The Issue Whether Respondents,1/ David Feliciano, d/b/a D and S Handyman, Inc., a Dissolved Florida Corporation, and D and S Handyman, Inc., failed to provide workers’ compensation coverage; and, if so, what penalty should be imposed?
Findings Of Fact The Department is the state agency responsible for enforcing the various requirements of chapter 440, Florida Statutes. Section 440.107(3) mandates, in relevant part, that employers in Florida must secure workers’ compensation insurance coverage for their employees. The testimony and evidence substantiates that D and S Handyman, Inc., a Dissolved Florida Corporation, is engaged in the construction industry in Florida as D and S Handyman, Inc., and that David Feliciano is its sole proprietor. On September 7, 2016, Investigator Murvin conducted a random jobsite workers’ compensation compliance investigation (Compliance Investigation). Investigator Murvin spoke with Mr. Feliciano who was working at a jobsite at 713 Lake Cummings Boulevard, Lake Alfred, Florida. During their discussion, Mr. Feliciano stated he had his own corporation (Respondent), and that Respondent was a subcontractor of ANS Plumbing to this job. Respondent was to install the plumbing at this jobsite. Mr. Feliciano claimed he had an exemption. Investigator Murvin checked the Florida Department of State, Division of Corporations’, Sunbiz website to verify Respondent’s status. Mr. Murvin determined that David Feliciano, d/b/a D and S Handyman, Inc., was no longer an active corporation but that when it was active, Mr. Feliciano was the sole corporate officer and registered agent. Investigator Murvin then checked the Department’s Coverage and Compliance Automated System (CCAS) to see whether Respondent had a workers’ compensation insurance policy or any current exemptions. CCAS is the Department’s internal database that contains workers’ compensation insurance policy information and exemption information. Insurance providers are required to report coverage and cancellation information, which is then input into CCAS. Investigator Murvin’s CCAS search revealed that Respondent had no workers’ compensation coverage or exemptions during the relevant period. An exemption is a method by which a corporate officer can exempt himself from the requirements of chapter 440. See § 440.05, Fla. Stat. Mr. Feliciano held an exemption as Respondent’s owner from December 11, 2013, until it expired on December 11, 2015. Investigator Murvin then contacted ANS Plumbing and confirmed that Respondent was subcontracted to install the plumbing at the jobsite. ANS Plumbing also confirmed that Mr. Feliciano of Respondent had an “exemption on file.”3/ Finding no insurance in place, Investigator Murvin contacted his supervisor, who directed him to issue the SWO. The SWO was issued and served on Mr. Feliciano/Respondent on September 7, 2016. Additionally, a business records request (BRR) was also served on Mr. Feliciano for Respondent’s business records. This BRR sought additional information concerning Respondent’s construction business between December 12, 2015 (the day after Mr. Feliciano’s exemption expired), through September 7, 2016 (the date the SWO issued). Respondent did not provide any business records to the Department in response to the BRR. The lack of business records compelled the Department to use the imputation formula to determine Respondent’s payroll. The Department assigned PA Richardson to calculate the appropriate penalty. For the penalty assessment calculation, PA Richardson consulted the classification codes listed in the Scopes® Manual, which has been adopted by the Department through Florida Administrative Code Rules 69L-6.021 and 69L-6.031. Classification codes are assigned to various occupations to assist the calculation of workers’ compensation insurance premiums. Based on the information obtained from the jobsite, PA Richardson assigned the appropriate class code for plumbing, 5183.4/ PA Richardson determined the gross payroll for Respondent for the entire period of non-compliance, which included two separate periods of non-compliance, i.e., December 12, 2015, through December 31, 2015, and January 1 through September 2016. There were different rates for each period. PA Richardson then utilized the corresponding approved manual rates for those classification codes and the related periods of non-compliance. PA Richardson applied the correct approved manual rates and correctly utilized the methodology specified in section 440.107(7)(d)l. and rules 69L-6.027 and 69L-6.028 to determine the penalty of $6,859.70. The Department has demonstrated by clear and convincing evidence that Respondent was engaged in the construction industry (specifically plumbing) in Florida between December 12, 2015, and September 7, 2016; that Respondent employed Mr. Feliciano; and that Respondent did not have the requisite workers’ compensation insurance or an exemption to cover Mr. Feliciano during the applicable period.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered by the Department of Financial Services imposing a penalty of $6,859.70 against Respondent, David Feliciano, d/b/a D and S Handyman, Inc., a Dissolved Florida Corporation, and D and S Handyman, Inc. DONE AND ENTERED this 28th day of February, 2017, in Tallahassee, Leon County, Florida. S LYNNE A. QUIMBY-PENNOCK Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 28th day of February, 2017.
The Issue The issues to determine in this matter are whether Respondent Alpha and Omega Builders of Jacksonville, Inc., failed to secure workers’ compensation coverage for its employees; and, if so, whether Petitioner Department of Financial Services, Division of Workers’ Compensation (Department), correctly calculated the penalty assessment it imposed against Respondent.
Findings Of Fact The Department is the state agency charged with enforcing the requirement of chapter 440 that employers in Florida secure workers’ compensation insurance coverage for their employees. See § 440.107(3), Fla. Stat. Respondent is a corporation located in Jacksonville, Florida, engaged in the roofing industry. Ms. Beckstrom, the Jacksonville supervisor for workers’ compensation compliance investigators, testified at the final hearing. Ms. Beckstrom largely read from the January 30, 2018, investigative report and narrative completed by Investigator Frank Odom, who did not testify at the final hearing.1/ Ms. Beckstrom did not perform the investigation of Respondent, but authorized Mr. Odom to do so. On January 30, 2018, Mr. Odom investigated the worksite at 5065 Soutel Drive, Jacksonville, Florida, which is the J. Fralin Funeral Home, a commercial business (the Soutel Drive site). Mr. Odom’s narrative stated, “[a]s I approached the site I observed 3 individuals on the roof installing shingles.” Much of the remaining portions of Mr. Odom’s narrative, which ultimately led to his determination that Respondent employed these three individuals without workers’ compensation insurance, is inadmissible hearsay. Although Ms. Beckstrom testified extensively on what Mr. Odom wrote in the investigative report and narrative, the undersigned cannot base findings of fact on inadmissible hearsay unless it explains or supplements other evidence. In contrast, Mr. Jessie, the owner of Respondent, testified at the final hearing that Mr. Odom contacted him the morning of January 30, 2018, by telephone. When Mr. Odom asked if Respondent had three individuals working on the Soutel Drive site, Mr. Jessie testified that he told Mr. Odom that these individuals were not supposed to be working.2/ Mr. Jessie stated that when he arrived at the Soutel Drive site after receiving the call from Mr. Odom, the three individuals had left. On cross-examination, Mr. Jessie did not recognize the names of Roberto Flores, Alex Alvarado, or Dagoberto Lopez, who Mr. Odom identified in the investigative report and narrative as the three individuals working on the roof at the Soutel Drive site. Mr. Jessie testified that he normally employs workers through an organization called Action Labor, who in turn secures the applicable workers’ compensation insurance for them. Mr. Jessie testified that he had arranged, through Action Labor, for three individuals to work on the Soutel Drive site, and that Action Labor had provided him a “ticket” for three individuals to work at the site. His testimony is credited. Although not crystal clear from his testimony, the undersigned understood Mr. Jessie to refer to Action Labor as an employee leasing company.3/ Mr. Jessie further testified that after meeting with Mr. Odom at the Soutel Drive site, he received a Stop-Work Order and Order of Penalty Assessment, as well as a Request for Production of Business Records for Penalty Assessment Calculation (Request for Production). The Request for Production requested several categories of business records from Respondent, for the time period of January 31, 2016, through January 30, 2018, to determine Respondent’s payroll during that time period (audit period). The Request for Production requested that Respondent provide all payroll documents, account documents, disbursements, workers’ compensation coverage, temporary labor service and day labor service records, subcontractors, and documentation of subcontractors’ workers’ compensation insurance coverage. At the final hearing, Ms. Murcia, the Department’s penalty auditor, testified that because Respondent had not timely provided sufficient records in response to the Request for Production, the Department issued the Amended Order. Ms. Murcia testified that the Department received some records requested pursuant to the Request for Production in February 2019 (which was well after the response deadline of 10 business days), but that they were incomplete and thus not sufficient to calculate a penalty. Because Respondent failed to provide sufficient records in response to the Request for Production, the Department calculated the Amended Order based on a completely imputed payroll. Ms. Murcia explained that the Department calculates a gross payroll for an employer (who provides insufficient records) at the statewide average weekly wage multiplied by 1.5 for each employee for the period requested for the calculation of the penalty. Based on this imputation calculation, the Amended Order imposed a penalty in the amount of $166,791.18. The evidence presented at the final hearing was insufficient to establish that the three individuals observed at the Soutel Drive site on January 30, 2018, were Respondent’s employees or subcontractors on that day or at any time during the audit period. The evidence presented at the final hearing established that Respondent failed to timely present sufficient records pursuant to the Request for Production.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, the undersigned recommends that the Department enter a final order dismissing the Stop-Work Order and Order of Penalty Assessment, and the Amended Order of Penalty Assessment, against Respondent. DONE AND ENTERED this 3rd day of April, 2019, in Tallahassee, Leon County, Florida. S ROBERT J. TELFER III Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 3rd day of April, 2019.
The Issue The issue is whether Respondent is liable for a penalty of $44,794.51 for the alleged failure to maintain workers' compensation insurance for two employees in violation of Chapter 440, Florida Statutes (2008).1
Findings Of Fact Petitioner is the state agency responsible for enforcing the statutory requirement that employers secure the payment of workers' compensation insurance for the benefit of their employees in accordance with Section 440.107. Respondent is a Florida corporation engaged in the construction business. Respondent utilizes a payroll service company, identified in the record as Frank Crum Leasing (Frank Crum). Frank Crum pays Respondent's employees and collects premiums for workers' compensation insurance based on payroll and employee hours that Respondent reports to Frank Crum each week. Frank Crum maintains a list of the reported employees that is updated weekly (the weekly Frank Crum list). Respondent reports payroll and employee hours to Frank Crum in arrears. On Wednesday afternoon of each week, Respondent reports payroll and employee hours to Frank Crum for the preceding Wednesday through Tuesday. Frank Crum publishes a weekly Frank Crum list each Thursday. New employees that begin work on Wednesday through Tuesday appear on the next weekly Frank Crum list. For example, new employees that began work anytime from Wednesday, February 18, 2009, through Tuesday, February 24, 2009, are reported on February 25, 2009, and appear on the weekly Frank Crum list dated February 26, 2009. New employees that began work anytime from Wednesday, February 25, 2009, through Tuesday, March 3, 2009, are reported on March 4, 2009, and appear on the weekly Frank Crum list dated March 5, 2009.2 Frank Crum collects workers' compensation insurance premiums from Respondent in arrears based on the payroll and employee hours reported each Wednesday for the previous week. The reporting of payroll and employee hours and the payment of insurance premiums in arrears has been Respondent's customary business practice for the past 13 years. On February 26, 2009, one of Petitioner's investigators conducted a random construction site visit at 6417 Grand Island Road, Apollo Beach, Florida. Four workers, who are identified by name in exhibits of record, were laying a concrete sidewalk at the site. The four workers laying the sidewalk were employees of Respondent. Two of the workers were on the weekly Frank Crum list dated February 26, 2006. The other two workers were not on the same list. The two workers who were not on the Frank Crum list dated February 26, 2006, are identified in the record as Mr. Ricardo Hurtado and Mr. Evelio Bueno. On February 26, 2009, Petitioner issued a Stop-Work Order and Penalty Assessment and requested business records from Respondent. Petitioner reviewed the business records and, on April 10, 2009, issued an Amended Order of Penalty Assessment in the amount of $44,794.51 for failure to maintain workers' compensation insurance coverage for the two workers who were not listed on the weekly Frank Crum list dated February 26, 2009, and identified in record as Mr. Hurtado and Mr. Bueno. Respondent does not dispute the accuracy of the penalty calculation. However, Respondent does dispute that Respondent is liable for the penalty assessment. Respondent maintains that the two unlisted workers were covered by workers' compensation insurance on February 26, 2009. The two unlisted workers began their employment with Respondent on February 25, 2009. On March 4, 2009, Respondent reported the new employees to Frank Crum. Respondent paid premiums to Frank Crum for workers' compensation insurance covering the two workers for the dates of employment on February 25 and 26, 2009. The two unlisted workers were covered by workers' compensation insurance on February 25 and 26, 2009. The weekly Frank Crum lists in Petitioner's exhibits are not clear and convincing evidence of the effective date of workers' compensation insurance coverage. The testimony of Respondent's witness at the hearing was clear and convincing that the two workers were covered by workers' compensation insurance in accordance with the customary business practice of Respondent and Frank Crum for the last 16 years. The terms of the workers' compensation insurance policies would have assisted the fact-finder in resolving any evidential conflicts concerning the effective date of workers' compensation insurance coverage. However, Petitioner did not submit copies of the insurance policies and did not submit the testimony of a representative of the workers' compensation insurance company. In support of Petitioner's assertion that Mr. Hurtado and Mr. Bueno were not covered by workers' compensation insurance, Petitioner cites, in paragraph number 13 of its PRO, the testimony of the general counsel of Frank Crum. Petitioner points to the deposition testimony of the general counsel which, in relevant part, states that she did not know whether the insurance company covered the two unlisted workers. The general counsel explained that such a determination would be up to the insurance company and not the general counsel for Frank Crum. The general counsel is correct. Petitioner submitted no evidence to show that the general counsel of Frank Crum is competent to testify for the insurance company. The evidence is clear that Respondent paid insurance premiums in arrears. The evidence is less than clear that insurance coverage was not in effect before the payment of the premium.3 The pretermitted insurance policy or competent testimony from an insurance representative may have clarified the issue. However, the only testimony concerning the effective date of workers' compensation coverage for the two unlisted workers comes from Respondent's live witness. The fact-finder finds her testimony to be credible and persuasive.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Petitioner issue a final order dismissing the Stop-Work Order and Amended Order of Penalty Assessment. DONE AND ENTERED this 4th day of August, 2009, in Tallahassee, Leon County, Florida. S DANIEL MANRY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 4th day of August, 2009.
