### IN THE COURT OF APP EALS OF TENNESS EE AT NAS HVILLE Ja nuary10, 200 6 S es sio n CNA (CONTI NENTAL CASUALTY) v. W IL LI AM KING , ET AL 

### .

Appeal f romthe Circ uit Court for CheathamCounty No. 5517 Robert

Burch, Jud ge

No. M2004- 02911-COA-R 3-CV - F iled on S eptem ber 28, 2006

A roofing contra ctor a

pplied for wor

kers c ompensation insuranc e, declaring in his application that he had no em ploy ees. H e paid a $750 minimum premium, and the insurance c ompany issued a policy . The c ompany

subsequently audited his r ecor ds and asse ssed an a dditional premium of over $14,700 for r oofer s who worked u n d er c ontrac t with him or his s ubcontra ctors, but who we re not cover ed by

their own wor

kers c ompensation policies. The c ontrac tor ref us ed t o p ay , and the insurancecompany

broug ht suit. The contrac tor cl ai m ed at t rial that all the wor kers we re indepe n d ent contractors a nd, thus, that he was not oblig ated to insure the m. The trial court ruled ag ainst him. W e af

firm the trial c ourt. Tenn. R. App . P . 3 Appeal as of Right; Judgme nt of th e Circ uit Court Aff irm ed
P ATR I C I A J. C O T T RE LL , J ., delivere d the opinion of the court, in which W I L L I AM C. K O CH , J R ., P.J ., M.S., joi ned. W I L L I AM B. C A IN , J

. , n o tp ar t i ci p at i n g.
M ark C

. S cr u ggs , Na s h v i l l e, T en n es s ee , fo r th e ap p el l an t , W i l l i am Ki n g d/ b / a K u s t o mR o o fi n g & Con su ltants

. Blakeley D. M atthews, Brian W

. Holmes, Nashville, Tennessee, for the appellee , CNA (Continental Casualty ).
OP IN ION
I. A C O N TR A C T O F I NS URANCE
Wil liam Stanley

King op er at es a roofing business under the name Kustom Roofing and Consultants. He does not car ry any employ ees on his payroll, but w hen a g ener al contra ctor hire s him to ins tall a roof, he then hires others to do the work and pay s them acc ording to the number of roofing square s they

complete.T h e e v id e n c e sh o w e d tha t C N A h a d a c tua lly c o n tra c te d w ith S t. P a u l T ra v e le rs In su ra n c e C o m p a n y to w rite 1
t h e pol i cy
. B u t s i n ce C N A i s na med as t h e pl ai n t i f f i n t h i s s u i t , a n y r ef

er en ce t o CN A i n t h i s opi n i on w i l l a l s o i n cl u de
a n y ro le e x e rc ise d o r in te re st he ld b y T ra v e le rs
. -2- I n J uly of 2001, Mr. King went to an ins uranc e age ncy to obtain g ener al l iabilityand wor kers compensation insurance. Ag ener al contra ctor, a subdivi s io n develope r for whom Mr. King intended to wo rk , re qu ir e d pr oo f that he ha d su c h ins ur a nc e be fo re it wo uld a g re e to ha ve him ins ta ll its ro of s. Mr . King ha d b e e n r e fu se d c ov e ra g e by tw o in su ranc e c omp anie s inthepr e vio us sixty day s. The insura nce agen t asked Mr. King questions, and an a pplication/information pag e wa s fi lle d o ut p ur

po rt e dly ba se d on tho se a ns we rs . T he fo rm state d th a t th e app lic a nt h a d n o e mpl oy e e s, and “N O” was chec ked in r esponse to the que stions “Are subc ontrac tors used? ” and “ I s any work sublet without certificates of insuranc e? ” Mr. King paid t he mi nimum premium of $750 and signed theapp lic a tio n w ith ou t r e a din g it.
Th e a g e nt f

