Travelers Ins. Co. v. Ultimate Logistics, LLC (In re Appeal from Decision of the Idaho Workers Comp. Bd.)
| Decision Date | 18 June 2020 |
| Docket Number | Docket No. 46840 |
| Citation | 167 Idaho 13,467 P.3d 377 |
| Court | Idaho Supreme Court |
| Parties | IN RE: Appeal from Decision of the IDAHO WORKERS COMPENSATION BOARD. Travelers Insurance Co. Petitioner-Appellant, v. Ultimate Logistics, LLC, Respondent-Respondent on Appeal. |
Eberle, Berlin, Kading, Turnbow & McKlveen Chtd., for Appellant. Neil D. McFeeley, Boise, argued.
Armstrong & Kirkendall, Chtd., for Respondent. Lawrence E. Kirkendall, Boise, argued.
Travelers Insurance Co. ("Travelers") appeals the decision of the district court, affirming a final order of the Idaho Department of Insurance in favor of Ultimate Logistics, LLC ("Ultimate"). The Department of Insurance's final order upheld a hearing officer's determination that two mechanics working for Ultimate were improperly included in a premium-rate calculation made by Travelers. In its petition for judicial review, Travelers argued that the Department of Insurance acted outside the scope of its statutory authority in determining that the mechanics could not be included in the premium-rate calculation. The district court rejected this argument. Because we conclude that the district court's ruling was correct, we affirm.
The National Council on Compensation Insurance ("NCCI") is a rating organization licensed by the State of Idaho pursuant to Idaho Code section 41-1620(1). Every insurer that provides workers' compensation insurance in Idaho is required to be a member of a rating organization such as NCCI. I.C. § 41-1615.
Insurers that are members of a rating organization must adhere to the rating organization's manuals of classification, rules, rates, and rating plans. I.C. § 41-1620(3). NCCI provides a number of services to insurance companies, such as analyzing trends, supplying workers' compensation information, assisting in pricing, analyzing proposed legislation, and preparing insurance rate recommendations. NCCI also publishes several manuals for insurers to follow. One manual, called the "Basic Manual," contains rules governing workers' compensation insurance policies and over 600 classification codes used to classify businesses. Another manual, called the "Scopes Manual," is also used to classify businesses under classification codes. The premium rates for workers' compensation insurance paid by businesses are determined based on the classification code applicable to the business.
When a business is unable to secure workers' compensation insurance on the voluntary market, it can apply to NCCI for an "assigned risk policy." NCCI, as the plan administrator, then assigns an insurance carrier operating in the state to handle the policy. Once an "assigned risk policy" has been assigned to an insurance carrier, the carrier may conduct an audit to determine whether the business and the individuals on its payroll have been classified correctly. Depending on the results of the audit, the premium may be adjusted by the insurance carrier, both retroactively and prospectively.
Every rating organization licensed in Idaho is required to provide any person aggrieved by the application of its rating system to their workers' compensation policy the opportunity to be heard. I.C. § 41-1622(2). NCCI designated the Idaho Workers' Compensation Appeals Board ("Board") to review the claims of persons aggrieved by the application of its rating system. Despite its name, the Board is not a state agency. Rather, the Board operates in conjunction with NCCI, providing an in-person hearing to aggrieved parties after NCCI makes an initial decision. Any party affected by a decision of the Board may appeal the Board's decision to the Idaho Department of Insurance. I.C. § 41-1622(2).
The Department of Insurance is a state agency. I.C. § 41-201. The Director of the Department of Insurance is tasked with enforcing the Idaho Insurance Code and may delegate his powers and duties to subordinates. I.C. §§ 41-207, -210(l)-(2).
When the Director appoints a hearing officer to hear an appeal, the hearing officer must issue either a recommended order or a preliminary order under the Idaho Administrative Procedure Act. I.C. § 67-5243. Upon the request of a party, a hearing officer's preliminary decision is reviewable by the Director. I.C. § 67-5245(2) - (3). If an issue is appealed to the Director, he hears the issue and enters a final order. I.C. § 67-5245(6). A final order of the Department of Insurance is, in turn, subject to judicial review. I.C. § 67-5270.