The Issue The issue in this case is whether Respondent failed to provide workers' compensation insurance coverage for employees, and, if so, what penalty should be assessed.
Findings Of Fact Petitioner is the state agency responsible for, inter alia, monitoring businesses within the state to ensure that such businesses are providing the requisite workers' compensation insurance coverage for all employees. The Division's headquarters are located in Tallahassee, Florida, but its investigators are spread throughout the state in order to more effectively monitor businesses. Respondent is a construction company that has been operating in excess of 30 years. It is a small company and usually only has a few employees at any given time. The company is located in Charlotte Harbor, Florida. Workers' compensation coverage is required if a business entity has one or more employees and is engaged in the construction industry in Florida. Workers' compensation coverage may be secured via three non-mutually exclusive methods: 1) The purchase of a workers' compensation insurance policy; 2) Arranging for the payment of wages and workers' compensation coverage through an employee leasing company; or 3) Applying for and receiving a certificate of exemption from workers' compensation coverage, if certain statutorily-mandated criteria are met. On January 8, 2009, Ira Bender, investigator for the Division, was doing on-site inspections in Port Charlotte, Florida. Bender stopped at the site on Edgewater Drive where new construction was underway at a YMCA. Bender observed a man (later identified as Thomas Woodall) sweeping the floor. Bender questioned Woodall and was told that Woodall worked for Respondent. When asked about his workers' compensation insurance coverage, Woodall advised that his insurance was maintained through Frank Crum Leasing Company ("Crum"). Bender called Crum and found that although Woodall had been carried as an employee of Respondent in the past, he had been released from coverage. The reason for his release was that his employment had been terminated for lack of business. Bender called Respondent to inquire about workers' compensation coverage. He was told that Respondent did not realize Woodall had been dropped from the Crum insurance coverage and that he would be reinstated immediately. In fact, coverage was restarted on that same day. Based on his finding that an employee had been working without coverage, Bender called his supervisor and provided his findings. The supervisor authorized issuance of a SWO based on the findings. The SWO was served on Respondent via hand- delivery at 11:45 a.m., on January 8, 2009. The SWO was also posted at the work site. The Division then requested business records from Respondent in order to determine whether there were any violations. If there were violations, then the Division would ascertain the amount of penalty to assess. Respondent cooperated and submitted the business records, as requested. After review of the business records, the Division issued its first Amended Order of Penalty Assessment ("Order") on January 14, 2009. The process employed by the Division was to locate all uncovered employees, i.e., those working without workers' compensation insurance for any period of time. The employees were then assigned a class code from the National Council on Compensation Insurance (NCCI) publication. Each trade or type of employment is assigned a code which sets the rate to be applied to an individual depending on the type of work he/she is performing. The Division assigned codes to the employees, determined how much the employee had been paid during the period of non-coverage, assigned the rate to the gross pay, and calculated the insurance premium needed to cover the worker for the time in question. A penalty of 1.5 times the premium was then assigned. The Order assessed a total penalty of $21,165.98 against Respondent. Respondent objected to the amount and refused to sign it due to errors contained in the Penalty Worksheet attached to the Order. Signing the Order would have allowed Respondent to return to work, but he refused to sign because he knew it was not correct. Pursuant to discussions between the parties and "additional records received," the Division issued a second Order on January 16, 2009, assessing a penalty of $6,501.27. Respondent believed that the Division was still in error and provided yet additional information--some verbal--to the Division. A third Order was issued on January 21, 2009, reducing the penalty to $3,309.56. However, Respondent still believed the penalty worksheet contained errors. Again, Respondent refused to sign and provided additional information to the Division. The Division issued a fourth Order on January 28, 2009, assessing a penalty of $2,822.24. That Order had an error concerning the spelling of an employee's name, but the penalty amount was correct. Respondent would not sign the fourth Order, because he did not believe he had intentionally violated any statute or rule concerning workers' compensation coverage for his employees. A corrected (fifth amended) Order was ultimately issued on May 19, 2009.1 The fifth Order asserts the amount of penalty now in dispute, which is the same amount appearing in the fourth amended Order. Respondent signed the fifth Order and entered into a payment plan for payment of the penalty, paying a down payment of $1,000 and monthly payments of $30 until paid in full. Respondent takes great offense to the fact that the penalty assessments were not faxed to him more quickly. He maintains that he had every intention to resolve this matter as quickly as possible, but the Division delayed and dragged out the process. The penalty worksheet attached to the fifth Order listed nine "Employee Names" that are subject to the penalty assessment. Each will be discussed below. The first "employee" is listed as "Cash" and is assigned Class Code 5403. This "employee" represents checks found in Respondent's records with the payee listed as "cash- casual labor" totaling $2,178.00 in gross payroll. Code 5403 was assigned because that is the code used by Crum for Respondent's general business. The manual rate for Code 5403 is $24.74. A penalty of $808.26 was assessed for that employee. The second employee is Jacob Prewitt. Prewitt was assigned Class Code 5221, due to the word "driveway" appearing on a check issued to him. Driveway work falls under a lower approved manual rate ($10.37) than general construction. The gross payroll amount was $1,960, and the penalty assigned to Prewitt was $304.88. The third employee is Woodall, assigned a Class Code of 5606, with a manual rate of $3.84. That code is used for supervisors and is, again, not as dangerous an occupation as general construction. The gross payroll for this entry was $1,008, and the penalty assessed for Woodall was $58.07. Cash is the fourth employee and has been covered in the discussion in paragraph 16, above. Barry Lawrence is the fifth employee; he is assigned Class Code 5437 as a cabinet maker/installer with a manual rate of $13.01. Lawrence had a Verification Letter issued by the Division indicating he was exempt from workers' compensation coverage. However, that exemption was limited to cabinet- making. By installing the cabinets, Lawrence performed work outside his exemption status. The gross payroll for his work was $6,200, and the penalty assessed for Lawrence was $1,209.33. Respondent was completely unaware that the exemption letter did not cover installation and had, in fact, always allowed cabinet- makers to install the cabinets as well. Brunderman Builders is listed as the sixth employee. It is assigned Class Code 5403 with a manual rate of $14.39. The gross payroll for this entry was $550, resulting in a penalty assessment of $118.73. The seventh employee is Jorge Gonzolas, assigned Class Code 5403, the general contracting code. Gonzolas was the employee of a contractor who was subcontracting with Respondent. The contractor died unexpectedly, and Gonzolas was left without payment for the work he had performed. Respondent generously decided to pay Gonzolas for his work, thereby, effectively making Gonzolas a de facto employee. The amount paid Gonzolas was $599.00; the penalty assessed for Gonzolas was $129.30. Woodall is again listed as employee number eight, this time with Class Code 5610, reflecting casual labor he did on one date that his insurance was not in place. The payroll amount for this work was $37.50. The penalty assessed for Woodall was $4.02. The ninth employee was Julio Garcia, assigned Class Code 8742 for outside sales, with a manual rate of $.64. The payroll amount for Garcia was $1,300. His penalty assessment amount was $12.48. Garcia was another one of the deceased subcontractor's employees that Respondent volunteered to pay for work Garcia had performed. The total payroll at issue for Respondent was $14,477.50. The total premium for that amount of payroll would have been $1,881.48, and the penalty assessed was $2,822.84. This is a fairly insignificant portion of Respondent's $5.5 million annual payroll. Respondent did not intentionally attempt to avoid the payment of workers' compensation insurance for its employees. There is no pattern of avoidance or indication that non-payment was Respondent's goal. Rather, there are plausible and reasonable explanations about the unpaid premiums. For Woodall, Respondent believed he was still covered through the Crum policy. For Gonzolas and Garcia, Respondent was simply attempting to be a nice guy. For Prewitt, the employee's exemption had unknowingly lapsed. For Lawrence, Respondent relied upon a Verification Letter from the state, but misinterpreted its scope. The Division, on the other hand, only pursued Respondent based on an actual finding of non-coverage. But for Woodall's presence at a work site doing manual labor (sweeping the floor), the Division would not have looked at Respondent's records. There is no indication the Division acted other than in strict accordance to its governing rules.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered by Petitioner, Department of Financial Services, Division of Workers' Compensation, upholding the assessment of a penalty of $2,822.24 against Respondent, Brunderman Building Company, Inc. DONE AND ENTERED this 9th day of October, 2009, in Tallahassee, Leon County, Florida. R. BRUCE MCKIBBEN Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 9th day of October, 2009.