or wa rd e d th e app lic a tio n to NC CI , w hic h a dmi nis te rs Te nn e sse e ’s a ssi g ne d risk pr og ram. A fe w we e ks late r, Mr . Kin g re c e ive d a po lic y in the ma il f

ro m CN A C on tin e ntal Ca su a lty to cover him for one f

ull y ear
. The fir st part of the five pag e policy states that “[w]e will pay 1 prom p t l y wh en due the be nefits re quired of y ou by the Workers Compensation L aw,” and further “[w]e have the right and duty to defe nd at our e x pense any claim, proc eeding or suit ag ainst y ou for benef its pay able by

this insurance.” The pre mium portion of the policy decla res that “ [t ]he premium shown on the Information Pa g e , s c he du le s a nde nd or se me nts is an e sti mate . T he fi na l pr e miu m w ill be de te rm ine d a ft e r this contra ct ends by

using the actual, not the estimated, premium basis and the prope r cla ssification and rate s that lawfully

apply to the business and work c overe d by this poli cy .”
T h e d o c u m e n t f

u r t h e r e x p l a i n s t h a tt h e p r e m i u mi s c a l c u l a t e db y m u l t i p l yi n g a r a t e b y a premium basis and that the most c o m m o n b asis is remuner ation paid to office rs and e mploy ees e ng a g e d inwo rk

c ov e re d b y

thepo lic y , anda lso to “ [a]ll oth e r p e rs on s e ng a g e d inwo rk that c ou ld make us liable unde r Part One (Workers Compensation Insuranc e) of this poli cy .” I n the abse nce of payro ll r e c or ds , th e c on tr a c t pric e fo r the se rv ic e s a ndmate ri a ls f urnis he d b y

su c h “ oth e r p e rs on s” can beused as the pr emium basis. Howeve r, this section “will not apply if y ou g ive us proof that the employ ers of

these pe rsons lawfully

secur ed their w orker s compensation oblig ation.” The poli cy further sets out the rig ht of the insurer to examine and audit all the re cords r elating to the policy

in order to de termine the final premium. Mr. King’s policy car ried a premium rate of $32.77 for e ach $100 of

remune ration.
On J uly 31, 2001, the underwriter for C NA sent a letter to Mr. King asking him to fill out and return an enclose d questionnaire about any subcontrac tors he hire d as part of his business. The letter u n d er s co re dt h e p o l i cyp ro v i s i o n s d i s cu s s ed ab o v e b y s t at i n g:Sho rt l y af t er t he p o l i cy was can c e ll ed , one of M r. K i ng’ s wo rkers was i njured o n t he job and went t o t he 2 hos pi t al

. M r
. K i ng not i f i ed C N A t hat t he i nj ur y had occur r ed. T he i ns ur anc e c om pany decl i ned c over age t o t he work er b e c a u se the inj u ry h a p p e n e d a fter the p o licy p e rio d e n d e d

.

T he form s are a ct ual l y ti t l ed “E l ect i o n o f N o n- C o verage b y S ub

- C o nt ract o r” and m ust b e si gned b y bo t h t he 3

su b c o n tra c to r a n d the ge n e ra l co n tra c to r. A ltho u g h the y p ro v id e a m e c h a n ism w h e re b y a s u b c o n tra c to r c a n w a ive his
o w n rig h t t o b e c o v e re d b y the W o rk e rs C o m p e n sa tio n L a w , t h e fo rm it se lf sta te s tha t he c a n n o t wa ive the rig h ts o f his empl o y e e s
. Th e s u b c o n t r a c t o r ’ s s i g n a t u r e a f f i r m s t h a t “ t h i s e l e c t i o n o f n o n
- c o v e r a g e w a s n o t a d v i s e d , c o u n s el ed or enco uraged b y sai d ge neral c o nt ract o r, or anyone acti ng fo r t he general co nt ract o r. ” T he general co nt ract o r’ s si gnat ure af f i r ms t h at “ I u n der s t an d t h at t h i s for m i s f or cl ar i f i ca t i on f or a u di t pu r pos es a n d doe s n ot r el i ev e t h e g en er al c on t r ac t or f r om r e s po n s i bi l i t y for t h e s u bc on t r a c t or ’ s e mp l oy e e s i n t h e e v e n t t h e s u bc on t r a c t or do e s n ot h a v e c ov e r a g e a t t h e t i me of an ac ci dent

