Crews v. W.R. Crews Inc. & Architectural Railings And Grilles
| Decision Date | 01 September 2010 |
| Docket Number | No. 4735.,4735. |
| Citation | 390 S.C. 15,699 S.E.2d 189 |
| Parties | William R. CREWS, Employee, Claimant, Respondent,v.W.R. CREWS, INC. & Architectural Railings And Grilles, Employers, and Liberty Mutual Insurance Corp., and The Hartford, Carriers, and South Carolina Workers' Compensation Uninsured Employers' Fund, Defendants,of whom W.R. Crews, Inc. & Architectural Railings and Grilles, Employers, The Hartford, Carriers, and South Carolina Workers' Compensation Uninsured Employers' Fund are Respondents,andLiberty Mutual Insurance Corp. is the Appellant. |
| Court | South Carolina Court of Appeals |
Allison Molony Carter, of Charleston, for Appellant.
A.G. Solomons, Jr., of Estill, John E. Parker, of Hampton, Latonya Dilligard Edwards and Matthew C. Robertson, both of Columbia, Stephen L. Brown, Francis Drake Roger, and Russell G. Hines, all of Charleston, for Respondents.
In this workers' compensation case, the circuit court held Liberty Mutual Insurance Corporation's cancellation of W.R. Crews, Inc.'s policy was invalid and remanded the matter to the commission to order Liberty Mutual to begin paying benefits and providing treatment to the claimant, William R. Crews.1 Liberty Mutual appeals. We affirm.
Crews was in the business of installing handrails and performed installation work for Architectural Railings and Grilles (ARG). Initially, he operated as a sole proprietorship and was insured under ARG's workers' compensation policy. Later, ARG notified him that he would have to obtain his own workers' compensation coverage. As a result, Crews incorporated his business in 2003 and contacted independent insurance agent Tim Loadholt of the Loadholt Agency to obtain workers' compensation coverage.
Loadholt procured workers' compensation insurance for Crews through the Assigned Risk Pool by submitting an application to the National Council on Compensation Insurance (NCCI).2 Crews obtained financing from a premium financing company to pay for coverage. The premium financing company paid the premiums in advance for the entire year and then received installment payments from Crews. Crews' coverage was assigned to Liberty Mutual.
Liberty Mutual issued the policy using estimated payroll information provided by Crews and Loadholt to compute the premiums. Because neither Crews nor Liberty Mutual would know the exact payroll exposure until the end of the policy term, the premiums were estimates until the completion of an actual audit. In order to complete the audit, Liberty Mutual needed actual payroll and tax documentation to verify the exposure. The central issue in this appeal is Crews' alleged noncompliance with Liberty Mutual's audit requests.
On September 22, 2003, Liberty Mutual issued Crews a policy covering the period beginning August 8, 2003, and ending August 8, 2004. This policy will be identified here as the “013 Policy.” 3 On May 11, 2004, Liberty Mutual sent Crews and Loadholt a renewal quote for the policy period beginning August 8, 2004, and ending August 8, 2005. The renewal quote related to a policy that would have been assigned a different number had it been issued. That policy will be referred to as the “014 Policy.”
On August 2, 2004, towards the end of the term of the 013 Policy, Liberty Mutual sent Crews a mail form audit request in order to determine whether Crews owed additional premium payments on this policy or was entitled to a refund of estimated premiums he had already paid. If the audit showed the actual premium should have been higher than what was originally estimated, Crews' coverage was still effective during the policy period; however, Liberty Mutual would be entitled to an additional payment to cover the increased exposure.
The quoted premium for the 014 Policy was due before coverage on that policy was scheduled to begin. Because Crews did not timely pay the premium, Liberty Mutual did not issue the policy and voided the renewal quote. Crews paid the quoted amount three days later. As a result, Liberty Mutual issued a third policy covering the period from August 11, 2004, through August 11, 2005. Like the 013 Policy, this policy, which was assigned a different number and will be referred to as the “024 Policy,” was financed so that the whole year's premium was paid in advance.