Findings Of Fact Respondent Judy Louise Robinson is currently licensed by the Florida Department of Insurance as a general lines agent, a health agent, and a dental health agent and has been so licensed since November 21, 1984. At all times material, Respondent engaged in the business of insurance as Fleming Island Insurer. At all times material, Respondent maintained two business bank accounts in the name of Fleming Island Insurer: Account No. 1740043215 at Barnett Bank in Orange Park and Account No. 11630004614 at First Union Bank, Park Avenue Office. First Union Bank is currently First Performance Bank. All funds received by Respondent from or on behalf of consumers, representing premiums for insurance policies, were trust funds received in a fiduciary capacity and were to be accounted for and paid over to an insurer, insured, or other persons entitled thereto in the applicable regular course of business. Respondent solicited and procured an application for a workers' compensation insurance policy from Linda Smith on September 13, 1989, to be issued by CIGNA. Respondent quoted Ms. Smith an annual workers' compensation premium of two thousand six hundred four dollars and forty cents ($2,604.40). Linda Smith issued her check payable to Fleming Island Insurer in the amount quoted by Respondent on September 13, 1989, as premium payment for the CIGNA workers' compensation insurance coverage. On September 14, 1989, Respondent endorsed and deposited Linda Smith's $2,604.40 check into Fleming Island Insurer's business bank account No. 1740043215 at Barnett Bank, Orange Park, Florida. On September 17, 1989, Respondent forwarded her check in the amount of two thousand six hundred eighty nine dollars and forty cents ($2,689.40) to NCCI ATLANTIC for issuance of a workers' compensation policy with CIGNA for Linda Smith, Inc. The difference between the amount paid to Respondent by Linda Smith ($2,604.40) and the amount paid by Respondent to CIGNA via NCCI ATLANTIC ($2,689.40) amounts to $85.00 advanced by Respondent because she misquoted the premium amount to Linda Smith. On September 17, 1989, Respondent notified Linda Smith that another $85.00 was due. Linda Smith never paid this amount to Respondent. On September 19, 1989, CIGNA issued a workers' compensation policy for Linda Smith, Inc. Respondent's check was thereafter returned to CIGNA due to insufficient funds. On or about October 20, 1989, CIGNA notified Respondent that her agency check had been returned as unpayable and requested substitute payment within ten days to avoid interruption in Linda Smith, Inc.'s workers' compensation insurance coverage. Respondent asserted that she was injured in an automobile accident on October 1, 1989 and could not work through July of 1990 due to chronic dislocation of her right arm, but she also asserted that she never closed her insurance business and operated it out of her home. Respondent's home is the address at which CIGNA notified her on October 20, 1989 concerning Ms. Smith's policy. Respondent failed to timely submit substitute payment to CIGNA, and as a result, Linda Smith, Inc.'s policy was cancelled January 1, 1990. On January 4, 1990, Linda Smith forwarded her own check in the full amount of $2,689.40 directly to CIGNA and her policy was reinstated. Respondent did not begin to repay Linda Smith the $2,604.40 proceeds of Linda Smith's prior check paid to Respondent until May 1991. At formal hearing, Respondent maintained that she was never notified that Linda Smith paid for the policy a second time. Even if such a protestation were to be believed, it does not excuse Respondent's failure to account to either Linda Smith or CIGNA for the $2,604.40, which Respondent retained. Respondent also testified that Barnett Bank's failure to immediately make available to Respondent the funds from Linda Smith's check, which cleared, resulted in Barnett Bank reporting to CIGNA that there were insufficient funds to cover Respondent's check to CIGNA. From this testimony, it may be inferred that Respondent knew or should have known that she owed someone this money well before May 1991. On November 11, 1989, Lewis T. Morrison paid the Traveler's Insurance Company six thousand forty-three dollars ($6,043.00) as a renewal payment on a workers' compensation policy for Morrison's Concrete Finishers for the policy period December 30, 1988 through December 30, 1989. At the conclusion of the 1988-1989 policy period, Traveler's Insurance Company conducted an audit of Morrison's Concrete Finishers' account. This is a standard auditing and premium adjustment procedure for workers' compensation insurance policies. It is based on the insured's payroll and is common practice in the industry. This audit revealed that Morrison's Concrete Finishers was due a return premium of two thousand one hundred fifty-three dollars and eighty- seven cents ($2,153.87) from the insurer. On March 30, 1990, Traveler's Insurance Company issued its check for $2,153.87 payable to Fleming Island Insurer. This check represented the return premium due Morrison's Concrete Finishers from Traveler's Insurance Company. On April 6, 1990, Respondent endorsed and deposited Traveler's Insurance Company's return premium check into the Fleming Island Insurer's business bank account No. 11630004614 at First Union Bank. The standard industry procedure thereafter would have been for Respondent to pay two thousand two hundred forty-eight dollars ($2,248.00) via a Fleming Island Insurer check to Morrison's Concrete Finishers as a total returned premium payment comprised of $2,153.87 return gross premium from Traveler's Insurance Company and $94.13 representing her own unearned agent's commission. When Respondent did not issue him a check, Lewis T. Morrison sought out Respondent at her home where he requested payment of his full refund. In response, Respondent stated that she would attempt to pay him as soon as she could, that she was having medical and financial problems, and that the delay was a normal business practice. Respondent testified that on or about April 19, 1990, in an attempt to induce Mr. Morrison to renew Morrison's Concrete Finishers' workers' compensation policy through Fleming Island Insurer, she offered him a "credit" of the full $2,248.00 owed him. Pursuant to this offer of credit, Respondent intended to pay Traveler's Insurance Company or another insurance company for Morrison's Concrete Finisher's next year's premium in installments from Fleming Island Insurer's account. This "credit" represented the return premium Respondent had already received from Traveler's Insurance Company on behalf of Morrison's Concrete Finishers for 1988-1989 which she had already deposited into Fleming Island Insurer's business account. Whether or not Mr. Morrison formally declined Respondent's credit proposal is not clear, but it is clear that he did not affirmatively accept the credit proposal and that he declined to re-insure for 1989-1990 through Respondent agent or Traveler's Insurance Company. Respondent still failed to pay the return premium and commission which she legitimately owed to Morrison's Concrete Finishers. On June 28, 1990, the Traveler's Insurance Company issued a check directly to Mr. Morrison for the full amount of $2,248.00. Respondent did not begin repaying Traveler's Insurance Company concerning Mr. Morrison's premium until after intervention by the Petitioner agency. At formal hearing, Respondent offered several reasons for her failure to refund the money legitimately due Mr. Morrison. Her first reason was that the district insurance commissioner's office told her to try to "work it out" using the credit method outlined above and by the time she realized this method was unacceptable to Mr. Morrison, he had already been paid by Traveler's Insurance Company. However, Respondent presented no evidence to substantiate the bold, self-serving assertion that agency personnel encouraged her to proceed as she did. Respondent also testified that she did not know immediately that Traveler's Insurance Company had reimbursed Mr. Morrison directly. However, it is clear she knew of this payment well before she began to pay back Traveler's, and since Mr. Morrison did not reinsure through her or Traveler's she should have immediately known the "credit" arrangement was unacceptable to him. Respondent further testified that she did not want to repay Mr. Morrison until a claim on his policy was resolved. However, there is competent credible record evidence that the Traveler's Insurance Company 1988-1989 workers' compensation policy premium refund was governed solely by an audit based on payroll. Mr. Morrison's policy premium or refund consequently was not governed by "loss experience rating", and the refund of premium would not be affected by a claim, open or closed. Thus, the foregoing reasons given by Respondent for not refunding Mr. Morrison's money are contradictory or not credible on their face. They also are not credible because Respondent admitted to Mr. Morrison in the conversation at her home (see Finding of Fact 24) that she was having trouble paying him because of medical and financial difficulties. Further, they are not credible because Respondent testified credibly at formal hearing that she would have paid Mr. Morrison but for her bank account being wiped out by a fraudulent check given her by an unnamed third party. On August 10, 1992, Respondent was charged by Information with two counts of grand theft. See, Section 812.014(2)(c) F.S. The allegations in the Information charged Respondent with theft of insurance premiums from Linda Smith and Lewis T. Morrison, and arose out of the same facts as found herein. On December 17, 1992, Respondent entered a nolo contendere plea to only the first count of grand theft as to matters involving Linda Smith and the other count was "null prossed." Respondent secured a negotiated sentence on the first count. "Grand theft" is a felony punishable by imprisonment by one year or more. Adjudication was withheld pending satisfactory completion of probation, including community service and payment of restitution and court costs. Respondent has been complying with her probation, including restitution payments.
Recommendation Upon the foregoing findings of fact and conclusions of law, it is recommended that the Department of Insurance enter a final order finding Respondent guilty of violations of Sections 626.561(1), 626.611(7), (9), (10), and (13); 626.621(2) and (6) F.S. under Count I, violations of Sections 626.561(1), 626.611(7), (9), (10), and (13), and 626.621(2) and (6) under Count II, and violations of Sections 626.611(14) and 626.621(8) F.S. under Count III, finding Respondent not guilty of all other charges under each count, and revoking Respondent's several insurance licenses. RECOMMENDED this 23rd day of June, 1993, at Tallahassee, Florida. ELLA JANE P. DAVIS Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 23rd day of June, 1993. APPENDIX TO RECOMMENDED ORDER 92-2060 The following constitute specific rulings, pursuant to S120.59(2), F.S., upon the parties' respective proposed findings of fact (PFOF). Petitioner's PFOF: As modified to more correctly reflect the whole of the record evidence and avoid unnecessary, subordinate, or cumulative material, all of Petitioner's proposed findings of fact are accepted. Respondent's PFOF: Sentence 1 is accepted as a paraphrased allegation of the Second Amended Administrative Complaint. Sentence 2 is covered in Findings of Fact 4-18. Sentence 3 is accepted but subordinate and to dispositive. Sentence 4 is apparently Respondent's admission that she owed $2,604.40 to Linda Smith and paid her $500.00 of it. Accepted to that extent but not dispositive in that full payment was not made timely. Sentence 1 is accepted as a paraphrased allegation of the Second Amended Administrative Complaint but not dispositive. Sentence 2 is accepted but immaterial. Sentence 3 is rejected as argument and not dispositive. As stated, the proposal also is not supported by the record. Sentence 4 It is accepted that Mr. Morrison admitted he had a claim. However, the record does not support a finding that he requested Respondent to contact Traveler's Ins. Co. about it. Even if he had, that is subordinate and not dispositive of the ultimate material issues. Sentence 5 is rejected as not supported by the credible record evidence. Covered in Findings of Fact 23-28. Sentence 6 is rejected as not supported by the record and as argument. Sentence 7 Accepted. Sentence 8 Accepted. The "Descriptive Narrative" is accepted through page 4, but not dispositive. Beginning with the words "In summary" on page 5, the remainder of the proposal is not supported by the record in this cause which closed April 16. 1993. COPIES FURNISHED: Daniel T. Gross, Esquire Division of Legal Services Department of Insurance and Treasurer 412 Larson Building Tallahassee, FL 32399-0300 Judy Louise Robinson 4336 Shadowood Lane Orange Park, FL 32073-7726 Tom Gallagher State Treasurer and Insurance Commissioner Department of Insurance and Treasurer The Capitol, Plaza Level Tallahassee, FL 32399-0300 Bill O'Neil General Counsel Department of Insurance and Treasurer The Capitol, PL-11 Tallahassee, FL 32399-0300
The Issue The issues to be decided are: 1) whether Petitioner, Amerisure Mutual Insurance Company (Amerisure), is entitled to a credit or refund due to the elimination of credits by Respondent, Department of Financial Services (Respondent or the Department), that Amerisure claims accrued in the calendar year 2009 and should apply to future assessments owed to the Special Disability Trust Fund (SDTF) and the Workers? Compensation Administration Trust Fund (WCATF)(collectively the Trust Funds); 2) whether the elimination of these credits was accomplished by the Department?s application of a policy meeting the definition of a rule that has not been adopted through the chapter 120 rulemaking process; and 3) whether any refund or credit is barred by the statute of limitations in section 215.26, Florida Statutes.