. ” -3- Please note that the payroll f or unin sured sub -contr actor s will be included in y our premium basis at audit unless y ou can provide evidence that the s ub-contra ctor is not subject to the state wor

kers c ompensation statutes and that all appropriate forms have been c ompleted and f

iled with the state and w ith our office . (empha sis added).
On Novembe r 20, 2001, CNA sent a letter to Mr. King notify ing him that the policy had bee n canc elled beca

use “r equeste d underw riting information has not been pr ovided.” It appea rs that Mr. King had failed to include any specific information about subcontr ac t ors in the questionnaire that he re turned. 2
An audit of Mr. King’ s rec ords was c onducted on De cembe r 28, 2001. I t re sulted in the insurer a ssessing him with an a dditional premiu m o f $14,790 for the months that he ha d been insured. Mr. King refuse d to pay , and C NA filed a collection suit in t he Ge nera l Sessions C ourt of Cheatham County

. Following a hearing in Nove mber of 2003, the Gene ral Sessions Court returne d a judgm e nt i n f

a vo r o f M r. Ki ng . CN A the n a pp e a le d f or a tria l de novo in the Circuit Court of Che a tham Co un ty . M r. Ki ng fi le d a c ou nte rc la im, wh ic h w a s d ism iss e d p ri or to t ri a l.
II. T R I A L C OU R T P ROCE E DI NGS
The trial in Circuit Court was conducte d on October 22, 2004. The only witnesses to testify w e r e th e au d it o r

w h o h a de xa mi n e dM r
. K in g ’ s r e c o r d s ; an a tt o r n e y f o r th e in s u r e r ; M arti n M u n o z, a roof er w ho worke d for Mr. King; and Mr. King himself.
The auditor testified that his examination reveale d that during the period the insurance w as in effe ct, Mr. King had employ ed two worke rs, Daniel Bor ck and Wil liam Wis sman, who di d not sign I -18 forms. These a

re documents used by subcontrac tors to waive their rig hts to be cover ed by wo rk e rs c omp e ns a tio n. Mr . King paid the m to ta l r e mun e ratio n o f $ 10 ,0 00 . M r. Ki ng ha d a lso pa id 3 $40,488 to Martin Munoz. Mr. Munoz had filled out an I -18 form, but the amount paid sug g ested to the aud ito r the po ssi bil ity that Mr . M un oz w a s p a y ing oth e r wo rk e rs ou t of the mon e y paid to h im. I n fac t, this proved to be the ca se.T he audi t or h ad t es t i f i ed t hat N el s on P aus e and W i l l i am Scot t Jer s en, wor ker s l i s t ed i n M r
. K i ng ’ s boo ks as 4 hel p ers t o M r. M uno z , had s i gned I- 1 8 s. H o wever, M r. M uno z t est i f i ed t hat he did no t know ei t her of t ho se men. -4- Since Mr. Munoz does not speak Eng lish ve ry well, he testified throug h a court interprete r. He e x plained that he has a continuing business relationship as a roofe r with Mr . King . Rather than paying an hourly

wag e, Mr. King pay s him byeac h square of roof ing hecompl etes. Mr. Munoz bring s helpers w ith him t o do the work, w hom he al s o p ay s b y t he complete d square . Under questioning, heidentified four individuals that he reme mbere d as having worke d for him during the policy period: Carlos Ba

