Ga. Insurers Insolvency Pool v. Carpet Cycle

• Docket Number: A24A0103,A24A0211,A24A0287
• Decision Date: 16 July 2024
• Citation: 904 S.E.2d 506
• Parties: GEORGIA INSURERS INSOLVENCY POOL v. CARPET CYCLE, LLC et al. Carpet Cycle, LLC et al. v. Georgia Insurers Insolvency Pool. Georgia Insurers Insolvency Pool v. Zep, Inc.
• Court: Georgia Court of Appeals

904 S.E.2d 506

GEORGIA INSURERS INSOLVENCY POOL

v.CARPET CYCLE, LLC et al.

Carpet Cycle, LLC et al.

v.Georgia Insurers Insolvency Pool.

Georgia Insurers Insolvency Pool

v.Zep, Inc.

A24A0103

A24A0211

A24A0287

Court of Appeals of Georgia.

July 16, 2024

Reconsideration Denied July 16, 2024

Michael J. Gorby, Atlanta, Amy C. Meyer Burns, Sandy Springs, Whitney Brooke Arp, for Appellant in A24A0103, A24A0287.

Catherine Koura, Atlanta, George A. Waters, Richmond Hill, Marion George Waters IV, Barton Curtis Solomon, Dalton, Alexis Renee’ West, for Appellee in A24A0103.

Stephanie Ann Rockwell, Lawrenceville, Marion George Waters IV, Alexis Renee’ West, for Appellant in A24A0211.

Michael J. Gorby, Atlanta, Amy C. Meyer Burns, Sandy Springs, Whitney Brooke Arp, for Appellee in A24A0211.

Seth Christopher Martin, Lawrenceville, for Appellee in A24A0287.

Gobeil, Judge.

At issue in these three appeals is the interpretation and interplay of the Georgia Insurers Insolvency Pool Act, OCGA § 33-36-1 et seq.(the "Pool Act") and Georgia’s Workers’ Compensation Act, OCGA § 34-9-1 et seq.(the "WCA").¹Specifically, in the context of a compensable workers’ compensation claim, these appeals require us to address the Georgia Insurers Insolvency Pool’s (the "Pool") right to reimbursement from the solvent insurer of a business utilizing the services of a staffing company when the staffing company’s insurer has become insolvent.

Summary of the Cases Presented

Briefly, as relevant to Case No. A24A0287, Jeffrey Ward sustained a compensable injury in July 2017.On the date of his injury, Ward was employed by North Georgia Staffing, Inc.("NGS"), a temporary staffing company, and NGS had assigned him to work at a warehouse owned and operated by Zep, Inc.("Zep").NGS’s workers’ compensation insurer, Guarantee Insurance Company("Guarantee"), accepted the claim as compensable and commenced payment of medical and indemnity benefits.After Guarantee was declared insolvent, the Pool assumed responsibility for Ward’s claim as required by OCGA § 33-36-14 of the Pool Act.The Pool then sought reimbursement for all amounts it had paid toward Ward’s claim from Zep’s still-solvent insurer, New Hampshire Insurance Company("NHIC").

The matter proceeded to a hearing before an administrative law judge ("ALJ") with the State Board of Workers’ Compensation(the "Board").The ALJ ruled that the Pool was not entitled to reimbursement from NHIC.The Board’s Appellate Division affirmed this ruling, and the Superior Court of Bartow County likewise affirmed the conclusion that the Pool was not entitled to reimbursement from NHIC.On appeal, the Pool argues that the superior court erred by (1) applying an "any evidence" standard to the Appellate Division’s conclusions of law; (2) deferring to the Appellate Division’s "flawed" interpretation of the Pool Act;(3) failing to consider Zep’s liability as a statutory employer (OCGA § 34-9-11 (c)); (4) interpreting the Pool Act in a way that would permit businesses to enter into contracts that contravene the Pool Act’s requirements; and (5) failing to apply the correct test to determine whether Ward was a borrowed servant of Zep at the time of his injury;

As relevant to Case Nos. A24A0103andA24A0211, Jay Hall sustained a work-related injury in 2010 while performing work for Carpet Cycle, LLC("Carpet Cycle").At the time, he was employed by Aliyah Personnel, Inc.("Aliyah"), a temporary staffing company that provided workers for companies including Carpet Cycle.Aliyah’s insurer, Lumbermen’s Underwriting Alliance ("Lumbermen’s"), paid medical and indemnity benefits on Hall’s workers’ compensation claim.In 2016, Lumbermen’s underwent liquidation, and the Pool took over administration of Hall’s claim.The Pool then sought reimbursement from Carpet Cycle and its still-solvent insurer, Rochdale Insurance Company("Rochdale").

An ALJ with the Board denied the Pool’s request for reimbursement, and the Appellate Division and the Superior Court of Gordon County affirmed this denial.In Case No. A24A0103, the Pool appeals, raising the same arguments it raised in Case No. A24A0287.In addition, the Pool argues that the superior court erred by finding that the date of injury, rather than the date of insolvency, controls the analysis of Hall’s employment status for purposes of the Pool Act.

