs. v. Custom Granite Kitchen and Baths, LLC ,

Case. No. 13 - 0799 (Fla. DOAH July 23, 2013; Fla. DFS Oct. 17,

2013). In that case, retroactive coverage secured for Custom

Granite Kitchen and Baths , LLC, after the determination on

July 20, 2012 , that there was no coverage in eff ect, did not undo

the wrong , or meet the employer ' s responsibilities under

Florida ' s Workers ' Compensation Law.

53. There are other DO AH cases illustrating that back dated

policies do not comply with the c overage requirements of

chapter 440. See general ly U.S. Builders, L.P. v. Dep ' t of Fin.

Servs. , Case No. 07 - 4428 (Fla. DOAH Jan. 14 , 2009; Fla. DFS Feb.

23, 2009) ( " back - dated " coverage not material because Florida law

does not recognize retroactive compliance with workers '

compensation requirements); De p ' t of Fin. Servs. v. H.R. Elec . ,

Case No. 04 - 2965 (Fla. DOAH Jun. 8, 2006; Fla. DFS Aug. 22, 2006)

(retroactive cover age obtained after issuance of Stop - work O rder

does not satisfy employer ' s obligation); Dep ' t of Labor & Emp.

Sec . v. E. Pers. Servs., Inc . , C ase No. 99 - 2048 (Fla. DOAH

Oct. 12, 1999; Fla. DLES Nov. 30, 1999) (obtaining coverage after

compliance investigator visits site and determines no cover age in

effect is no defense to Stop - work O rder or pe nalty assessment.)

54. Florida law requires th at insur ers notify employers at

least ten days prior to cancellation of a workers ' compensation

insurance policy. § 440.42(3), Fla. Stat . Respondent received

timely notification of cancellati on from its insurance carrier.

Pet . Ex. 9 .

55. Additionally, insurers are required to notify the

Department of all expired or cancelled policies. § 440.185(6),

Fla. Stat. Associated Industries Insurance Company timely

notified both Respondent and the Depar tment of the cancelled

policy. Pet . Ex. 9 and 14 .

56. Res pondent ' s testimony that it provided payment

information to the carrier for processing the payment of the

subject premium before the effective date of cance l lation of its

policy is unpersuasive and inconsistent with prior testimony

g iven by Respondent unde r oath. 7/ Pet . Ex. 13 at 12:15 - 21 .

57. Moreover, Respondent's assertion is contradicted by the

information contained in both CCAS and obtained from NCCI, and is

suspiciously uncorroborated by any documentary eviden ce provided

by Respondent. Pet . Ex. 1 4 .

58. Likewise, a negative inference is found against the

accuracy of this payment claim since Respondent failed to produce

any records or evidence to verify the alleged payment of the

insurance premium, particularly when such documentation or

evidence was uniquely accessible by Respondent. See generally

Martinez v. State , 478 So. 2d 871 ( Fla. 1985).

59. Respondent ' s self - serving statement that it made

payment or provided payment information to its insurance carrier

for processing before the effective date of cancel l ation of its

policy is, therefore, rejected. § 120.57(1)(c) , Fla. Stat .

60. The Department properly utilized the procedures

mandated by sectio n 440.107(7)(d)1 . and Florida Administrative

Code Rule 69L - 6.035, to calculate the penalty owed by Respondent

as a result of Respondent ' s failure to comply with the coverage

requirements of chapter 440.

61. The minimum statutory penalty based on employer ' s

payroll is $1,000.00.

62. The Department has proven by clear and convincing

evidence that it properly issued an OPA to Respondent, and that

the penalty assessment of $1,000.00 was properly calculated.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is RECOMMENDED that the Department enter a f ina l o rder

imposing and assessing the proposed Order of Penalty Assessment

against Respondent.

DONE AND ENTERED this 7th day of January , 2019 , 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 7th day of January , 2019 .

ENDNOTE S

1/ This request followed a routine workers' compensatio n

compliance inspection at 15 Northwest 5 th Avenue, Hallandale,

Florida.

2/ Because Respondent's net penalty was below the statutory

minimum, a minimum $1,000.00 penalty was assessed, as permitted

by law.

3/ Insurance carriers in the S tate of Florida are required to

submit all workers' compensation insurance information , including

cancelled, active, and non - renewed policies; payroll; class

codes; and insurance carrier in formation to t he Department.

§ 440.185(6), Fla. Stat. This informatio n is housed internally

in CCAS.

4/ NCCI is a nationally recognized source for workers'

compensation insurance information. NCCI collects industry data

and then analyzes that data to provide insura nce rates and loss

cost recommendations for insurance providers, including the

Florida Office of Insurance Regulation to establish the approved

manual rates. § 627.091(4), Fla. Stat.

5/ Notably, there was no claim by Mr. Baldeo that day that he had

made payment or that payment was being pr ocessed by the insurance

company.

6/ Insurance carriers will back date lapsed policies, but only

when the employer produces evidence that no injury occurred

during the lapse in coverage. An insurance carrier is unlikel y

to provide retroactive coverage to an employer whose employees

suffered compensable, work - related injuries during a lapse in

coverage. This is one compelling reason why there must be

continuo us coverage without any lapses.

7/ If this defense had been accurate and viable, the undersigned

would have expected Respondent to have raised this potentially

"game changing" fact during the investigation. It did not.

COPIES FURNISHED:

Davain Baldeo

Baldeo Enterprises, Inc.

15 Northwest 5th Avenue

Hallandale, Florida 33009

(eServed)

Dustin William Metz, Esquire

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399 - 4222

(eServed)

Steven Hart , Qualified Representative

Department of Financial Services

200 East Gaines Street

Tallaha ssee, Florida 32399 - 4229

(eServed)

Julie Jones, CP, FRP, 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 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.