rrig a, Antonio Venc es, L eopoldo Guadarrama and JorgeAlfre do. None of the m ha d s ig ne d an I -1 8 f orm. 4
Acc ording to Mr. Munoz, Mr. King told him that he does not provide w orker s compensation insurance and that he does not ta ke income taxes or Social Security out of the money he pay s. Mr. Munoz i n turn tells his helpers that he doe s not pr ovide worke rs compensation and he does not take de du c tio ns fr om the ir

pay . H ow e ve r, he app are ntl y re po rt s that pay to the I RS, f or fi ve 10 99 fo rm s forth e y ear 2 00 1 h ave b een en ter ed i nt o th e reco rd whi ch li st th e pay er as “Mar ti n M un oz , M & M Roofing.” The recipients of funds t otaling $84,500 on those forms include some names whic h are ide nti c a l to or

sim ila r t o th os e of

theind ivi du a ls that Mr . M un oz i den ti fi ed as wo rking fo r h im during the policy

period. When Mr. King was c alled to the stand, his te stimony was very consistent with that of Mr. Mu no z. H is r e sp on se s to qu e sti on ing a t th e ve ry be g inn ing of his te sti mon y se t out the ba sis fo r h is arg ume nt that th e ins ur e r w a s n ot e nti tle d to a ny a dd iti on a l pr e miu m f

ro m hi m: Q:

.. . y ou us e la

bo re rs to d o th e wo rk , th e a c tual r oo fi ng wo rk , c or re c t?
A: I use indepe ndent contra ctors Q: An d it ’s y ou r posit ionthat e ve ry on e wh o d oe s w or k f or y ou is a su bc on tr a c tor , c or

re c t?
A: Yes. Eve ry

body that does work f

or me is an indepe ndent contra ctor.
Mr . King wa s c los e ly

qu e sti on e d a s to his inv olv e men t wi th thewo rk e rs wh o a c tually did the roofing that he paid f

or and f or which hewas pai d

. He t es t i fi ed t h at he did not set their wor k ho ur s, didno t pr ov idetoo ls, a nddidno t te ll the m ho w to do the ir job s. Hedida sk

thewo rk e rs to us e saf e ty e qu ipm e nt, bu t di d n ot r e qu ir e the m to . A sk e d h ow muc h ti me he sp e nt o n th e job sit e while the wor

k was g oing on, he answe red, “Almost never .” He also stated he c ould fire any of the wo rk e rs
. Mr. Kin g wa s also questioned about the a pplication for insurance that he had sig ned and about other w orker s compensation policies he had purc hased ove r the y ear s. His answer s showed a lack of intere st in the details of any of those policies. Aske d why he did not g o over the details of-5-

theapp lic a tio n u nd e r r e vie w w iththea g e nt, he re sp on ded ” I ’m no t a n in su ranc e a g e nt. I ’m jus t obtaining insurance, and it’s his job t o fill out all thi s paper work c oncerning the insurance .”
Wh e n th e ap p li c a ti o n a t is s u e w a s s h o w n to h im , M r
. K in g a d mi tt e d th a t the neg ative response s to the questions about the use of subc ontrac tor s an d whether any work ha d been suble t wi tho ut c e rtif

ic a te s o f i ns ur a nc e we reun tr ue. He also te sti fi e d th a t hi s si g natur e wa s th e on ly hand writi ng in the do c ume nt that heha d f ill e d inhim se lf . H ow e ve r, he w as im pea c he d b y his deposition testimonyto the eff ect that he did not remember fil l i n g the form out, that some of the writi ng loo ke d li ke his hand writi ng a ndso me didno t, andthat hemay ha ve fi lle d s omeof

