BP Staff, Inc. v. Capital City Ins. Co.

• Decision Date: 16 January 2008
• Docket Number: 2008-UP-060
• Court: South Carolina Court of Appeals
• Parties: BP Staff, Inc., Appellant, v. Capital City Insurance Company, Respondent.

BP Staff, Inc., Appellant,
v.
Capital City Insurance Company, Respondent.

No. 2008-UP-060

Court of Appeals of South Carolina

January 16, 2008

Unpublished

Heard December 12, 2007

Appeal From Unknown County Ralph K. Anderson, III, Administrative Law Court Judge.

D. Randle Moody, II, and Ellison F. McCoy, both of Greenville, for Appellant.

Mark Aloysius Cullen, of W. Palm Beach, for Respondent.

PER CURIAM

At issue in this appeal is the application of an experience modifier rating to Appellant BP Staff in the workers' compensation insurance policy issued by Capital City Insurance Company. The Administrative Law Court upheld the decision by the Department of Insurance to support the application of S.B. Phillips' experience modifier rating to BP Staff. BP Staff appeals the Administrative Law Court's ruling on the ground that S.B. Phillips and BP Staff are separate entities owned respectively by father and son. We affirm the ruling of the Administrative Law Court.

FACTS

S.B. Phillips is a temporary staffing agency founded in Greenville in 1968 and owned by Sam Phillips. Blanton Phillips, Sam Phillips' son, worked for S.B. Phillips for several years in numerous positions until he eventually was "running most of the back office operations of the business, accounting and payroll and risk management." Blanton primarily handled workers compensation for S.B. Phillips. In July of 2002, Blanton formed BP Staff, Inc. which provided "payroll, staffing, risk management, and other related services" to companies. Blanton is the sole owner of BP Staff.

In September 2002, BP Staff and S.B. Phillips entered into an agreement whereby BP Staff would hire the temporary workers of S.B. Phillips, perform payroll functions for those workers, and provide workers' compensation for those workers. In essence, BP Staff would hire S.B. Phillips temporary employees and perform the same "back office" services for those temporary employees as Blanton himself had performed while working with S.B. Phillips. The temporary workers would still be provided to S.B. Phillips for placement in temporary positions with S.B. Phillips' clients as the workers had been in the past. After the agreement S.B. Phillips essentially eliminated the in-house performance of "back office" functions such as risk management while still performing the "front office" services of sales, recruiting, and customer service. Some of BP Staff's permanent employees were previously employed by S.B. Phillips. As late as 2004, permanent employees of BP Staff remained on S.B. Phillips' payroll but were "assigned to BP Staff."

In September 2002, S.B. Phillips and BP Staff each applied for workers' compensation insurance through South Carolina's Assigned Risk Pool after they were unable to secure coverage in the voluntary insurance market. South Carolina's Department of Insurance (Department) forwarded the applications to Capital City Insurance Company (Capital City), one of two carriers in the Assigned Risk Pool. After reviewing BP Staff's application, Capital City issued a policy for BP Staff with a 1.33 experience modifier rating (Modifier). Experience modifier ratings (Modifier) are factors calculated using a complex formula developed by the National Council on Compensation Insurance (NCCI).^[1] NCCI also produces an experience rating plan manual (Plan Manual) that sets forth the rules governing the application of Modifiers to different entities applying for workers' compensation insurance. Once approved by the Department of Insurance, the Plan Manual sets forth the rules regarding insurance coverage in the Assigned Risk Pool.

Modifiers are factors which affect the total cost of an entity's premium. Under the Plan Manual, new companies applying for worker's compensation insurance receive a neutral Modifier of one. If an insured has a history of above-normal claims for their type of industry, the insured's Modifier would increase and thus cause an increase in the overall premium. The Modifier system provides an incentive for employers to provide a safe workplace. Insurance carriers traditionally consider temporary staffing agencies to be a high-risk business.

In its determination to apply the 1.33 Modifier of S.B. Phillips to BP Staff, Capital City reviewed the Plan Manual and information provided by S.B. Phillips and BP Staff before concluding the Modifier should follow the employees that created the experience. BP Staff's request for reconsideration of the Modifier was granted by Capital City but the decision to apply S.B. Phillips' modifier to BP Staff was not altered. BP Staff appealed Capital City's imposition of a 1.33 Modifier to NCCI and then the South Carolina Department of Insurance. The Department held an evidentiary hearing on October 14, 2004, after which it ruled in favor of Capital City.

