National Fire Insurance Company of Hartford fka v. LLC (2011)

MEMORANDUM OF DECISION

The plaintiff, National Fire Insurance Company of Hartford, sues the defendant, Beaulieu Company, LLC, for unpaid premiums owed for workers' compensation insurance coverage for the periods of March 26, 2005, to March 26, 2006, and April 13, 2006 to June 26, 2006.

The defendant is a roofing contractor that performs work primarily for commercial construction projects.   The defendant uses its own employees, contract labor, and subcontractors to conduct its work.

Because it is difficult to predict exactly how much labor will be needed during an upcoming policy period and because workers' compensation insurance premiums are based on the type of labor and amount of time expended by various workers for a particular job, the insurer prepares an estimated bill at the beginning of the policy term.   After the term expires, the insurer audits the insured's payroll and expenditures to calculate the precise coverage which was provided and the appropriate premium for that coverage.   Depending on whether the estimated premium was excessive or deficient, a refund or a supplemental bill issues.

The final premium is computed by resorting to an insurance industry publication entitled, “Basic Manual for Workers' Compensation and Employers Liability Insurance.”   This manual assigns specified rates for different occupations which vary according to the risk of injury associated with that occupation.   For example, the chargeable premium rate for coverage of a roofer is higher than the rate for a salesperson or clerical worker in the same company.   The audit determines the amount of compensation paid during the policy term for each occupation and uses a formula to arrive at the adjusted premium, retrospectively.

The plaintiff alleges, in the first count, that the defendant breached the insurance contract by failing to pay the additional premium for the policy period March 2005 to March 2006, and, in the second count, for the period April 2006 to June 2006.   There is no controversy concerning the rates employed by the plaintiff nor as to the occupational classification of the workers to which the rate was applied.   Instead, the dispute between the parties is whether those persons or entities ought to have been included in the premium recalculation at all.   The litigants agree that the defendant owes $49,807 in additional premiums, and what remains to be decided is whether an additional $46,529 is owed.

As a threshold issue, the defendant asserts that the plaintiff is confined by its complaint to damages arising from additional premiums owed as a result of remuneration to employees only.   Paragraph six of the complaint refers to “a premium based upon employee and wage information furnished by the Defendant to the Plaintiff.”   The court rejects this assertion.

Paragraph nine of the complaint alleges that the defendant failed to pay “the premiums due under the Policy.”   This language is sufficiently broad to apprise the defendant that the plaintiff seeks damages for all additional premiums owed as a consequence of the audits.

Also, it should be observed that Part Five. C. of the insurance agreement bases the premium recalculation on the remuneration paid to both employees and “[a]ll other persons engaged in work that could make [the plaintiff] liable” to pay workers' compensation benefits.   However, subparagraph two of Part Five. C. exempts remuneration from the adjusted premium computation if the defendant submits proof that “the employees of these [other] persons lawfully secured their workers' compensation obligations.

Under General Statutes § 31–284, an employer is required to secure workers' compensation for its employees.  “Employees” are defined in General Statutes § 31–275(9)(A)(i) to include independent contract labor as well as regularly employed persons.   Also, General Statutes § 31–291 obligates a contractor to secure compensation for employees of a subcontractor engaged by the principal contractor as if the subcontractor's employees were the principal's own employees, where the work done is part of the trade or business of the principal and performed on premises under the principal's control.   Thus, the coverage provided by the plaintiff to the defendant embraced employees of the defendant, contract labor of the defendant, and employees of subcontractors of the defendant unless the subcontractors provided for such coverage.

The word “control,” as used in § 31–291, is a term of art which is “merely descriptive of the work area” and is unrelated to ownership or possessory rights.  Samaoya v. Gallagher, 102 Conn.App. 670, 676–77 (2002).   One who is primarily responsible for dealing with the owner or possessor of the work site and is “ultimately responsible to them for the satisfactory completion of the work” controls the premises for purpose of principal contractor responsibility under § 31–291.  Hebert v. RWA, Inc., 48 Conn.App. 449, 454 (1998).

Therefore, the plaintiff is entitled to include in its premium recalculation all persons or entities, whether employees of the defendant or not, for whom the plaintiff may be liable to pay workers' compensation benefits, unless the defendant proves that such coverage was otherwise provided.   See Hartford Accident and Indemnity Co. v. Capitol Home Improvement Co., 2 Conn.Cir.Ct. 664, 609–70 (1964).

The disputed portion of the additional premiums pertains to workers' compensation coverage for Kurt Squires, Mike Rome, David Sloda, Mark Lapire, M.J. Poirier, and Sky Tech Roofing, LLC. Except for Poirier, the plaintiff asserts that all the individuals were employees of the defendant.   As to Poirier and the LLC, the plaintiff contends that they were subcontractors lacking workers' compensation insurance during the relevant periods.   The defendant denies that any of these persons were its employees and asserts that all persons or entities had appropriate insurance coverage.

The plaintiff also submits that, even if all of the above-named individuals were independent contractors rather than employees, the plaintiff was entitled to additional premiums for their work with the defendant because they all fit within Part Five. C. 2. of the insurance policy in that they “engaged in work that could make” the plaintiff liable to provide workers' compensation benefits.   The court agrees with this contention except with respect to Mike Rome.

Stephen Kidd, an audit manager who oversaw the defendant's account for the plaintiff, testified that his examination of the defendant's records show that Squires, Sky Tech Roofing, LLC, M.J. Poirier, Sloda, and LaPine failed to have independent workers' compensation insurance during the policy terms.   The court finds Kidd's testimony credible and persuasive in this regard.

Although the defendant submitted to the plaintiff certificates of insurance for these individuals and the LLC, the certificates are silent as to precisely who is covered under these independent insurance policies.   Kidd investigated each policy and determined that the policies failed to cover these individuals or failed to provide coverage during the effective periods of the plaintiff's policies which are the bases for its breach of contract claim.

The court also finds, however, that Mike Rome was adequately covered as an employee of the defendant.   Rome was paid $2,100 in addition to his wages as a finder's fee for connecting the defendant with a prospective client.   This sum was unrelated to any work Rome performed for the defendant as an employee nor would a finder's fee fall within Part Five. C. 2. because the plaintiff incurred no liability risk for workers' compensation benefits for such activity.   That portion of the plaintiff's claim for additional premiums attributable to this $2,100 is around $16.

The litigants agreed that the defendant owed $49,807 to the plaintiff for undisputed additional premiums.   As to the disputed premiums, the court awards additional damages on the first count of $36,938 and $9,575 on the second count plus costs to be assessed by the clerk.

Sferrazza

Sferrazza, Samuel J., J.