Findings Of Fact Amerisure is a carrier as defined in section 440.02(4), Florida Statutes, authorized to transact the workers? compensation line of business in the State of Florida. At all times relevant to the Department?s Notice of Intent, Amerisure was authorized to transact the workers? compensation line of business in Florida, and required to pay assessments to both the SDTF and WCATF. Pursuant to section 440.49(9)(b), Florida Statutes, the SDTF is maintained by annual assessments, paid quarterly, upon the insurance companies writing compensation insurance in Florida; the commercial self-insurers under sections 624.462 and 624.4621, Florida Statutes; the assessable mutuals as defined in section 628.6011, Florida Statutes; and the self-insurers under chapter 440, Florida Statutes. Section 440.49(9)(b) requires the Department to determine the rate each year for the next calendar year, based on the Department?s estimate of the amount of money necessary to administer section 440.49, and to maintain the SDTF for that next calendar year. In addition, the total amount to be assessed against all entities subject to assessment is prorated among those entities. Similarly, pursuant to section 440.51(1), the WCATF is maintained by annual assessments, paid quarterly, upon the carriers writing compensation insurance in Florida and self- insurers. Section 440.51(1) provides that the rate is determined each year for the next calendar year based on the anticipated expenses of the administration of chapter 440 for the next calendar year. In addition, the total amount to be assessed against all entities subject to assessment is prorated among those entities. Workers? compensation policies are unique insurance policies in that they provide statutorily mandated coverage that must be purchased by most employers; they provide “no fault” coverage and have no maximum dollar amount limit in the primary coverage of medical benefits. To make such coverage affordable, the market has developed various types of policies which allow an employer, based upon its size and financial wherewithal, to limit its exposure for a possible reduction in premium. For example, there are standard policies that provide coverage from the first dollar of loss, there are large deductible policies where the employer shares in a greater amount of risk, there are retrospective policies where final premium amount is determined on the basis of loss development during the policy, and there are dividend plans which also take into account loss experience. Most workers? compensation policies are annual policies which can incept at any given day within a calendar year. It is not unusual for a workers? compensation policy to run between two calendar years. Regardless of the kind of workers? compensation policy issued to an employer, the initial premium at the time of policy inception is referred to as an “estimated premium.” This is because the “estimated premium” is based on the actual number of employees in a company?s payroll and the payroll classifications as to each employee?s particular job -- e.g., executive supervisor, window cleaner, etc. Because the final exposure is unknown until the last day of coverage, the “estimated premium” is always subject to change. Most workers? compensation policies have standard language copyrighted by the National Council on Compensation Insurance (NCCI), a statistical and rating organization which files rates and forms in Florida for use by carriers, which address this very point. Under the “Part Five Premium” section of a standard NCCI policy, “Section E” states that the premium shown on the information page, schedules, and endorsement is an “estimate.” Section E further states that the final premium will be determined by an audit after the policy ends by using the actual and not the estimated premium base, and the proper calculations and rates that lawfully apply to the business and work covered by the policy. Finally, Section E provides that if the actual premium is more than what the policyholder paid as an estimated premium, the insured must pay the balance. Conversely, if it is less than what was paid, the insurance company will refund premium. When audits are performed either at the end of the policy year or later, premiums may be refunded to a policyholder. Dividend plans are a kind of workers? compensation policy which allows for a dividend payment back to the policyholder if the actual loss experience observed is more favorable than anticipated. The payment of a dividend is not guaranteed, but is subject to the approval of an insurer?s Board of Directors. Significantly, the earliest that a dividend can be paid out under a dividend plan is six months after the policy has ended. As such, dividends are never paid in the same calendar year as a policy incepts. All workers? compensation carriers writing business in Florida pay an assessment on every premium dollar to fund the SDTF and WCATF. When the NCCI files for rates in Florida, it takes into account the assessments paid by carriers to the Trust Funds, and the charge for the assessments is included in the rates developed by the NCCI. The rate is the amount applied to the payroll, and the product of the payroll and rate equals the premium for a particular payroll classification. Reporting and Collection of Assessments The Department provides pre-printed forms entitled “Carrier and Self-Insurance Fund Quarterly Report” to workers? compensation carriers, such as Amerisure, to self-report “net premium” amounts on a quarterly basis. The Department also provides a “spreadsheet” form that the carriers may utilize to indicate how they are calculating the net premium amount for each of the trust funds. After calculating the net premium amount for each trust fund on the spreadsheet, the carrier writes in that net premium amount on the quarterly report and multiplies that amount by the assessment rate set by the Department (which is reflected on the quarterly report form). If a carrier returns more premium and/or pays more in dividends than it has written in one quarter, it has a “negative net premium” and owes no assessment for that quarter. The quarterly report form provides empty circles, referred to on the form as “buttons,” for the carrier to fill in indicating whether the net premium amount is negative or positive. When a carrier has negative net premium for a quarter, a credit amount is reflected on the next quarterly report form to be applied toward future assessments. This credit amount is pre-printed by the Department on the next quarter?s form. This amount appears in the “debit/credit box” on the quarterly report form or in the “balance carried forward” on the spreadsheet. The direct written premium in the insurance industry is the summation of all premiums for a given period less any returns made during that period. Amerisure subtracts any premium returned during the calendar year from its gross number to determine direct written premium, regardless of what year the policy, for which premium is returned, incepted. In order to calculate the net premium amount for assessment purposes, Amerisure deducts the amount of dividends paid or credited to policyholders from their direct written premium amount, regardless of the fact that the policy year for the dividend being paid is a different calendar year than the year that the dividend is paid or credited. By statute, workers? compensation insurance companies, such as Amerisure, are assessed by the Department for contributions to the SDTF based on the amount of “net premiums written,” and companies are assessed for contributions to the WCATF based on the amount of “net premiums earned” or “net premiums collected.” Since at least 2004, Amerisure has been utilizing “direct written premium” to calculate the “net premium” or “net premium collected” amount listed in its quarterly reports for both the SDTF and WCATF Funds. The Department utilizes annual reports filed with the NAIC by carriers to perform their audits and determine if an insurer has accurately reported the amount of net premium subject to assessments for the Trust Funds. Assessments to the Trust Funds are paid by Amerisure during the quarter that premium is written. Premium is considered written when a policy first incepts or when additional premium is charged on a policy. Because Amerisure utilizes net written premium as a “proxy” for net collected premium, it pays more in trust fund assessments up front than it would if it were able to report the company?s actual collected premium. Amerisure?s 2009 Credits In the last two quarters of 2008, Amerisure began to experience negative net premium. This continued through all of calendar year 2009 until Amerisure once again experienced positive premium in calendar year 2010. Amerisure?s negative premium was a result of the economic downturn, which gravely impacted a large portion of Amerisure?s Florida customer base in the construction industry. Due to so many employers downsizing their workforce, Amerisure returned 12 million dollars in premium in calendar year 2009. The majority of the 12 million dollars of premium returned to policyholders was for approximately 1200 policies which had incepted prior to 2009 and for which assessments had been paid into the trust funds prior to 2009. Amerisure?s payment to the trust funds of the original assessment amounts on the policies that incepted prior to 2009 was based on “estimated premium,” on what Amerisure believed the premium to be at that point in time, prior to the calculation of the final premium. According to Raymond Neff, who was accepted as an expert in the field of workers? compensation insurance, Amerisure?s experience of negative net premium in late 2008 and 2009 was not unique in the workers? compensation construction sector as verified by NCCI data showing similar impacts to other carriers due to the recession and reductions in payroll during this time frame. The Department did not rebut his testimony in any meaningful way. Reporting and Payments for the SDTF For the time periods in 2008, Amerisure paid quarterly assessments to the SDTF based upon reported net premiums written, or did not pay assessments due to reported negative net premiums written, as follows: for the quarter ending March 31, 2008, Amerisure reported $27,651,422 in net premiums, and paid an assessment of $1,249,844; for the quarter ending June 30, 2008, Amerisure reported $5,282,751 in net premiums, and paid an assessment of $238,780; for the quarter ending September 30, 2008, Amerisure reported negative net premiums of $923,570, and no assessment was due or paid; and for the quarter ending December 31, 2008, Amerisure reported negative net premiums of $1,269,343, and no assessment was due or paid. Because of premium refunds made to policyholders in the quarters ending September 30, 2008, and December 31, 2008, resulting in an overpayment, Amerisure received a credit against future SDTF assessment payments in the amount of $99,119.66. For the time periods in 2009, Amerisure did not owe or pay assessments to the SDTF due to reported negative net premiums written, resulting from reported payment of premium refunds to policyholders, as detailed below. For the quarter ending March 31, 2009, Amerisure reported negative net premiums of $1,422,158, and no assessment was due or paid. When the Department provided Amerisure with its Carrier and Self-Insurance Quarterly Premium Report to complete for the quarter ending March 31, 2009, it included a $99,119.66 "Debit/Credit" carried over from 2008 for the SDTF on the report form. For the quarter ending June 30, 2009, Amerisure reported negative net premiums of $2,382,484, and no assessment was due or paid. When the Department provided Amerisure with its Carrier and Self-Insurance Quarterly Premium Report to complete for the quarter ending June 30, 2009, it included a $163,401.20 "Debit/Credit" for the SDTF on the report form. This amount was the sum of $99,119.66 carried over from 2008, plus a $64,281.54 credit from the quarter ending March 31, 2009, calculated by application of the 2009 assessment rate to the $1,422,158 reported negative net premium for the quarter ending March 31, 2009. For the quarter ending September 30, 2009, Amerisure reported negative net premiums of $2,392,606, and no assessment was due or paid. When the Department provided Amerisure with its Carrier and Self-Insurance Quarterly Premium Report to complete for the quarter ending September 30, 2009, it included a $271,089.48 "Debit/Credit" for the SDTF on the report form. This amount was the sum of $99,119.66 carried over from 2008; plus a $64,281.54 credit from the quarter ending March 31, 2009, calculated by application of the 2009 assessment rate to the $1,422,158 reported negative net premium for the quarter ending March 31, 2009; plus a $107,688.28 credit from the quarter ending June 30, 2009, calculated by application of the 2009 assessment rate to the $2,382,484 reported negative net premium for the quarter ending June 30, 2009. For the quarter ending December 31, 2009, Amerisure reported negative net premiums of $3,237,419, and no assessment was due or paid. When the Department provided Amerisure with its Carrier and Self-Insurance Quarterly Premium Report to complete for the quarter ending December 31, 2009, it included a $379,235.27 "Debit/Credit" for the SDTF on the report form. This amount was the sum of $99,119.66 carried over from 2008; plus a $64,281.54 credit from the quarter ending March 31, 2009, calculated by application of the 2009 assessment rate to the $1,422,158 reported negative net premium for the quarter ending March 31, 2009; plus a $107,688.28 credit from the quarter ending June 30, 2009, calculated by application of the 2009 assessment rate to the $2,382,484 reported negative net premium for the quarter ending June 30, 2009; plus a $108,145.79 credit from the quarter ending September 30, 2009, calculated by application of the 2009 assessment rate to the $2,392,606 reported negative net premium for the quarter ending September 30, 2009. For the time periods in 2010, Amerisure paid quarterly assessments to the SDTF based upon reported net premiums, as detailed below. For the quarter ending March 31, 2010, Amerisure reported net premiums of $828,566, and paid an assessment of $37,451.18. The assessment was paid by application of $37,451.18 of the $99,119.66 credit carried over from 2008. When the Department provided Amerisure with its Carrier and Self-Insurance Quarterly Premium Report to complete for the quarter ending March 31, 2010, it included