it o ut.
At the conclusion of t he proof and closing arg uments, the t rial court announce d its decision fr om the be nc h. Th e c ou rt he ld that the ins ur a nc e po lic y a t issu e wa s a va lidc on tr a c t a ndthat by its terms it obligate d the insuranc e company to defe nd suits byworke rs employ ed by M r. King or by his subcontrac tors who wer e injured on the job.
The court also stated that “. . . it’s a f inding of fac t that the worke rs for the defe ndant, Mr. King wer e, under the facts that have been presented in this case , independe nt contra ctors, as were those of the subs.” Howeve r, the court immediately followed this stateme nt by noting that the issue was not cle ar- cut, that it would have take n a lawsuit to establish the true status of t he wor kers, that CN A w ou ld h a ve be e n r e qu ir e d b y its c on tr a c t t o defe ndsu c h a su it i n any

c a se , andthat th e su it could have g one either

way with reg ard to the status of the se employ ees.
Th e c ou rt we nt o n to ob se rv e that th e po lic y e xpla ine d w hat Mr

. Ki ng cou ld ha ve do ne to e xc l u d e h i s w o rk e r s f

r o m t h e p r o t e c t i o n s o f t h e p o l i c y ( s u c h a s b y r e q u i r i n g h i s s u b c o n tra c tor s to obtain certificates of

insuranceor by

having worke rs fill out I -18 forms), that Mr. King did not take tho se a c tio ns , andthat a s a re su lt, theins ur e r w a s le ft e xpos e d to theri sk s inv olv e d in c ov e ri ng tho se worke rs. The c ourt ac cording ly g rante d CNA a judgme nt f or the premium amount of $14,790, as well as pre

judgme nt interest of $4,001.52. The court’s de cision was memoria liz ed in an or der dated November

19, 2004. This appea l followed.

III. T HE W O R K ER S C OM P E NS AT I ON L AW The purposeof the Worker s Compensation L aw, Te nn. Code Ann. § 50-6- 101 et seq ., is t o provide a reliable and equitable reme dy to worker s who ar e injured on the job, while limit ing the liabilityto which the employ er is exposed. See Clanton v. Cain-Sloan Co. , 677 S. W

. 2 d 4 4 1, 443 (T e nn . 1 98 4) ; Sa sse r v . A v e rit t E x pre ss , 839 S.W .2d 422, 429 (Tenn. Ct. App. 1992)

. To ac hieve that pu rp os e , e ve ry

e mpl oy e r w ho se op e ratio ns fall w ith in th e sco pe o f the L a w i s r e qu ir e d to maintain a policy

of insuranc e to sec ure any possible wo rk er s co m pensation liabilityor, in the alternative, to meet string ent financ ial require ments in order to e stablish and maintain the status of a self- insured employ er. Te nn. Code Ann. § 50-6- 405.-6-

Gene rally , only

empl o y er s wi t h five or mor e employ ees a re r equire d to provide worke rs c omp e ns a tio n c ov e ra g e fo r the ir e mpl oy e e s. Te nn . Co de An n. § 5 0- 6- 10 6( 5) . H oweve r, thi s limit ation does not a

pply to the construction industry , perha ps beca use of the dang ers a

rising in many construction tra des and be causemany small contrac tors employ few er than five worke rs. Tenne ssee C o d e A n n o t a t e d§ 5 0

- 6

- 1 1 3 ( f ) ( 1 ) p r o v i d e s t h a t “

. . . a n y p e r s o n e n g a g e di n t h e c o n s tru c t i o n i n d u s tr y, including prin c ip al c o n tr a c to rs, intermediate contra ctors, or subc ontrac tors, shall be re quired to ca rry w o rk e r s ' c o m p e n s a t i o n i n s u r a n c e
. T h i s r e q u i r e m e n t s h a l l ap p l y w h e t h e r o r n o tt h e p e r s o n e m p l o ys fe we r than f

ive(5 ) emplo y e e s. Sol e pr op ri e tor s andpa rtne rs sh a ll n ot b e re qu ir e d to c arry wo rk e rs ’ compensation insurance on the mselves . . . .”
The e xis te n c e o f

a n e mp lo y e r
- e mp lo y e e r e lati o n s h ip h a s b e e n s a idto b e a p rimary require ment for e mploy er liability under the Workers Compensation L aw. Mu rra y v . G oo dy e ar

