Perkins v. A. Perkins Drywall

• Decision Date: 02 March 1993
• Docket Number: Nos. 91-2931,91-3250,s. 91-2931
• Citation: 615 So.2d 187
• Court: Florida District Court of Appeals
• Parties: 18 Fla. L. Week. D630 Darrell PERKINS, Appellant, v. A. PERKINS DRYWALL and Cigna Property and Casualty Companies, Appellees. A. PERKINS DRYWALL, Appellant, v. CIGNA PROPERTY AND CASUALTY COMPANIES, Appellees.

Page 187

615 So.2d 187

18 Fla. L. Week. D630

Darrell PERKINS, Appellant, v. A. PERKINS DRYWALL and Cigna Property and Casualty

Companies, Appellees.

A. PERKINS DRYWALL, Appellant, v. CIGNA PROPERTY AND CASUALTY COMPANIES, Appellees.

Nos. 91-2931, 91-3250.

District Court of Appeal of Florida,

First District.

March 2, 1993.

J. Michael Brennan, Fort Pierce, for Darrell Perkins, appellant/claimant.

George Murphy, Maitland, for Employer, A. Perkins Drywall.

Neil J. Hayes and Nancy Lehman, West Palm Beach, for appellee, Cigna Property and Cas. Companies.

MICKLE, Judge.

We have for consideration two cases consolidated on appeal. In Case No. 91-2931, Darrell Perkins ("Claimant") appealed the final order of the Judge of Compensation Claims ("JCC") holding that the workers' compensation ("W/C") policy that afforded coverage to his father's business, A. Perkins Drywall ("Employer"), did not cover Claimant on the date of his accident. In Case No. 91-3250, the Employer challenged the JCC's determination in the same order that due to Employer's material misrepresentation that Claimant was a partner in A. Perkins Drywall, on which assertion CIGNA ("Carrier") relied to its detriment, the W/C policy did not cover Claimant on the date of injury and the Employer, but not the Carrier, is liable to pay W/C benefits to Claimant. Because the facts herein are completely covered within the provisions and remedies of Chapter 440, Florida Statutes, we hold the JCC erred, as a matter of law, in relying on section 627.409(1), Florida Statutes (1989), to prevent Claimant from recovering from the Carrier pursuant to the Employer's W/C insurance policy in effect on the date of the accident. We reverse.

By pretrial stipulation, all parties agreed Claimant had an accident on July 24, 1990, that arose out of and occurred within the course and scope of employment. Claimant worked as a drywall hanger for A. Perkins Drywall. He fell from a scaffold at a construction site and landed on his feet, crushing both heel bones. He remained temporarily totally disabled from that date to the time of hearing, June 19, 1991.

The Carrier had issued a W/C policy that afforded coverage to the business for the policy period from August 10, 1989, through August 10, 1990. Arvil Perkins, d/b/a A. Perkins Drywall, was the named insured. The policy was a renewal of a prior policy that Port St. Lucie Insurance Agency ("Agency") had produced and forwarded to the National Council on Compensation Insurance. By operation of the assigned risk pool, CIGNA was randomly selected to provide W/C coverage. The original annual "minimum premium" for Employer's 1989-90 policy amounted to $500, because the only parties shown on the policy were "clerical office employees," although the policy provided additionally for wallboard installation if any employees were hired for that task. As a result of a December 1989 audit performed on Employer's policy, the Carrier assessed a very substantially higher estimated policy premium of $10,922. Sara Bryant, an underwriting supervisor for the Carrier, testified that the reason for the increase in premium was "[t]o upgrade to coincide with a previous audit." The Carrier processed the endorsement increasing the premium on December 13, 1989.

A customer service representative of the Agency, Richard Warren Styles, testified that in a December 1989 letter, he informed Arvil Perkins that the audit would result in the much higher premium. Styles characterized the options available then as 1) getting together with the insured to assure that coverage continued by payment of the higher premium, or 2) exploring "some other alternatives as to how the coverage could best be written." At their meeting in January 1990, Arvil Perkins expressed a desire to reduce the policy premium, and he told Styles that most of the payroll producing the additional premium was the amount he had paid his son (Claimant) during the previous year. Styles told Mr. Perkins that the law permitted the exemption of owners, sole proprietors, and partners, and if the business was incorporated, it allowed the exemption of corporate officers. See section 440.02(12)(b), (12)(c), & (12)(d)(4), Florida Statutes (1989) (defining "employee" and permitting exemption from W/C coverage for certain classifications).