a $99,119.66 "Debit/Credit" carried over from 2008 for the SDTF on the report form. The credits of $64,281.54, $107,688.28, and $108,145.79 recognized in the reports for the quarters ending June 30, September 30, and December 31, 2009, were deleted. However, the Department did not otherwise notify Amerisure that it was deleting the credits or why it was deleting the credits. It also did not provide a point of entry for Amerisure to challenge the deletion of the credits. For the quarter ending June 30, 2010, Amerisure reported net premiums of $1,282,179. It paid an assessment of $57,954.49 by application of $57,954.49 of the $99,119.66 credit carried over from 2008. For the quarter ending September 30, 2010, Amerisure reported net premiums of $937,504. It paid an assessment of $13,687.56 in part by application of the remainder of the $99,119.66 credit carried over from 2008, along with a payment of $9,974.01. For the quarter ending December 31, 2010, Amerisure reported net premiums of $657,457, and paid an assessment of $9,597.41. For the time periods in 2011, Amerisure paid quarterly assessments to the SDTF based upon reported net premiums, as follows: for the quarter ending March 31, 2011, Amerisure reported $2,455,230 in net premiums, and paid an assessment of $35,846.36; for the quarter ending June 30, 2011, Amerisure reported $1,741,790 in net premiums, and paid an assessment of $25,430.13; for the quarter ending September 30, 2011, Amerisure reported $2,054,805 in net premiums, and paid an assessment of $30,000.15; and for the quarter ending December 31, 2011, Amerisure reported $1,823,063 in net premiums, and paid an assessment of $26,616.72. For the time periods in 2012, Amerisure paid quarterly assessments to the SDTF based upon reported net premiums, as follows: for the quarter ending March 31, 2012, Amerisure reported $4,816,098 in net premiums, and paid an assessment of $69,351.81; and for the quarter ending June 30, 2012, Amerisure reported $2,072,685 in net premiums, and paid an assessment of $29,846.66. Reporting and Payments for the WCATF For the time periods in 2008, Amerisure paid quarterly assessments to the WCATF based upon reported net premiums, or did not pay assessments due to reported negative net premiums, as follows: for the quarter ending March 31, 2008, Amerisure reported $30,353,820 in net premiums, and paid an assessment of $75,885; for the quarter ending June 30, 2008, Amerisure reported $6,696,958 in net premiums, and paid an assessment of $16,742; for the quarter ending September 30, 2008, Amerisure reported $874,225 in net premiums, and paid an assessment of $2,186; and for the quarter ending December 31, 2008, Amerisure reported $1,271,387 in negative net premiums, and no assessment was due or paid. Because of premium refunds made to policyholders in the quarters ending September 30, 2008, and December 31, 2008, resulting in an overpayment, Amerisure received a credit against future WCATF assessment payments in the amount of $3,178.47. For the time periods in 2009, Amerisure did not owe or pay assessments to the WCATF due to reported negative net premiums resulting from reported payment of premium refunds to policyholders, as detailed below. For the quarter ending March 31, 2009, Amerisure reported $1,321,194 in negative net premiums. When the Department provided Amerisure with its Carrier and Self- Insurance Quarterly Premium Report to complete for the quarter ending March 31, 2009, it included a $3,178.47 "Debit/Credit" carried over from 2008 for the WCATF on the report. For the quarter ending June 30, 2009, Amerisure reported $2,990,876 of negative net premiums. When the Department provided Amerisure with its Carrier and Self- Insurance Quarterly Premium Report to complete for the quarter ending June 30, 2009, it included a $6,481.46 "Debit/Credit" for the WCATF on the report, which is the sum of $3,178.47 carried over from 2008, plus a $3,302.99 credit from the quarter ending March 31, 2009, calculated by application of the 2009 assessment rate to the $1,321,194 reported negative net premium for the quarter ending March 31, 2009. For the quarter ending September 30, 2009, Amerisure reported $2,176,521 in negative net premiums.2/ When the Department provided Amerisure with its Carrier and Self- Insurance Quarterly Premium Report to complete for the quarter ending September 30, 2009, it included a $13,958.65 "Debit/Credit" for the WCATF on the report. This amount was the sum of $3,178.47 carried over from 2008; plus a $3,302.99 credit from the quarter ending March 31, 2009, calculated by application of the 2009 assessment rate to the $1,321,194 reported negative net premium for the quarter ending March 31, 2009; plus a $7,477.19 credit from the quarter ending June 30, 2009, calculated by application of the 2009 assessment rate to the $2,990,876 reported negative net premium for the quarter ending June 30, 2009. For the quarter ending December 31, 2009, Amerisure reported $3,549,615 in negative net premiums. When the Department provided Amerisure with its Carrier and Self- Insurance Quarterly Premium Report to complete for the quarter ending December 31, 2009, it included a $19,399.95 "Debit/Credit" for the WCATF on the report. This amount was the sum of $3,178.47 carried over from 2008; plus a $3,302.99 credit from the quarter ending March 31, 2009, calculated by application of the 2009 assessment rate to the $1,321,194 reported negative net premium for the quarter ending March 31, 2009; plus a $7,477.19 credit from the quarter ending June 30, 2009, calculated by application of the 2009 assessment rate to the $2,990,876 reported negative net premium for the quarter ending June 30, 2009; plus a $5,441.30 credit from the quarter ending September 30, 2009, calculated by application of the 2009 assessment rate to the $2,176,521 reported negative net premium for the quarter ending September 30, 2009. For the quarters in 2010, Amerisure paid quarterly assessments to the WCATF based upon reported net premiums, as detailed below. For the quarter ending March 31, 2010, Amerisure reported $225,027 in net premiums, and paid an assessment of $1,800.22 by applying $1,800.22 of the $3,178.47 credit carried over from 2008. When the Department provided Amerisure with its Carrier and Self-Insurance Quarterly Premium Report for the quarter ending March 31, 2010, it included a $3,178.47 "Debit/Credit" carried over from 2008 for the WCATF on the report. The credits of $3,302.99, $7,477.19, and $5,441.30 recognized in the reports for the quarters ending June 30, September 30, and December 31, 2009, were deleted. The Department did not otherwise notify Amerisure that it was deleting the credits or why it was deleting the credits. The Department also did not provide an opportunity for Amerisure to challenge the deletion of the credits. For the quarter ending June 30, 2010, Amerisure reported $2,011,533 in net premiums, and paid an assessment of $16,092.26, which was paid in part by application of the remainder of the $3,178.47 credit carried over from 2008. For the quarter ending September 30, 2010, Amerisure reported $1,094,027 in net premiums, and paid an assessment of $23,466.23. This payment included $14,714.01 due for an assessment owed for the quarter ending June 30, 2010. For the quarter ending December 31, 2010, Amerisure reported $656,608 in net premiums, and paid an assessment of $5,252.86. For the time periods in 2011, Amerisure paid quarterly assessments to the WCATF based upon reported net premiums, as follows: for the quarter ending March 31, 2011, Amerisure reported $2,456,006 in net premiums, and paid an assessment of $24,068.86; for the quarter ending June 30, 2011, Amerisure reported $1,864,571 in net premiums, and paid an assessment of $18,272.80; for the quarter ending September 30, 2011, Amerisure reported $2,539,405 in net premiums, and paid an assessment of $24,866.17; and for the quarter ending December 31, 2011, Amerisure reported $1,782,608 in net premiums, and paid an assessment of $17,469.56. For the time periods in 2012, Amerisure paid quarterly assessments to the WCATF based upon reported net premiums, as follows: for the quarter ending March 31, 2012, Amerisure reported $4,837,632 in net premiums, and paid an assessment of $84,658.56; and for the quarter ending June 30, 2012, Amerisure reported $2,348,810 in net premiums, and paid an assessment of $41,104.18. For its Carrier and Self-Insurance Fund Quarterly Premium Reports submitted to Respondent for the quarters ending March 31, 2008; June 30, 2008; September 30, 2008; and December 31, 2008, premium refunds made to policyholders included in the calculation of "net premiums" and "net premiums written" reflect premium refunds made to policyholders by Amerisure in the calendar year 2008. For its Carrier and Self-Insurance Fund Quarterly Premium Reports submitted to the Department for the quarters ending March 31, 2009; June 30, 2009; September 30, 2009; and December 31, 2009, premium refunds made to policyholders included in the calculation of "net premiums" and "net premiums written" reflect premium refunds made to policyholders by Amerisure in the calendar year 2009. For its Carrier and Self-Insurance Fund Quarterly Premium Reports submitted to the Department for the quarters ending March 31, 2010; June 30, 2010; September 30, 2010; and December 31, 2010, premium refunds made to policyholders included in the calculation of "net premiums" and "net premiums written" reflect premium refunds made to policyholders by Amerisure in the calendar year 2010. For its Carrier and Self-Insurance Fund Quarterly Premium Reports submitted to the Department for the quarters ending March 31, 2011; June 30, 2011; September 30, 2011; and December 31, 2011, premium refunds made to policyholders included in the calculation of "net premiums" and "net premiums written" reflect premium refunds made to policyholders by Amerisure in the calendar year 2011. For its Carrier and Self-Insurance Fund Quarterly Premium Reports submitted to the Department for the quarters ending March 31, 2012, and June 30, 2012, premium refunds made to policyholders included in the calculation of "net premiums" and "net premiums written" reflect premium refunds made to policyholders by Amerisure in the calendar year 2012. For its Carrier and Self-Insurance Fund Quarterly Premium Reports submitted to the Department for the quarters ending March 31, 2008; June 30, 2008; September 30, 2008; and December 31, 2008, premium refunds made to policyholders included in the calculation of "net premiums" and "net premiums written" reflect refunds made to policyholders by Amerisure for policies where assessments for premium for those policies were paid in calendar years prior to 2008. Likewise, for its Carrier and Self-Insurance Fund Quarterly Premium Reports submitted to the Department for the quarters ending March 31, 2009; June 30, 2009; September 30, 2009; and December 31, 2009, premium refunds made to policyholders included in the calculation of "net premiums" and "net premiums written" reflect refunds made to policyholders by Amerisure for policies where assessments for premium for those policies were paid in calendar years prior to 2009. Events Following the Deletion of 2009 Credits Gene Smith, Assessments Coordinator for the Division of Workers? Compensation of the Department, has the responsibility to calculate the assessment rate for the Trust Funds. Evelyn Vlasak was Mr. Smith?s predecessor as Assessments Coordinator. On September 13, 2010, Gene Smith sent an e-mail requesting that Amerisure provide for each quarter in 2008 and 2009 “[a]n original computer generated run showing the written premium for all Line of Business 160 (workers? compensation) in Florida by policy number with totals at the end.” Amerisure provided the requested information via Excel spreadsheet on October 1, 2010. By letter dated December 9, 2010 (received on December 14, 2010), Mr. Smith stated, in pertinent part: We received the excel spreadsheet of Amerisure Mutual Insurance Company?s 2008- 2009 Policy Level Details. To complete our audit we also need the detailed documentation for dividends and large deductibles. Please review the list below, and provide the requested documentation by December 20, 2010. The same Policy Level Detail spreadsheets for each quarter from January 1, 1999, through the current quarter 2010. There is no need to provide 2008 and 2009 as you have already provided these. Detail of annual dividends declared and paid from January 1, 1999, through the current quarter 2010. Detail of quarterly large deductible “add backs” from January 1, 1999, through the current quarter 2010. In response, Amerisure?s counsel contacted Mr. Smith via e-mail on December 14, 2010, to ask why the Department needed this information. Mr. Smith responded by e-mail on January 2, 2011, stating that the Department would respond very soon. On January 4, 2011, David Hershel, an attorney for the Department, contacted Amerisure?s counsel and advised that the additional data requested in the December 9, 2010, letter was needed to review the credit amounts claimed by Amerisure. Mr. Hershel stated that the Department would send a revised letter, paring down its information request. On January 10, 2011, Mr. Smith sent a letter, which stated: We received the excel spreadsheet of Amerisure Mutual Insurance Company?s 2008- 2009 Policy Level Details. To complete our audit we also need the detailed documentation for dividends and large deductibles, as well as the payments for the second and third quarters of 2010. Please review the list below. Detail of annual dividends declared and paid from January 1, 2008, through the 4th quarter 2010. Detail of quarterly large deductible “add backs” from January 1, 2008, through the 4th quarter 2010. Payments for the second and third quarters of 2010 for the WCATF as required by Florida law. Please provide the requested documentation by January 21st, 2011. Thank you in advance for your time and assistance. If you have any questions, please feel free to contact me. On January 17, 2011, Amerisure agreed to send in the requested payments as a sign of good faith. In this transmittal, Amerisure reserved its rights to withhold against further assessments. On January 27, 2011, Amerisure provided Gene Smith with Excel spreadsheets containing the information sought in items 1 and 2 of the January 10, 2011, letter. On July 1, 2012, some 17 months later, Gene Smith responded by letter, directing that the appropriate procedure and remedy to request a refund of monies