Tire & Rubber Co. 46 S.W .3d 171, 175 (Tenn. 2001). Stratton v. United Inter-M ountain Telephone , 695 S.W .2d 947, 950 (Tenn. 1985) . Howeve r, under Tenn. Code Ann. § 50-6-113( a), an employ er may be he ld l iab le for

inj urie s su staine d b y

e mpl oy e e s o f h is s ub c on tr a c tor s, e ve n w he n th os e subcontrac tors aredeeme d to be independe nt contrac tors. Murray , 46 S.W .3d at 175.
Te nn e sse e Cod e An no tate d § 50 -6 -1 13 re a ds in p e rtine nt p art , (a) A prin c ip a l o r in te r me d iate c o n tr a c to r , o r s u b c o n tr a c to r s h a ll b e li ab lefor compensation to any

employ ee injured while in the employ of any of the subcontrac tors of the princ ipal , in terme d ia te c o n tr a c to r , o r

s u b contra ctor and eng ag ed upon the subject matter

of the c ontrac t to the same extent as the immediate employ er.

... (d) This section applies only in case s wherethe injury occur red on, in, or a

bout the premises o n wh i ch t he princ ipal contra ctor ha s undertake n to execute work or that areoth e rw iseun de r the princ ipal c on tr a c tor ' s c on tr ol o r m a na g e me nt.
The a bove statute is sai d t o cre ate “ statutory employ ers” in situations where an injured wo rk e r c a nn ot r e c ov e r c ompen sat ionfr om an im me diate e mpl oy e r. Th e statut e ’s pu rp os e is “ to protec t employ ees of

irresponsible and uninsured subcontrac tors by imposing ultimate liabilityon the pre sumably

responsible princ ipal contra ctor, who ha s i t wi t hin his power, in choosing su bc on tr a c tor s, to p a ss u po n th e ir re sp on sib ili ty a ndins ist up on app ro priate c omp e ns a tio n f or the ir worke rs.” Murray, 4 6 S

. W

. 3 dat1 7 5 (T en n
. 2 0 0 1 )( q u o t i n g Br own v . Ca nte rb ur

y Cor p ., 844 S.W .2d 134, 136 (Tenn. 1992) ).
Tenne ssee Code A nnotated § 50-6- 113 m u s t b e understood as an integ ral pa rt of the compre hensive sche me established by the W orker s Compensation L aw. Thelaw’s g oal of providing br oa d c ov e ra g e fo r i nju re d w or ke rs c ann ot be a c hie ve d w ith ou t a re lia blesy ste m to pa ss responsi b i l i t y u p the line if lower level employ ers or

subcontrac tors do not car ry the re quired insurance . I n the ca se bef ore us, the gen er al contractor r equire d the subcontra ctors, such a s Mr. King , to c arry worke rs compensation insurance. Mr. King could have imposed a similar requir ement on any subcontrac tors he used.T o s u p p o rt h is a rg u m e n t, M r. K ing c ites th is c o u rt’s o p inio n in the c a se o f Cons um er s Ins ur ance U SA v. Sm i t h, 5 N o. E2002- 00724- CO A- R3- CV , 2002 W L 31863300 ( T en n
. Ct

. App. D ec
. 23, 2002) ( n o T en n
. R

. A pp. P

. 11 a ppl i ca t i on f i l ed)