Liberty Mutual did not receive a response to the mail form audit request it sent Crews on August 2, 2004, and sent another request on August 30, 2004. Because Liberty Mutual received no response to the follow-up request, on October 14, 2004, it issued an estimated audit to Crews indicating neither party owed money to the other but this determination was subject to revision once Crews sent the requested information with proper tax documentation. On the same day, Liberty Mutual sent Crews a separate letter, advising that the 024 Policy “has been canceled” effective November 18, 2004. The letter further stated the reason for the cancellation was “non-compliance with plan rules,” explaining Crews failed to comply with auditing or loss prevention service department requests. The letter further advised in block letters the policy would not be reinstated and suggested Crews submit another application to NCCI for workers' compensation coverage. In a deposition, Cindy Thiel, a senior customer account representative with Liberty Mutual Involuntary Market Operations, further clarified that the auditing request with which Crews allegedly failed to comply concerned the 013 Policy.
In response to a telephone call from Crews, Liberty sent an additional mail form audit report to him on October 22, 2004. This mailing was documented in a timeline prepared by Thiel. According to the timeline, this form was for the 013 Policy. The Loadholt Agency faxed the completed audit form to Liberty Mutual on November 12, 2004; however, no supporting tax documentation was included.
On November 19, 2004,4 Liberty Mutual sent a letter to Crews requesting tax documentation.
Contrary to Liberty Mutual's assertion on appeal that the purpose of the request was to do a final premium calculation for the 024 Policy, the letter contained the following warning: “If the proper documentation is not sent along with your mail audit your current policy may be canceled for non-compliance with audit.” (Emphasis added.)
The Loadholt Agency alleged it faxed the requested documents to Liberty Mutual on December 21, 2004; however, Liberty Mutual denied receiving the documents and the only fax verification report in the record pertaining to that time indicated that the transmission had failed. Moreover, Thiel testified that on December 8, 2004, Liberty Mutual sent another follow-up request on the 024 Policy and, on December 23, 2004, issued “the final warning letter for the 024 term.” On January 25, 2005, Liberty Mutual sent Crews an estimated audit on the 024 Policy in which it advised that the policy was cancelled on November 18, 2004, and that neither party owed anything to the other. The correspondence further advised that the calculations were subject to revision when Crews submitted a report of actual amounts and proper tax documentation. On November 17, 2004, the NCCI received a notice that the 024 Policy had been cancelled on October 21, 2004, and under applicable regulations, it would have considered coverage cancelled thirty days after that date.5
Crews suffered a serious workplace injury on February 2, 2005. Liberty Mutual acknowledged receiving a fax containing the tax documents on the same day. By letter dated February 4, 2005, however, Liberty Mutual advised Crews it was denying his claim for benefits because his workers' compensation policy had been cancelled effective November 18, 2004. On February 14, 2005, Liberty Mutual issued a revised audit bill, showing that based on the documents he submitted the day of his accident, Crews owed an additional $1,347 on the 013 Policy and would receive an invoice for this amount under separate cover.
Crews filed a Form 50 on December 20, 2005. The single commissioner heard the matter on July 27, 2006, and by order dated April 10, 2007, upheld Liberty Mutual's cancellation of the 024 Policy for “[Crews'] lack of substantial compliance with reasonable audit requirements for the 013 policy.” In addition, the single commissioner found although ARG was Crews' statutory employer, it had relied in good faith on what it believed to be a valid Certificate of Insurance and, based on this finding, allowed its carrier to transfer liability to the Uninsured Employers' Fund (the Fund).
In a divided decision, the appellate panel affirmed the single commissioner. 6 Pursuant to a petition for judicial review filed by Crews, the circuit court issued an order on May 8, 2008, reversing the appellate panel's order and remanding the matter to the commission with instructions to find that Liberty Mutual was responsible for paying Crews' workers' compensation benefits. The court further determined Liberty Mutual's cancellation of the 024 Policy was invalid based on the following findings: (1) none of the circumstances under which the assigned risk plan allows cancellation of a policy was present in this case, (2) Crews complied to the best of his ability with Liberty's Mutual's audit procedures, and (3) any breach by Crews affected only the 013 Policy and not the 024 Policy. This appeal followed.
I. Did the circuit court err in holding Liberty Mutual could not cancel the 024 Policy based on Crews' alleged noncompliance with an audit request on the 013 Policy?
II. Did the circuit court err in finding Crews substantially complied with Liberty Mutual's audit requirements?
III. Did the circuit court err in failing to uphold the appellate panel's findings that Liberty Mutual provided Crews sufficient notice that the policy was to be cancelled and reason for cancellation of the policy?
IV. Was the purported cancellation ineffective because of Liberty Mutual's alleged failure to...
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