paid into the State Treasury is set forth in section 215.26, Florida Statutes, and providing the forms developed for this request. On September 26, 2012, Amerisure submitted its applications for credit or refund pursuant to section 215.26. Amerisure requested a credit or refund of $25,095.70 paid into WCATF and $236,663.25 paid into SDTF from October 26, 2010, through July 26, 2012, which Amerisure alleges it should not have been required to pay in light of the amount of credit it had accrued in 2008 and 2009. For example, the request for refund with respect to the SDTF states: Through the reporting period of June 30, 2012, Amerisure has paid $236,663.25 in assessments to the SDTF that the company should not have been required to pay since it had credits that should have been applied against its assessment liability. As such, Amerisure requests a refund of the total amount of $236,663.25 paid into the SDTF between September 30, 2010, and June 30, 2012. Furthermore, Amerisure asserts its right to apply, and requests the SDTF to facilitate, the application of the remaining credit balance of $189,783.75 against future assessment liability. The Department denied Amerisure?s request for refund of the overpayment of assessments paid into the SDTF and WCATF from January 2011 onward in its NOI dated January 28, 2013. The Department states in its NOI that Amerisure is “seeking to be paid in cash for supposed credits which it never accrued.” The denial letter also informed Amerisure of its right to an administrative hearing. Amerisure timely filed a Request for Administrative Hearing, which gave rise to this proceeding. The statement that the credits never accrued is inconsistent with the Department?s prior calculation of the credits on the reporting forms that the Department sent to Amerisure each quarter to complete. The forms for 2009 clearly indicated accrued credits and Department staff acknowledged eliminating those credits. The Department?s Treatment of “Excess Credits” Maya Brown is a government analyst with the Department?s Division of Workers? Compensation. Her duties include creating manuals, performing audits on insurance carriers, and processing refunds for carriers. According to Ms. Brown, she was instructed in 2009 by Ms. Vlasak that at the end of a year, if a company has negative premiums and does not owe any assessments or has not paid any assessments, that balance, which she described as “excess credits,” is then removed. Based upon this understanding, Ms. Brown removed $451,532 (which Amerisure refers to as the 2009 credits) from Amerisure?s rolling calculations when the 2010 quarterly report forms were sent to Amerisure. She did not call Amerisure and notify them that she was deleting the credits or of the reason for doing so, and does not know of anyone else providing that information to Amerisure. The quarterly report form for the first quarter of 2010, however, carried forward the 2008 credits that Amerisure had accumulated in 2008. Ms. Brown first learned about the concept of “excess credits” in 2004 when she was trained to perform audits by Ms. Vlasak. Since 2004, the only other Assessment Unit employee performing audits besides Ms. Brown was Ms. Vicki Griffin. Ms. Griffin was also trained by Ms. Vlasak and utilized the same procedures with regard to “excess credits.” Sometime before May 2009, Ms. Vlasak drafted proposed rules for the Assessment Unit that addressed “excess credits” based on negative “net premium”. An early version of the draft rules was prepared as early as March 29, 2006. The July 26, 2008, draft of proposed rule 69L-4.003, entitled “Completion of Quarterly Reports and Payment of Assessment by Carriers,” included the following in subsection (e)(5): If as a result of premium offsets for dividends paid or credited and premium refunds, a Carrier will owe no assessments for any of the four calendar year quarters, the Carrier will be able to apply the unused premium offset to reduce assessments owed in any of the other three quarters of the same calendar year. However, after the Quarterly Report is filed for the period ending December 31, the Division will adjust the Carrier?s records to remove any credits due to these premium offsets that were not used in that year. Therefore the (credit) debit pre-printed on the upcoming March 31st Quarterly Premium and Assessment Report will reflect only overpayment of assessment(s) owed for the previous calendar year. If this adjustment is necessary, the Carrier will be [sic] receive written notification. Section (h) of the draft proposed rule addressed the Department?s procedure for “overpayments”: When a Carrier has computed its net assessable premiums and assessments according to this rule and later determines that either the WCATF or SDTF assessment has been overpaid, the company may elect to apply the overpayment against future assessments owed to the same fund or may submit an [sic] refund request under Section 215.26, Florida Statutes. Written notification of an overpayment must be accompanied by detailed documentation of the computation of the alleged overpayment, a copy of the State Page of the Annual Report for the referenced year, and as needed, revised Quarterly Reports. Written notification that a refund has been requested must meet the requirements of Section 215.26, Florida Statutes, including the submission of the approved form. The refund request must be received within three years of the date the alleged overpaid amount was initially deposited into the state treasury. Written notification of the election to apply the overpayment against future assessment payments must be received within three years of the date the overpaid amount was initially deposited into the state treasury. Upon verification of an overpayment, future assessments may be offset until the verified overpayment is fully utilized, with no time limitations. Each Carrier shall bear the responsibility to notify the Division in written format, that an overpayment may have occurred and to provide documentation that will allow the Department to verify the amount of the alleged overpayment. If an overpayment has occurred, and revised Quarterly Reports are submitted, the Carrier does not submit an Application for Refund on an approved form, the Carrier will be allowed to offset future assessments to the extent of the overpayment. However, after the end of the three-year window, in the absence of a written refund application, the unused portion of the overpayment, if any, will no longer be available as an offset against future assessments, or for the issuance of a refund pursuant to Section 215.26(2). The Division shall bear the responsibility to acknowledge receipt of this notification and to verify the amount of overpayment, if any, as well as respond to the request for credit or refund. The Department acknowledges that these draft proposed rules were never promulgated or published in a notice of proposed rule development. In 2011, Mr. Jenkins, the new Bureau Chief, revived attempts to promulgate rules for the Assessment Unit. That is, he circulated Ms. Vlasak?s draft proposed rules to members of his staff for their consideration. However, other office priorities took precedence, and as of 2013, no further attempts at rule development have been undertaken by the Department in this regard. Ms. Brown understood that the language in Ms. Vlasak?s draft rules is consistent with what occurred in 2009 regarding Amerisure?s reporting of negative premium. Despite the failure of the Department to adopt the draft rules, or some other version of them, the policy reflected in these proposed rules has been applied by the Department to eliminate Amerisure?s 2009 credits. Ms. Vlasak based her procedures on section 624.5094, Florida Statutes. However, the Department has since acknowledged that the statute does not speak to or define “excess credits.” The elimination of “excess credits” at the end of the year is currently the policy of the Division of Workers? Compensation and is how its employees process quarterly reports and assessment payments. This procedure is also reflected in a draft policy and procedures manual put together by Gene Smith at the direction of Greg Jenkins to capture the policies and procedures of the Assessment Unit. Under the caption “Prior Balance Carried Forward,” the manual provides: . . . a company may report (in very rare circumstances) negative net premium on Line 1 of the Quarterly Premium Report for either the WCATF or SDTF which would otherwise result in a negative assessment amount. This will carry over the following quarter. Should the company continue to reflect a negative amount by calendar year end, these negative amounts are removed per Section 624.5094, F.S. Mr. Jenkins wrote and compiled these policies and procedures when he was the Assessment Unit coordinator, a position he held until about a year and a half ago. If, on the other hand, a carrier only experiences negative net premium during some quarters but not all, these credits may be deemed an “official overpayment” and be allowed to carry forward. The process to determine if an overpayment is “official” has not been written into any policy or procedure, proposed rule, rule, or statute. Determining whether credits for a given calendar year are “excess” or “official overpayments” is a process that occurs only after a company has filed its annual report with the NAIC. This never occurs before March of the year following the year in question. Pursuant to current Department policy, a company cannot request a refund for an overpayment until after it is deemed an “official overpayment.” Mr. Smith testified that he agreed with the Department?s position that section 624.5094 required credits accumulated to be eliminated if the company continued to reflect a negative amount of net premium by the end of the calendar year, despite the fact that the statute does not include or define the term “excess credits.” Mr. Smith acknowledged that his interpretation of section 624.5094 stems from his belief that a carrier can experience negative net written premium for all four quarters of a year, which he believes is a violation of section 624.5094. This, in turn, is based on Mr. Smith?s definition of net written premium. To determine the net premium amount for assessment purposes, Mr. Smith took the position that carriers can only deduct return premium for a policy that incepts in the same calendar year that the premium is returned. Mr. Smith believed that additional premiums collected in a calendar year subsequent to the policy year for which the premium is collected would likewise not be included in the direct written premium or net premium number. Mr. Smith could point to no statute, rule, or bulletin which defines net premium in this fashion. Mr. Jenkins, the Bureau Chief, agreed with Mr. Smith?s interpretation, deferring to his judgment. Mr. Jenkins acknowledged that the determination made with regard to Amerisure?s 2009 credits was based on Mr. Smith?s definition of net premium, because Amerisure could not offset refunds or dividends from prior policy years in determining the amount of net premium. Mr. Jenkins also agreed with Mr. Smith that section 624.5094 “tied the Department?s hands” with regard to Amerisure. The Department?s determination that its “excess credits” policy prevents Amerisure from utilizing the 2009 credits against future assessments is further outlined in a June 9, 2011, email from Victoria Griffin to Gene Smith which states: Gene, You had asked me about my recall of the unit?s procedure for dealing with negative premium and section 624.5094 FS in the past. Since I have been here it has been common practice to accept all reporting at face value to include negative premiums till such time that we received the report from NAIC which reflected the written, earned and dividends the carriers reported, which may include negative amounts. In regards to your question regarding 624.5094, we have not ever reviewed individual policy holder information for any insurance company. My understanding of what happened with the Amerisure Mutual file is that they reported negative premiums for all four (4) quarters of 2009, (stating verbally that they took a loss for that year and wanted to recoup) and they believed that they were entitled to the credit amount reflected for 2009. Regardless of the fact that no assessment amounts had been paid in to the funds for that time frame. When we completed the audit for 2009, those negative amounts were removed; leaving a credit balance reflected from actual overpayments of 2008 to both funds. These overpayments were used towards future assessments and as of 4th quarter 2010 were exhausted. Let me know if you need any more information. Thanks, Vicki If Amerisure and other carriers were to use the Department?s definition of “net premium” and not include additional premium written for policies that incepted in prior calendar years, the Department would most likely experience a substantial drop in the amount of assessments collected for either Trust Fund. This represents the most probable scenario because it is more likely for an insurer to charge additional premium after a year-end or subsequent audit than to return premium. In fact, for the last 12 years that Andrea Koehler has worked at Amerisure, other than the period at issue in 2008-2009, the company consistently wrote more premium than it returned. Most importantly, this interpretation of the definition of net premium is inconsistent with using the amounts listed in a company?s NAIC reports as an audit method to insure proper reporting by the insurance companies. In order for the numbers to be comparable, the amount reported must be consistent with industry practice in reporting to the NAIC.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department enter a final order incorporating the findings of this Recommended Order and reinstating Amerisure?s 2009 credits as credits toward future assessments due to the Trust Funds. DONE AND ENTERED this 15th day of November, 2013, in Tallahassee, Leon County, Florida. S BARBARA J. STAROS Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 15th day of November, 2013.
The Issue At issue in this proceeding is whether the Respondent, Klenk Roofing, Inc. ("Klenk Roofing"), failed to abide by the coverage requirements of the Workers' Compensation Law, chapter 440, Florida Statutes, by not obtaining workers' compensation insurance for its employees and, if so, whether the Petitioner properly assessed a penalty against the Respondent pursuant to section 440.107.