Travelers is a member of NCCI which provides workers' compensation insurance in Idaho. NCCI assigned Travelers to provide an "assigned risk policy" to Ultimate. Travelers audited Ultimate for the year of 2015 and found that Ultimate had been misclassified. Travelers believed Ultimate should have been classified as a trucking company as defined under Classification Code 7219 of NCCI's Scopes Manual. Travelers also determined that two mechanics working with Ultimate should have been included in its premium-rate calculation. Accordingly, Travelers sent an invoice to Ultimate for $39,000 in premiums to make up for the additional risks covered by the policy during the previous coverage periods.
Ultimate disagreed with Travelers' classification of its business and the inclusion of the two mechanics in the premium-rate calculation. Consequently, Ultimate requested NCCI review both determinations. NCCI advised Ultimate that it could not make a determination as to whether the two mechanics were properly included in Travelers' premium-rate calculation. It explained: As for the classification issue, NCCI explained that Ultimate was appropriately classified as a trucking company and that any mechanics working for the trucking company were correctly classified under Code 7219. NCCI also informed Ultimate of its right to appeal its initial determination to the Board.
Ultimate appealed, requesting a hearing before the Board. After the hearing, the Board agreed with NCCI that Ultimate was properly classified as a trucking company under Code 7219 and that any mechanics included under Ultimate's workers' compensation policy fell under Code 7219. As to whether the two mechanics were required to be covered under the workers' compensation policy, the Board noted the following:
NCCI advised [Ultimate] prior to the appeals board meeting that the issue of Travelers including the mechanics under [Ultimate's] policy is a coverage issue and is not within the authority of NCCI or the Board to act on. The only issue before the Board is the proper classification of workers covered under the policies.
The Board also informed Ultimate of its right to appeal the decision to the Idaho Department of Insurance.
Ultimate appealed to the Idaho Department of Insurance, and the Department appointed a hearing officer to hear the appeal. Ultimate again argued that Travelers had incorrectly classified it as a trucking company under Code 7219. Ultimate also argued again that the mechanics should not have been included in the premium-rate calculations because the mechanics are independent contractors operating as single member LLCs.
Travelers, on the other hand, argued that the Board correctly determined that Ultimate was properly classified as a trucking company under Code 7219. Travelers also argued the Department of Insurance, like NCCI and the Board, did not have statutory authority to answer the question of whether the mechanics were employees or independent contractors, and by extension, whether they should have been included in the premium-rate calculation.
At the Department hearing, the auditor who conducted the audit for Travelers explained that he included the mechanics in the premium-rate calculation because they were uninsured subcontractors:
Well, to say that they do not have to purchase Workers' Comp in Idaho is probably a fair statement. But if you refer back to Rule 2-H.2 ... we are picking them up as uninsured subcontractors. They had no insurance. So they might not have had an obligation to buy Workers' Comp, but they were still uninsured subcontractors.
The Department's hearing officer entered a preliminary order upholding the Board's determination that Ultimate was properly classified as a trucking company under Code 7219. However, the hearing officer determined that the mechanics should not have been included in the premium-rate calculation under Basic Manual Rule 2.H and entered an order to that effect.
Travelers appealed to the Director of the Department of Insurance, and the Director affirmed the hearing officer's preliminary order.
After the Director entered his final order, Travelers sought judicial review in district court. In its petition for review, Travelers argued the Department did not have the statutory authority to determine whether the mechanics were employees or independent contractors. It also argued that the Director's final order was not supported by substantial, competent evidence. Neither Travelers nor Ultimate sought review of the classification of Ultimate as a trucking company under Code 7219.
Shortly after Travelers filed its appeal, Ultimate's counsel filed a motion to withdraw, which was granted. After a new attorney did not appear on behalf of Ultimate within 21 days, Travelers filed a motion for entry of default judgment against Ultimate. The district court reasoned that it would be inappropriate to set aside an agency's final order "based solely on a lack of participation by [Ultimate]," and denied the motion. Consequently, the district court determined it would consider the merits of the appeal based only on the arguments made by Travelers and set the matter for a hearing.
After the hearing was set, an attorney...
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