BP Staff subsequently appealed the Department's findings to the Administrative Law Court (ALC) on August 5, 2005. On August 23, 2006, the ALC upheld the Department's findings, specifically the interpretation of the Plan Manual, the evidence in support of applying the 1.33 Modifier to BP Staff, the sufficiency of the Department's findings, and the denial of BP Staff's request to reopen the record and admit a letter issued by NCCI subsequent to the Department's hearing. BP Staff filed notice to appeal with this court on September 22, 2006.

STANDARD OF REVIEW

As revised by Act 387 in 2006, South Carolina Code Section 1-23-380 sets forth the standard of review when the court of appeals is sitting in review of a decision by the Administrative Law Court on an appeal from an administrative agency. Section 1-23-380(A)(5) forbids the court of appeals from substituting "its judgment for the judgment of the agency as to the weight of the evidence on questions of fact." S.C. Code Ann. § 1-23-380(A)(5) (2006). The court of appeals may reverse or modify the decision only if substantial rights of the appellant have been prejudiced because the administrative decision is clearly erroneous in light of the reliable and substantial evidence on the whole record, arbitrary or otherwise characterized by an abuse of discretion, or affected by other error of law. S.C. Code Ann. §§ 1-23-380(A)(5)(d)-(f) (2006). "The review of the administrative law judge's order must be confined to the record." S.C. Code Ann. § 1-23-610(C) (2006).

The Department's decision can be set aside if it is unsupported by substantial evidence. Hamm v. Central States Health & Life Co., 292 S.C. 408, 410, 357 S.E.2d 5, 6 (1987); Lark v. Bi-Lo, Inc., 276 S.C. 130, 136, 276 S.E.2d 304, 307 (1981). "Substantial evidence" is not a mere scintilla of evidence, nor the evidence viewed blindly from one side of the case, but is evidence which, considering the record as a whole, would allow reasonable minds to reach the conclusion the administrative agency reached. Taylor v. S.C. Dep't of Motor Vehicles, 368 S.C. 33, 36, 627 S.E.2d 751, 752 (Ct. App. 2006) cert. granted, Aug. 9, 2007; S.C. Coastal Conservation League v. S.C. Dep't of Health & Envtl. Control, 363 S.C. 67, 76, 610 S.E.2d 482, 487 (2005).

The party challenging a governmental body's decision bears the burden of proving the decision is arbitrary. Pressley v. Lancaster County, 343 S.C. 696, 704, 542 S.E.2d 366, 370 (Ct. App. 2001). Appellants also shoulder the burden of proving an agency's decision is unsupported by evidence. Bursey v. S.C. Dep't of Health & Envtl. Control, 360 S.C. 135, 142, 600 S.E.2d 80, 84 (Ct. App. 2004), aff'd, 369 S.C. 176, 631 S.E.2d 899 (2006).

LAW/ANALYSIS

I. The Experience Rating Plan Manual

BP Staff argues the Administrative Law Court improperly considered the Plan Manual. This argument is not preserved for our review.

BP Staff did not contest either the Department's or the ALC's treatment of the Plan Manual as "the applicable governing document concerning the issues in this case." In fact, BP Staff concedes in numerous briefs that "the terms of the 1984 Plan Manual contain all rules applicable to this dispute." In their brief to the ALC, BP Staff uses the term "regulation"^[2] when referring to the Plan Manual and presses the court to utilize the rules of statutory construction in interpreting the Plan Manual.

An issue not ruled upon by antecedent trial courts is not preserved for appeal. West v. Newberry Electric Coop., 357 S.C. 537, 543, 593 S.E.2d 500, 503 (Ct. App. 2004) (holding an issue neither addressed by the trial judge in the final order nor mentioned in a subsequent motion for reconsideration is not preserved for review); Wilder Corp. v. Wilke, 330 S.C. 71, 76, 497 S.E.2d 731, 733 (1998) ("It is axiomatic that an issue cannot be raised for the first time on appeal, but must have been raised to and ruled upon by the trial judge to be...