Findings Of Fact Based on the oral and documentary evidence adduced at the final hearing, and the entire record in this proceeding, the following findings of fact are made: The Department is the state agency responsible for enforcing the requirement of the workers' compensation law that employers secure the payment of workers' compensation coverage for their employees and corporate officers. § 440.107, Fla. Stat. Klenk Roofing is a corporation based in Daytona Beach. The Division of Corporations’ “Sunbiz” website indicates that Klenk Roofing was first incorporated on February 23, 2005, and remained an active corporation up to the date of the hearing. Klenk Roofing’s principal office is at 829 Pinewood Street in Daytona Beach. As the name indicates, Klenk Roofing’s primary business is the installation of new roofs and the repair of existing roofs. Klenk Roofing was actively engaged in roofing operations during the two-year audit period from July 24, 2012, through July 23, 2014. Kent Howe is a Department compliance investigator assigned to Volusia County. Mr. Howe testified that his job includes driving around the county conducting random compliance investigations of any construction sites he happens to see. On July 23, 2014, Mr. Howe was driving through a residential neighborhood when he saw a house under construction at 2027 Peninsula Drive in Daytona Beach. He saw a dumpster in the driveway with the name “Klenk Roofing” written on its side. Mr. Howe also saw a gray van with the name “Klenk Roofing” on the door. Mr. Howe saw three men working on the house. He spoke first with Vincent Ashton, who was collecting debris and placing it in the dumpster. Mr. Howe later spoke with Jonny Wheeler and Craig Saimes, both of whom were laying down adhesive tarpaper on the roof when Mr. Howe approached the site. All three men told Mr. Howe that they worked for Klenk Roofing and that the owner was Ronald Klenk. Mr. Ashton and Mr. Wheeler told Mr. Howe that they were each being paid $10 per hour. Mr. Saimes would not say how much he was being paid. After speaking with the three Klenk Roofing employees, Mr. Howe returned to his vehicle to perform computer research on Klenk Roofing. He first consulted the Sunbiz website for information about the company and its officers. His search confirmed that Klenk Roofing was an active Florida corporation and that Ronald Klenk was its registered agent. Ronald Klenk was listed as the president of the corporation and Kyle Klenk was listed as the vice president. Mr. Howe next checked the Department's Coverage and Compliance Automated System ("CCAS") database to determine whether Klenk Roofing had secured the payment of workers' compensation insurance coverage or had obtained an exemption from the requirements of chapter 440. CCAS is a database that Department investigators routinely consult during their investigations to check for compliance, exemptions, and other workers' compensation related items. CCAS revealed that Klenk Roofing had no active workers' compensation insurance coverage for its employees and that Ronald and Kyle Klenk had elected exemptions as officers of the corporation pursuant to section 440.05 and Florida Administrative Code Rule 69L-6.012. Mr. Howe’s next step was to telephone Ronald Klenk to verify the employment of the three workers at the jobsite and to inquire as to the status of Klenk Roofing's workers' compensation insurance coverage. Mr. Klenk verified that Klenk Roofing employed Mr. Wheeler, Mr. Ashton, and Mr. Saimes. Mr. Klenk also informed Mr. Howe that Klenk Roofing did not have workers' compensation insurance coverage for the three employees. Based on his jobsite interviews with the employees, his interview with Mr. Klenk, and his Sunbiz and CCAS computer searches, Mr. Howe concluded that as of July 23, 2014, Klenk Roofing had three employees working in the construction industry and that the company had failed to procure workers’ compensation coverage for these employees in violation of chapter 440. Mr. Howe consequently issued a Stop-Work Order that he personally served on Mr. Klenk on July 23, 2014. Also on July 23, 2014, Mr. Howe served Klenk Roofing with a Request for Production of Business Records for Penalty Assessment Calculation, asking for documents pertaining to the identification of the employer, the employer's payroll, business accounts, disbursements, workers' compensation insurance coverage records, professional employer organization records, temporary labor service records, documentation of exemptions, documents relating to subcontractors, documents of subcontractors' workers compensation insurance coverage, and other business records to enable the Department to determine the appropriate penalty owed by Klenk Roofing. Anita Proano, penalty audit supervisor for the Department, was assigned to calculate the appropriate penalty to be assessed on Klenk Roofing. Penalties for workers' compensation insurance violations are based on doubling the amount of evaded insurance premiums over the two-year period preceding the Stop-Work Order, which, in this case was the period from July 24, 2012, through July 23, 2014. § 440.107(7)(d), Fla. Stat. At the time Ms. Proano was assigned, Klenk Roofing had not provided the Department with sufficient business records to enable Ms. Proano to determine the company’s actual gross payroll. Section 440.107(7)(e) provides that where an employer fails to provide business records sufficient to enable the Department to determine the employer’s actual payroll for the penalty period, the Department will impute the weekly payroll at the statewide average weekly wage as defined in section 440.12(2), multiplied by two.1/ In the penalty assessment calculation, the Department consulted the classification codes and definitions set forth in the SCOPES of Basic Manual Classifications (“Scopes Manual”) published by the National Council on Compensation Insurance (“NCCI”). The Scopes Manual has been adopted by reference in Florida Administrative Code Rule 69L-6.021. Classification codes are four-digit codes assigned to occupations by the NCCI to assist in the calculation of workers' compensation insurance premiums. Rule 69L-6.028(3)(d) provides that “[t]he imputed weekly payroll for each employee . . . shall be assigned to the highest rated workers’ compensation classification code for an employee based upon records or the investigator’s physical observation of that employee’s activities.” Ms. Proano applied NCCI Class Code 5551, titled “Roofing — All Kinds and Drivers,” which “applies to the installation of new roofs and the repair of existing roofs.” The corresponding rule provision is rule 69L-6.021(2)(uu). Ms. Proano used the approved manual rates corresponding to Class Code 5551 for the periods of non-compliance to calculate the penalty. On September 17, 2014, the Department issued an Amended Order of Penalty Assessment in the amount of $214,335.58, based upon an imputation of wages for the employees known to the Department at that time. After Klenk Roofing provided further business records, the Department on December 16, 2014, was able to issue a Second Amended Order of Penalty Assessment in the amount of $87,159.20, based on a mixture of actual payroll information and imputation. The Department eventually received records sufficient to determine Klenk Roofing's payroll for the time period of July 24, 2012, through July 23, 2014. The additional records enabled Ms. Proano to calculate a Third Amended Order of Penalty Assessment in the amount of $19.818.04. The evidence produced at the hearing established that Ms. Proano utilized the correct class codes, average weekly wages, and manual rates in her calculation of the Third Amended Order of Penalty Assessment. The Department has demonstrated by clear and convincing evidence that Klenk Roofing was in violation of the workers' compensation coverage requirements of chapter 440. Jonny Wheeler, Vincent Ashton, and Craig Saimes were employees of Klenk Roofing performing services in the construction industry without valid workers' compensation insurance coverage. The Department has also demonstrated by clear and convincing evidence that the penalty was correctly calculated by Ms. Proano, through the use of the approved manual rates, business records provided by Klenk Roofing, and the penalty calculation worksheet adopted by the Department in Florida Administrative Code Rule 69L-6.027. Klenk Roofing could point to no exemption, insurance policy, or employee leasing arrangement that would operate to lessen or extinguish the assessed penalty. At the hearing, Ronald Klenk testified he was unable to obtain workers’ compensation coverage during the penalty period because it was prohibitively expensive to carry coverage for fewer than four employees. He stated that the insurers demanded a minimum of $1,500 per week in premiums, which wiped out his profits when the payroll was low. Mr. Klenk presented a sympathetic picture of a small business squeezed by high premiums, but such equitable considerations have no effect on the operation of chapter 440 or the imposition of the penalty assessed pursuant thereto.
Recommendation Having considered the foregoing Findings of Fact, Conclusions of Law, the evidence of record, the candor and demeanor of the witnesses, and the pleadings and arguments of the parties, it is, therefore, RECOMMENDED that a final order be entered by the Department of Financial Services, Division of Workers' Compensation, assessing a penalty of $19,818.04 against Klenk Roofing, Inc. DONE AND ENTERED this 28th day of April, 2015, in Tallahassee, Leon County, Florida. S LAWRENCE P. STEVENSON Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 28th day of April, 2015.
The Issue Is Respondent obligated to pay $1,100.00, pursuant to a September 8, 2000, Notice of Penalty Assessment Order because on August 30, 2000, he was an employer engaged in the "construction industry" as that term is defined by Section 440.02(7), Florida Statutes (2000), and had one or more employees.
Findings Of Fact Petitioner is the state agency charged with enforcing the statutory requirement that employers secure workers' compensation insurance for their employees. On August 30, 2000, Lisa Lyonais, Petitioner's investigator, conducted an on-site inspection of a single-family residence under construction in Ocala, Florida. She was accompanied by investigators of the Department of Insurance. Ms. Lyonais observed three persons working inside the house. One person was cleaning-up and sweeping. Ms. Lyonais determined this person to be an employee of Nadeau Construction Unlimited, Inc. (Nadeau). Due to what the other two persons told her, Ms. Lyonais pursued an investigation of Respondent. The building permit posted on the job board outside the house listed Nadeau as the general contractor and as the owner of the house. Ms. Lyonais telephoned Mr. Nadeau. Mr. Nadeau came to the job site and spoke with Ms. Lyonais. Due to what Mr. Nadeau told her, Ms. Lyonais contacted Respondent. Ms. Lyonais interviewed Respondent when he arrived at the job site. Respondent admitted then, and at hearing, that he was laying tile in the house; that he did not have a workers' compensation exemption; and that he did not carry workers' compensation insurance. Respondent's sister-in-law had requested that Mr. Nadeau hire Respondent to lay the tile in the house which Mr. Nadeau was constructing for her. A price for the tile- setting had been agreed-upon between Mr. Nadeau and Respondent prior to Respondent's commencing the work. By his answers to Requests for Admission, Respondent admitted this agreement constituted a "contract." He enlisted the help of his "church brothers," Brown and Sims, who were the two men originally interviewed on the job site by Ms. Lyonais. On August 30, 2000, Ms. Lyonais served on Respondent a Request for Business Records, so that she could determine whether Respondent was required to provide workers' compensation insurance. Respondent provided no records. Petitioner is the state agency authorized to issue workers' compensation exemptions and to which insurance carriers report that they have issued workers' compensation insurance policies to employers. Petitioner's electronic data base of this information allows its investigators to determine whether a particular employer has obtained an exemption or secured workers' compensation insurance. Ms. Lyonais verified on this electronic data base that Respondent had not secured workers' compensation insurance. Based on her observations on the job site, the search results of Petitioner's data base, and her understanding of the Florida Workers' Compensation Law, Ms. Lyonais issued a Stop Work Order on August 30, 2000, for Respondent's failure to secure workers' compensation insurance for himself and his two employees, Brown and Sims. On September 7, 2000, Respondent signed an Employer Payroll Affidavit in which he declared that he was a sole proprietor, that he had employees, and that he did not currently have workers' compensation insurance. Respondent also completed an Employee Payroll Worksheet in which he indicated that he employed the other two tile workers, Brown and Sims, whom he would pay $300.00 and $80.00 respectively, once he was paid by Mr. Nadeau. Mr. Nadeau paid Respondent $1,800.00, by business check dated September 8, 2000, for ceramic tile labor. Respondent endorsed the check and used some of the proceeds to pay Brown and Sims. The National Council on Compensation Insurance (NCCI) classifies types of employment and prescribes workers' compensation insurance premium rates for those classifications. Petitioner has adopted NCCI's SCOPES Manual by rule. See Rule 38F-5.111, Florida Administrative Code. Tile setting is classified by the SCOPES Manual under class code 5348 (stone, mosaic or terrazzo or ceramic tile work). The premium rate for each $100.00 of compensation paid under class code 5348 is 0.116. Ms. Lyonais calculated the evaded premium, or the premium that Respondent would have paid had he secured workers' compensation insurance, by multiplying the gross compensation to employees by the premium rate, resulting in a total of $208.80. She calculated the statutory penalty as twice that amount ($417.60) or $1,000.00, whichever is greater, and assessed $100.00 for each day the employer operated in violation of the Workers' Compensation Law. There is some evidence that Respondent, Brown, and Sims worked more than one day at the job site. Although an assessment might have been made for every day which Respondent, Brown, and Sims worked the job site, Petitioner is satisfied with assessing a $100.00 penalty only for the one day of August 30, 2000. At hearing, Respondent did not refute the foregoing formula or Ms. Lyonais' calculations, noted that he had paid the $1,100.00 penalty to Petitioner when it was assessed and that to do so had been a hardship on his family. He asserted that he had made an honest mistake because he felt he was working for his sister-in-law, whom he believed to be the homeowner. Respondent's wife also testified that the house belonged to her sister. However, Respondent presented no corroborative documentary evidence that his sister-in-law, in fact, owned the house at any time material. He also did not present any documents to refute the building permit. (See Finding of Fact No. 4). Respondent did not suggest that he had filed proof with the Agency of his financial ability to pay compensation, which filing, under Chapter 440, Florida Statutes, is an alternative to securing coverage through an insurance company. Respondent did not suggest that he, Brown, or Sims had filed an election not to be covered by Chapter 440, Florida Statutes.
Recommendation Based upon the findings of fact and conclusions of law, it is RECOMMENDED: That the Department of Labor and Employment Security, Division of Workers' Compensation enter a Final Order declaring Respondent to have been a statutory employer on August 30, 2000; ratifying the $1,100.00 penalty assessment; and denying Respondent any refund. DONE AND ENTERED this 30th day of March, 2001, in Tallahassee, Leon County, Florida. ELLA JANE P. DAVIS Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 30th day of March, 2001.
The Issue Did Respondent, John McCary General Contractor, Inc. (McCary), fail to secure workers’ compensation insurance for employees as required by chapter 440, Florida Statutes (2016)?1/ If so, what is the appropriate penalty?