. I n a s i n g l e s en t en ce of t h at opi n i on , w e s pok e of a n a u t omobi l e i n s u r an ce c on t r ac t a s be i n g v oi d a b in iti o . O ur us e of t hat t er m was unfort un at e and ob vi ous l y i nadve r t ent , b eca us e t he cen t r al hol di ng o f t hat cas e was t hat when an ap p l i ca nt f

o r i nsur an ce m ak es a m aterial m i srep rese ntati o n w i t h the int en t t o d ec eive o r wh i ch i nc rea ses the risk o f l o ss t o t he i ns ure r, t he p o l i cy i s voi dabl e at t he i ns ur er ’ s opt i on . T h e sa m e p rin c ip a l i s o p e ra tive he re . M r. K ing ’s mi s r epr es en t at i on s mi g h t h av e g i v en CN A g r ou n ds t o v oi d t h e pol i cy , bu t u n der t h e ci r cu ms t an ce s of t h i s c as e, h e ca n n ot d i sclaim his co ntrac t ua l o b l i ga t i o ns. -7- IV. I S THE C ON TRA C T E N FORC EABLE ?
An insuranc e policy

is a contra ct wher eby

for a stipulated consideration one party promises to compensate the other f or losses d u e to s pecif

ied risks. See B lack’ s Law Dictionar y (5th Ed. 1979); Tenn. Code A nn. § 56-7-101. I nsuranc e policies a re subjec t to the same rules and principles that are us e d to c on str

ue oth e r c on tr a c ts

. Massachusetts Mutual L ife Insurance Co. v. Je fferson , 104 S.W .3d 1 3 , 2 0 (T enn. Ct. App. 2002). As long as a policy ’s terms ar e unambig uous, they will be e n f o r c e das written . A lls tate In su ra nc e Co. v . W att s , 811 S.W .2d 883, 886 (Tenn. 1991)

. Additionally , the provisions of the Workers Compensation L aw must be re ad int o every policy of worke rs compensation insurance. See G eneral Guaranty I nsurance Co. v. Sc udginton , 376 S.W .2d 464, 466 (Tenn. 1964)

. Mr. King acknow ledg es that he sig ned the application for insurance, but testified that he had no t r e a d th e po lic y

a nd wa s not inte re ste d in a ny of its de ta ils . T he la w h a s lo ng be e n s e ttl e d th a t “ in the abse nce of

fraud or mistake, an insure d cannot c laim that he is n o t bound by the contra ct of insurance , or ce rtain provisions there of, bec ause hehas not rea d it, or is otherwise ig norant of, or unacquainted with its provisions.” W ebber v . State Farm Mutual Auto Insurance Co. , 49 S.W .3d 2 6 5 , 2 7 4 (T en n
. 2 0 0 1 )( q u o t i n g Ge n era lA me r i ca n L i f e I n s u r a n ce Co . v. A rmstrong , 1 8 5 S. W.2d 505, 50 7 (T e nn . 1 9 4 5 ) )

. F u rt h e r , " t h e i n s u r e di s c o n c l u s i v e l y p r e s u m e dt o h a v e k n o w l e d g e o f, a n dto h a v e a s s e n t e dt o , a l l t h e t e r m s , c o n d i t i o n s , l i m i t a t i o n s , p r o v i s i o n s o r r e c i t a l s i n t h e p o l i c y, irrespe ctive of w hether the insured a ctually rea d, or could re ad, the insurance c ontrac t.” Ibid.;see also, De Ford v. National Lif e & A cc i d en t In s . Co. , 185 S.W .2d 617, 621-22 (Te nn. 1945) (re cog nizi ng and applying the same rule , even w hen the insure d could not rea d the contra ct).
A consider able amount of trial testimonywas de voted t o examining M r. King ’s application for insurance and to the question of who wa s responsible for the inacc urate information containe d in the document. We note that an a pplication for insurance is c onsidered to be an uncondi t i onal reque st for cove ra ge ef

fec tive immediately

upon acc eptanc e by

the company

. Corbitt

v. Fe deral Kemper I nsurance Co. , 594 S.W .3d 728, 729 (Tenn. Ct. App. 1980). O nce a cce pted, the application i s i n c o rp o r a t e di n t o t h e p o l i c y. Mr. King arg ues t hat i n light of all the m aterial misrepre sentations on his application, there was no mee ting of