In Case No. A24A0211, Carpet Cycle/Rochdale have filed a cross-appeal from the superior court’s order, arguing that the Pool Act, as applied, is unconstitutional, and the superior court should have considered whether the Pool Act violates Carpet Cycle/Rochdale’s constitutional rights to due process and access to the courts.

As explained more fully below, we affirm in Case No. A24A0287.In Case No., A24A0103, we affirm in part and reverse in part, and we agree with the Pool that the Board applied the wrong test in determining whether Hall was Carpet Cycle’s borrowed servant at the time of his work injury.We therefore remand to the superior court with direction to remand to the Board.And, as explained below, we dismiss Carpet Cycle/Rochdale’s cross-appeal in Case No. A24A0211.

Standard of Review

[1–3] In reviewing a workers’ compensation award, this Court must construe the evidence in the light most favorable to the party prevailing before the appellate division.In addition, the findings of the Board, when supported by any evidence, are conclusive and binding, and neither the superior court nor this Court may substitute itself as a factfinding body in lieu of the State Board.But erroneous applications of law to undisputed facts, as well as decisions based on erroneous theories of law, are subject to a de novo standard of review.

[4]Cho v. Mountain Street Water, Inc., 322 Ga. App. 400, 400, 745 S.E.2d 663(2013)(citation and punctuation omitted)."On appeal to this Court, our duty is not to review whether the record supports the superior court’s decision but whether the record supports the initial decision of the [Board]."Heritage Healthcare of Toccoa v. Ayers,323 Ga. App. 172, 174, 746 S.E.2d 744(2013)(citation and punctuation omitted).

The Georgia Insurers Insolvency Pool and the Pool Act

[5–9] Before delving into the facts of these cases, we begin with some context: an overview of the Pool and the Pool Act.As we recently described in Ga. Insurers Insolvency Pool v. DuBose,

The … Pool is a non-profit legal entity created by the Georgia General Assembly and governed by the Pool Act ….The Pool provides a limited safety net for insurers that experience liquidation….When an insurance company is placed into liquidation, all existing claims of the insolvent carrier are transferred to the Pool by the liquidator and the Pool undertakes responsibility for the handling and administration of those claims in keeping with the Pool Act….The Pool is then responsible for the investigation, adjustment, compromise, settlement, and payment of covered claims; for the investigation, handling, and denial of noncovered claims; and for the management and investment of funds administered by the [P]ool.

349 Ga. App. 238, 241 (1), 825 S.E.2d 606(2019)(citations and punctuation omitted).Further, the Pool is a "guarantor of last resort, providing benefits only when there is no other insurance available."Id. at 246(1)(b), 825 S.E.2d 606.

Significantly, the Pool Act includes an exhaustion provision requiring a claimant to exhaust certain sources of insurance coverage before seeking payment of his or her claim from the Pool.OCGA § 33-36-14 (a).This subsection provides in relevant part:

[A]ny person having a claim against a policy or an insured under a policy issued by an insolvent insurer, which claim is a covered claim and is also a claim within the coverage of any policy issued by a solvent insurer, shall be required to exhaust first his or her rights under such policy issued by the solvent insurer.The policy of the solvent insurer shall be treated as primary coverage and the policy of the insolvent insurer shall be treated as secondary coverage and his or her rights to recover such claim under this chapter shall be reduced by any amounts received from the solvent insurers.

OCGA § 33-36-14 (a).The Pool Act also authorizes the Pool to seek reimbursement from solvent insurers to offset amounts the Pool paid to a claimant.OCGA § 33-36-14 (b).

[10–12] In accordance with "the [ ]Pool Act, when an insurance company is placed into liquidation, the [ ] Pool becomes responsible for the handling and administration of the insolvent insurer’s claims, and the [ ] Pool is deemed the insurer to the extent that such claims constitute ‘covered claims’ within the meaning of the [ ]Pool Act."Palmer v. Ga. Insurers Insolvency Pool,361 Ga. App. 803, 804, 865 S.E.2d 623(2021).Claims under a workers’ compensation insurance policy "may fall within the meaning of a ‘covered claim’ as defined by the [ ]Pool Act."Id.The WCA, in turn, "is intended to provide a complete and exclusive system and procedure for the resolution of disputes between employers and employees who are subject to this chapter concerning accidents and injuries arising out of and in the course of employment[.]"OCGA § 34-9-23.Pursuant to the Pool Act, the WCA is applicable to the Pool.Palmer,361 Ga. App. at 807, 865 S.E.2d 623.

Factual and Procedural Background

a. Case No. A24A0287

As relevant to Case No. A24A0287 and viewed in the light most favorable to Zep/ NHIC, as the prevailing parties before the Board, the record shows that in July 2017, Zep and NGS entered into a contract (the "Personnel Agreement") under which NGS agreed to provide temporary personnel services for assignment at Zep’s warehouse.The contract provided that NGS would: recruit, hire, and assign all associates for Zep; be solely responsible for paying all associates; and provide workers’ compensation insurance for NGS associates.

NGS hired Jeffrey Ward after he attended a job fair at Zep’s warehouse.He attended a "new hire"...