Hardee v. McDowell
| Decision Date | 23 February 2009 |
| Docket Number | No. 26605.,26605. |
| Citation | 673 S.E.2d 813 |
| Parties | Anthony HARDEE, Employee/Claimant, v. Harry D. McDOWELL, as Personal Representative of the Estate of W.D. McDowell, Uninsured Employer, and S.E. Smith Construction Co., Inc., Alleged Statutory Employer, and Companion Property and Casualty Insurance Company, Carrier/Defendant/Appellants, with the South Carolina Uninsured Employers' Fund, Appearing/Respondents, of whom Harry D. McDowell, as Personal Representative of the Estate of W.D. McDowell is Respondent, and S.E. Smith Construction Co., Inc. and Companion Property and Casualty Insurance Co., are Petitioners, and the South Carolina Uninsured Employers' Fund is Respondent. |
| Court | South Carolina Supreme Court |
Weston Adams, III, Brian G. O'Keefe, Jillian M. Benson, and Ashley B. Stratton, all of McAngus Goudelock & Courie, of Columbia, for Petitioners.
Latonya Dilligard Edwards, of Columbia; Harry D. McDowell, pro se, of Loris; and Terri Morrill Lynch, Matthew J. Story, and Margaret M. Urbanic, all of Clawson & Staubes, of Charleston, for Respondents.
We granted certiorari to review the decision in Hardee v. McDowell, 372 S.C. 413, 642 S.E.2d 632 (Ct.App.2007). In Hardee, the South Carolina Court of Appeals upheld the finding of the South Carolina Workers' Compensation Commission that a general contractor and its insurer, Smith Construction Co. and Companion Property & Casualty Insurance Co., could not transfer liability for a worker's injury to the South Carolina Uninsured Employers' Fund under section 42-1-415 of the South Carolina Code.1 The Court of Appeals determined Smith Construction did not obtain proof of insurance from its subcontractor at the time the subcontractor was engaged to perform work as required by section 42-1-415. We granted the petition of Smith Construction and its insurer for certiorari and affirm as modified.
Smith Construction, a general contractor, hired W.D. McDowell as a subcontractor to perform framing and other work for its construction projects on several occasions. Because McDowell could not afford workers' compensation insurance for its employees, Smith Construction routinely paid the premium and then took weekly deductions from McDowell's pay for reimbursement.
On March 11, 2002, McDowell presented Smith Construction with a certificate of insurance indicating McDowell had coverage from January 30, 2002 to January 30, 2003. During the year, McDowell worked on various jobs for Smith Construction. Smith Construction, relying upon the earlier certificate did not seek proof of insurance for any of these jobs.
In the summer of 2002, McDowell began working on the Socastee library project for Smith Construction. Smith Construction admittedly did not ask for proof of insurance for this job and had no representation from McDowell as to proof of insurance other than the earlier certificate that was in Smith Construction's file.
On September 6, 2002, Anthony Hardee, one of McDowell's employees, was totally and permanently disabled when he fell from scaffolding while working on the Socastee library project. The day before the accident, McDowell's insurance was cancelled. Neither Smith Construction nor McDowell was aware of the cancellation at the time of Hardee's accident.2
Hardee filed a workers' compensation claim. Smith Construction sought to transfer its liability as a statutory employer to the Fund under section 42-1-415. The workers' compensation hearing commissioner found Smith Construction, as the general contractor, was liable for paying Hardee's benefits and it was not allowed to shift liability to the Fund under section 42-1-415 because Smith Construction did not request or obtain proof of insurance from McDowell for the job in question—the Socastee library project.
The full Commission upheld the findings of the hearing commissioner and adopted the hearing commissioner's order in full. The circuit court affirmed. Upon further appeal, the Court of Appeals affirmed. Hardee v. McDowell, 372 S.C. 413, 642 S.E.2d 632 (Ct. App.2007). Smith Construction (and its insurer) petitioned for a writ of certiorari, which this Court granted.3
Smith Construction contends the Court of Appeals erred in affirming the full Commission's decision that section 42-1-415 requires a contractor to obtain proof of insurance from a subcontractor for each particular job for which the subcontractor is engaged to perform work. It argues the case of South Carolina Uninsured Employer's Fund v. House, 360 S.C. 468, 602 S.E.2d 81 (Ct.App. 2004) mandates that proof of insurance be obtained only at the time the subcontractor is first engaged to work and not for each particular job. In the alternative, Smith Construction contends that, even if it obtained proof of insurance at the outset of the Socastee library job, it still would not have learned of the cancellation of McDowell's policy.