Findings Of Fact The Division is the state agency responsible for enforcing the statutory requirement that employers secure workers’ compensation insurance for the benefit of their employees. § 440.107(3), Fla. Stat. McCary is a roofing contractor owned and operated by John McCary. It is in the construction industry. On November 18, 2016, Mr. Howe, a compliance investigator for the Division, visited a house where McCary was tearing off the roof. Mr. Howe recorded the names of each employee. He conducted an investigation that included speaking to Mr. McCary, re-interviewing the employees, checking with the employee leasing company that McCary used, and checking the Davison database of insured individuals. Mr. Howe could not find a record of workers’ compensation coverage for at least one employee. This triggered further investigation that resulted in Mr. Howe issuing a Stop-Work Order to McCary on November 18, 2016, for failure to secure workers’ compensation insurance in violation of sections 440.10(1), 440.38(1) and 440.107(2). After that, the Division followed its usual practice of requesting documents, reviewing its databases, soliciting information and explanations from the employer, and analyzing the information and documents obtained. Division Exhibit 9 shows that the Division asked McCary for business records on November 21, 2016, and that McCary did not provide them until December 12, 2016. The Division’s investigation and analysis resulted in the evidence admitted in this proceeding. The evidence proved the allegations of the Division’s Third Amended Order of Penalty Assessment, including its attached Penalty Calculation Worksheet. McCary did not comply with workers’ compensation insurance coverage requirements for the period May 1 through November 18, 2016. During that period, McCary employed Arcenio Rosado, Domingo Esteves, Javier Restrepo, Jose Alfredo Fuentes, Carlos Toledo, Edwin Valle, Kelly Alvarez, Kyle Shiro, Claudia Florez, and Nelson Geovany Melgar Rodenzo and that they performed work for it. McCary would have paid $4,744.06 in insurance premiums to provide workers’ compensation coverage for these employees during that period. During that period, McCary also used the services of two subcontractors, Star Debris Removal and E C Roofing, LLC. These subcontractors did not have workers’ compensation insurance for their employees during the May 1 through November 18, 2016, period. Premiums to provide coverage to the employees of the two subcontractors who worked on McCary’s projects would have totaled $100,771.09. From May 1 to November 18, 2016, McCary made cash payments of $195,856.02 that its documents could not confirm to be for a valid business expense. Florida Administrative Code Rule 69L-6.035(1)(k) requires that 80 percent of that amount be deemed wages or salaries paid employees when calculating the premiums used to determine the ultimate penalty. Eighty percent of McCary’s unaccounted-for cash payments is $156,684.82. That amount is legally deemed to be a payroll expense. McCary would have paid $29,143.38 to provide coverage for the employees represented by the cash payments. Altogether, McCary would have paid $134,658.53 to provide workers’ compensation coverage to the uncovered employees represented by the actual and deemed payroll during the May 1 to November 18, 2016, period.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services, Division of Workers’ Compensation, enter a final order finding that John McCary General Contractor, Inc., failed to secure payment of required workers’ compensation insurance coverage from May 1 to November 18, 2016, in violation of section 440.107, Florida Statutes, and imposing a penalty of $269,317.06, reduced by $1,000.00. DONE AND ENTERED this 17th day of July, 2018, in Tallahassee, Leon County, Florida. S JOHN D. C. NEWTON, II Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 17th day of July, 2018.
The Issue The issue for determination is whether Respondent committed the offenses set forth in the Amended Administrative Complaint and, if so, what action should be taken.
Findings Of Fact HSH No. 2 is a six-bed assisted living facility. It provides services to individuals with mental deficits and/or psychiatric issues. HSH No. 2 is located at 20700 Southwest 122nd Avenue, Miami, Florida. After a settlement agreement with AHCA, South Dade was allowed to submit a CHOW to purchase HSH No. 2 from the prior owner. South Dade became the legal owner of HSH No. 2 on December 28, 2005. Prior to obtaining initial licensure from AHCA, South Dade was required to provide AHCA with proof of liability insurance. Liability insurance coverage is for the protection of residents at the assisted living facility in case of injury or death. Without liability insurance, a resident injured at a facility would have no recourse if he/she was harmed or injured in any way. AHCA, not the facility, is listed on each facility’s certificate of insurance as the certificate holder. Additionally, the address of AHCA’s licensure department is listed on each facility’s certificate of insurance in order that AHCA will be notified in the instance of a lapse of insurance coverage. South Dade provided proof of liability insurance to AHCA on October 17, 2005, for the period of September 23, 2005, through September 23, 2006. South Dade obtained the liability coverage from an insurance company in Miami, Florida. Having obtained liability insurance and having provided proof of liability insurance, South Dade obtained licensure from AHCA. South Dade was eventually issued a standard biennial license by AHCA for the period of December 28, 2007, through December 27, 2009. South Dade was the licensee. On September 4, 2007, South Dade, as a corporation, was administratively dissolved due to its failure to file its annual report as required by law. At the time, South Dade was 100 percent owned by Larazo Martinez. South Dade does not dispute that Mr. Martinez allowed the dissolution of South Dade in order for Natalie Egea, who had recently become HSH No. 2’s administrator, to gain ownership of HSH No. 2.1 South Dade continued to carry-on business, as HSH No.2, even though it (South Dade) was administratively dissolved. South Dade’s corporate status was reinstated on May 11, 2009, over two years after its dissolution. Mr. Martinez was listed as the only officer, i.e., president. Instead of applying for a CHOW to begin the process of new ownership of HSH No. 2, an application for renewal of the license was submitted to AHCA. An application for licensure renewal was filed on November 13, 2007, with AHCA. Only South Dade, as the licensee, could apply for renewal of the license. Ms. Egea completed the application for the licensure renewal. She listed Mr. Martinez, the individual, as the owner of HSH No. 2, not South Dade, the corporation. Furthermore, she indicated that the applicant was an individual, not a corporation. Ms. Egea was aware that there was a difference between South Dade, the corporation, and Mr. Martinez, the individual, owning HSH No. 2.2 After receiving the renewal application, AHCA sent a letter dated December 6, 2007, by certified mail, return receipt, to Ms. Egea, as the administrator of HSH No. 2, advising her, among other things, that the application omitted several documents and was, therefore, incomplete; that the liability insurance for HSH No. 2 had expired; and that proof of current liability insurance coverage needed to be provided. Further, the letter advised Ms. Egea that, in several items on one of the forms, she listed herself as the owner of the facility, but, on another document, she listed Mr. Martinez as the owner of the facility and listed herself as the administrator. By letter dated December 20, 2007, Ms. Egea responded to AHCA’s letter dated December 6, 2007, and, among other things, provided the omitted documents and corrected the documents referring to the owner of HSH No. 2 to reflect Mr. Martinez as the owner. Furthermore, Ms. Egea advised AHCA that the facility was having difficulty in obtaining liability insurance coverage. The evidence demonstrates that, when Ms. Egea filed the renewal application, the intent in the application process was to change the ownership of HSH No. 2 to Mr. Martinez, and, eventually, to herself. Further, the evidence demonstrates that Ms. Egea considered Mr. Martinez as owning HSH No. 2, even though AHCA’s licensure documents showed South Dade as owning HSH No. 2 and as the licensee. AHCA issued South Dade a conditional license for the period December 28, 2007, through February 27, 2008, pending proof of liability insurance coverage. Through the issuance of a license to an assisted living facility, AHCA is guaranteeing to the public that that facility is in compliance with all the requirements set by AHCA. But through the issuance of a conditional license, AHCA is putting the public on notice that there are outstanding conditions of licensure that the facility has not met. Even though AHCA renewed the license in the name of South Dade, the application should have been considered a CHOW. AHCA mistakenly treated the application as a renewal, instead of a CHOW. The renewal application was in actuality an application for licensure by an individual, not previously licensed by AHCA. As a result, the application was a CHOW, not a renewal application for licensure. When a facility’s liability insurance coverage expires, the facility is required to provide AHCA with proof of a renewal policy or proof of a new policy. At the expiration of its liability insurance on September 23, 2006, South Dade was unable to immediately renew its liability insurance or obtain new liability insurance from companies in Miami. South Dade blamed the recent hurricanes in the South Florida area as causing insurance companies to become reluctant to issue new liability insurance policies. However, AHCA was the agency licensing and renewing the licensure of assisted living facilities in the entire State of Florida; but AHCA was not aware of any other assisted living facilities in the South Florida area having such difficulty. The undersigned does not find the reason put forth by South Dade for the difficulty in obtaining liability insurance coverage as a plausible reason. AHCA sent a notice of violation (NOV) dated December 4, 2007, by certified mail, return receipt, to Ms. Egea, as the administrator, for the lapse of liability insurance coverage. The NOV, among other things, requested proof of current liability insurance within ten days and indicated, among other things, that the failure to comply could result in an administrative proceeding to revoke the license or deny licensure. AHCA’s interpretation of the ten-day period is the maximum amount of time that a facility has to provide evidence to AHCA that it has current liability insurance and that there has not been a lapse and, therefore, no violation. AHCA’s interpretation is found to be reasonable. South Dade failed to provide proof of insurance within the ten-day period or during the month of December 2007. A second NOV dated January 2, 2008, was sent by certified mail, return receipt, to Ms. Egea, as the administrator, for the failure to have liability insurance coverage. The second NOV also requested proof of current liability insurance within ten days and indicated, among other things, that the failure to comply could result in an administrative proceeding to revoke the license or deny licensure. South Dade was finally able to obtain liability insurance coverage, effective January 2, 2008, through January 2, 2009. AHCA was provided proof of the coverage. However, approximately three months later, the liability insurance coverage was canceled, effective March 24, 2008, for non-payment of premium. Notification of the canceled liability insurance coverage was faxed to AHCA on July 17, 2008. AHCA sent a NOV dated July 18, 2008, the next day by certified mail, return receipt, to Ms. Egea, as the administrator, for the failure to have liability insurance coverage. The NOV also requested proof of current liability insurance within 21 days and indicated, among other things, that the failure to comply could result in an administrative proceeding to revoke the license or deny licensure. AHCA states that the purpose of the NOV dated July 18, 2008, was to make certain that there was no lapse in the policy providing liability insurance coverage, not to provide South Dade a time frame in which to purchase the required liability insurance coverage. The purpose stated by AHCA is found to be reasonable. South Dade received the NOV dated July 18, 2008, on July 23, 2008. South Dade obtained liability insurance coverage on August 12, 2008, effective August 12, 2008, through August 12, 2009. The usual procedure of the insurance agent from whom South Dade obtained the liability insurance coverage was to mail the Certificate of Liability Insurance to both the insured and AHCA when the insurance carrier approves and binds coverage. A finding of fact is made that the insurance agent followed the same procedure in the instant case. On November 3, 2008, AHCA issued its Administrative Complaint charging South Dade, among other things, with failure to maintain liability insurance coverage. After receiving the Administrative Complaint, Ms. Egea contacted the insurance agent regarding the Certificate of Liability Insurance. The insurance agent reiterated to Ms. Egea that the Certificate of Liability Insurance was mailed to AHCA in August 2008. On November 5, 2008, AHCA received the Certificate of Liability Insurance, as proof of insurance, when it was faxed to AHCA by the insurance agent. Also, the liability insurance policy, effective August 12, 2008, had a different policy number than the last liability insurance policy. The different policy number indicated that the liability insurance coverage effective on August 12, 2008, was a new, not a renewal, policy.3 South Dade was without liability insurance coverage from March 24, 2008, until August 12, 2008, when liability insurance coverage was obtained. South Dade failed to maintain continuous liability insurance coverage from March 24, 2008, to August 11, 2008. South Dade had a lapse in liability insurance coverage from March 24, 2008, to August 11, 2008. No evidence was presented to show that any resident was harmed in any form or manner at HSH No. 2.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency for Health Care Administration enter a final order: Finding that South Dade Elderly Care Corporation, d/b/a Home Sweet Home No. 2, committed the offenses set forth in Counts I, II, and III in the Amended Administrative Complaint. Revoking the license of South Dade Elderly Care Corporation, d/b/a Home Sweet Home No. 2. DONE AND ENTERED this 3rd day of May, 2010, in Tallahassee, Leon County, Florida. ERROL H. POWELL Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 3rd day of May, 2010.