Based on information supplied by Arvil Perkins, Styles prepared and filed a Confidential Request for Information form, dated February 1, 1990, adding Darrell Perkins' name to that of his father, d/b/a Perkins Drywall. The form reflected a change in ownership from Arvil Perkins' sole proprietorship to a partnership in which father and son had interests of 65% and 35%, respectively. The stated purpose of the change was to exclude Claimant from W/C coverage and thereby reduce Employer's premium. Consistent with that intent, no notice of election to be covered under the W/C policy was filed on Claimant's behalf. A group medical insurance policy through the United Chambers Insurance Plan was found to be a reasonable replacement for the W/C coverage of Claimant because of the substantially lower costs of the substituted policy. In a Notice of Denial, dated October 16, 1990, the reason given for denying W/C coverage of Claimant was section 440.02(12)(c) [Florida Statutes (1989) ], which included in the definition of "employee" "a sole proprietor or a partner who devotes full time to the proprietorship or partnership and elects to be included in the definition of employee by filing notice thereof...." (e.s.) No such election was filed on Claimant's behalf.

Regarding the issue of Claimant's actual classification at A. Perkins Drywall, the JCC found that Claimant had no ownership interest in the business and did not share in any of the company's profits. Claimant testified he did not contribute capital to the business and had no decision-making power, nor was he personally responsible for any business losses. At no time did Claimant enter a partnership agreement with his father regarding the business. Claimant's testimony, accepted as credible and true by the JCC, demonstrates he never considered himself to be a partner in his father's business. The JCC found that, on the date of the accident, Claimant was an "employee," as defined in section 440.02(13), Florida Statutes (Supp.1990). The W/C policy was held to be in effect on the date of the accident.

However, the JCC held the policy covering Employer did not afford coverage to Claimant because "the Employer made a material misrepresentation as to the partnership status of the Claimant which the Carrier relied on to its detriment." The JCC relied on section 627.409(1), Florida Statutes (1989), which provides:

(1) All statements and descriptions in any application for an insurance policy or annuity contract, or in negotiations therefor, by or in behalf of the insured or annuitant, shall be deemed to be representations and not warranties. Misrepresentations, omissions, concealment of facts, and incorrect statements shall not prevent a recovery under the policy or contract unless:

(a) They are fraudulent;

(b) They are material either to the acceptance of the risk or to the hazard assumed by the insurer; or

(c) The insurer in good faith would either not have issued the policy or contract, would not have issued it at the same premium rate, would not have issued a policy or contract in as large an amount, or would not have provided coverage with respect to the hazard resulting in the loss, if the true facts had been made known to the insurer as required either by the application for the policy or contract or otherwise.

Even an unintentional misstatement in an insurance application will preclude recovery where the misstatement materially affects the risk or the insurer's willingness to accept that risk on the agreed terms. de Guerrero v. John Hancock Mut. Life Insur. Co., 522 So.2d 1032 (Fla. 3d DCA1988). Claimant maintains that the JCC erred, as a matter of law, in applying section 627.409(1) to hold the W/C benefits were not payable to Claimant by the Carrier, where the Employer (but not Claimant) represented that Claimant was a partner in the business.

We find our factually similar decision in B & B Steel Erectors v. Burnsed, 591 So.2d 644 (Fla. 1st DCA1991), rev. den., 599 So.2d 654 (Fla.1992), written after the date of the final order appealed here, is instructive in tracing the effects of the numerous changes in the applicable W/C statute during 1989-91. The evidence in Burnsed established that the claimant and his father and brother were owners and corporate officers of a construction company, B & B Steel Erectors. At some time in 1989, the brother became concerned about the high cost of the company's W/C insurance and met with his insurance agent to discuss a way to reduce premium costs. The Burnseds followed the agent's recommendation to exempt themselves from W/C coverage, as corporate officers, and to "fill the gap" with medical and disability insurance. Certificates of exemption were filed in November 1989 and February 1990. In July 1990, the agent sent the Burnseds a form letter indicating that, as a result of "some very important changes" in the W/C law enacted by the Florida Legislature during the 1990 session, everyone in the construction industry was required to be covered by W/C insurance. Id. at 645. No further communication occurred between the agent and the Burnseds until the claimant in Burnsed sustained injuries while acting as both a crew supervisor and a welder substituting for an absentee worker in August 1990 (only three weeks after Darrell Perkins' accident). In February 1991, the JCC entered an order finding B & B's corporate officers were statutorily covered as of July 1, 1990, or alternatively, that the carrier was estopped from denying coverage by virtue of the Burnseds' reliance on the agent's form letter and the normal method of conducting business between the agency and the company. Id. Finding...