Under the statutory employment doctrine, a contractor may be held liable for work-related injuries to employees hired by a subcontractor. See S.C.Code Ann. § 42-1-410 (1985) (); Miller v. Lawrence Robinson Trucking, 333 S.C. 576, 580, 510 S.E.2d 431, 433 (Ct.App.1998) ().
The Fund was "created [by the South Carolina Legislature] to ensure payment of workers' compensation benefits to injured employees whose employers have failed to acquire necessary coverage for employees...." S.C.Code Ann. § 42-7-200(A)(1) (Supp.2008).
Section 42-1-415 provides that a contractor may shift liability to the Fund if the contractor obtains adequate proof that the subcontractor had insurance coverage at the time the subcontractor "was engaged to perform work":
(A) Notwithstanding any other provision of law, upon the submission of documentation to the [C]ommission that a contractor or subcontractor has represented himself to a higher tier subcontractor, contractor, or project owner as having workers' compensation insurance at the time the contractor or subcontractor was engaged to perform work, the higher tier subcontractor, contractor, or project owner must be relieved of any and all liability under this title except as specifically provided in this section.... The higher tier subcontractor, contractor, project owner, or his insurance carrier may petition the [C]ommission to transfer responsibility for continuing compensation to the Uninsured Employers' Fund....
(B) To qualify for reimbursement under this section, the higher tier subcontractor, contractor, or project owner must collect documentation of insurance as provided in subsection (A) on a standard form acceptable to the [C]ommission. The documentation must be collected at the time the contractor or subcontractor is engaged to perform work and must be turned over to the [C]ommission at the time a claim is filed by the injured employee.
S.C.Code Ann. § 42-1-415(A)-(B) (Supp. 2008) (emphasis added).
The issue in this case is at what point in time a contractor must obtain proof of insurance from a subcontractor. Section 42-1-415 provides that such proof must be obtained when the subcontractor is "engaged to perform work."
In the direct appeal of this case, the Court of Appeals first considered Smith Construction's argument that the Commission erred by requiring a contractor to collect proof of insurance from its subcontractor for each job the subcontractor performs. Hardee, 372 S.C. at 417, 642 S.E.2d at 635. The Court of Appeals noted that "Smith Construction contends that a contractor complies with section 42-1-415 by obtaining proof of insurance from its subcontractor once a year." Id. at 417-18, 642 S.E.2d at 635.
Smith Construction, relying on the case of South Carolina Uninsured Employer's Fund v. House, 360 S.C. 468, 602 S.E.2d 81 (Ct. App.2004), argued section 42-1-415 is satisfied if the contractor obtains proof of insurance the first time it hires a subcontractor in any given year, regardless of the number of jobs the subcontractor performs. Id. at 418, 642 S.E.2d at 635. In contrast, Hardee argued that "a common sense reading of the statute" requires a contractor to demand proof of insurance at the beginning of each new job rather than once a year. Id.
The Court of Appeals held the House case was not controlling as the issue presented in House was whether a contractor had a continuing duty to collect proof of insurance throughout the term of the work where there is one continuous job, as opposed to a series of separate jobs. Id. at 418-19, 642 S.E.2d at 635. The Court of Appeals stated the issue in the present appeal, however, concerns what is meant by "engaged to perform work" in circumstances "where a contractor employs a subcontractor for a series of separate jobs in a single year." Id. at 419, 642 S.E.2d at 635.
Turning to the language of the statute, the Court of Appeals found "the plain language [of section 42-1-415] contemplates the contractor require proof of insurance for each job the subcontractor performs regardless of the number of jobs the subcontractor performs in a given year." Id. at 419, 642 S.E.2d at 635-36. Noting the statute requires a contractor to collect proof of insurance at the time the subcontractor is "engaged to perform work," the court concluded: Id. at 419, 642 S.E.2d at 636. The Court...
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