the minds, and thus that the i nsuranc e poli cy was void ab ini tio

. This arg ument 5 does not stand up to scrutiny , howeve r, for by signing the application, Mr. King w as vouching for the ac cura cy

of the information it contained

. T h e t ri al court c orre ctly conclude d that such anT he p o l i cy specif i cal l y gave t he i nsur ed t he ri ght o f cancell at i o n at any t i m e up o n wri t t en no t i ce. T hus, M r. 6 K i ng co ul d ha ve cancell ed t he p o l i cy i f he fo und t he p rem i um rat e unsat i sfact o ry
. H e al so co ul d have requir ed any su b c o n tra c to r h e hir e d to furn ish insu ra n c e fo r th a t sub c o n tra c to r’s w o rk e rs , th u s e lim ina ting the ir p a y fro m the b a sis
u s e d t o c a l c u l a t e h i s f

i n a l pr e mi u m. -8- arg ument violated the we ll-established rule that a party may not attempt to avoid a contra ct by taking advanta g e of his own wr ong
. See D odson by Dodson v. Shrade r, 824 S.W .2d 545, 547 (Tenn. 1992) ; Br own v . O gle , 46 S.W .3d 721, 727 (T en n
. C t

. Ap p
. 2000); Mo ra t v . S tate Fa rm Mu tua l A uto Insurance Co. , 9 49 S.W. 2d69 2, 696 ( Te nn . Ct . A pp . 1 99 7) . A c c or din g ly , CN A i s e nti tle d to en fo rc e t h e p o l i cyaga i n s tM r. Ki n g.
V. T HE P R E MI U M C AL CUL AT I ON
Since the insuranc e ag ree ment is enfor cea ble by CNA, the question bec omes whethe r CNA is en t i t l ed t o the pre mium as calculated throug h its audit. A premium is the consideration for an insuror a g r e e in g to a s s u me a s p e c if ie d r is k , a n d th e a mo u n t o f th e p r e mi u m is r e lated to the mag nitude of the risk involved. The policy

here in stated that the final pr emium amount would not be de termined until the end of the policy

period. The rea son for this provision, which is a s t an d ar d feature of w orker s compensation policies, is that any number of e mploy ees may be hire d or terminate d while the policy is in effe ct, thus increa sing or decr easing the amount of risk to which the insurer is exposed. Thus, Mr. King ’s payment of the minimum premium and his d ec l ar ation that he had no employ ees did not cut off the insurer ’s rig ht to assess a re trospective pr emium, based upon the true deg ree of risk it f

ace d. The premium rate of $32.77 for eac h $100 of worke r re muneration was set out in the policy , as wa s the insurer’ s rig ht to conduct a retrospe ctive audit. Mr. King ag ree d to pay 6 a pre mium based on a spec ified rate applied to the pr emium base. The iss ue in this case is whe ther the cor rec t base wa s used. The poli cy stated that the pre mium was based on r emuner ation to Mr. King ’s employ ees and to “all other pe rsons eng ag ed in work that could be make us li able unde r the policy .” It also stated that pay ro ll re c or ds or the c on tr a c t pri c e of se rv ic e s f

ro m th os e pe rs on s c ou ld b e us e d to c a lc ulate the re mun e ratio n. Ob vio us ly , this la ng ua g e wa s inc lud e d be c aus e of thestatut ory

e mpl oy e r l ia

bil ity established in Tenn. Code A nn. § 50-6-113. CNA c oncluded that this l anguag e included the two worke rs who wor

ked dire ctly

for Mr. King as well as the w orker s used by Mr. Munoz. The J uly

31, 2002, letter fr om CNA made that position even c lear er, stating th at the “payroll for uninsure d subcontrac tors” would be inc luded in the pre mium base.
It w a s a ndis C NA ’s po sit ionthat if a wor ke r emplo y e d b y

on e of Mr . King ’s su bc on tr a c tor s, or the two “ subcontrac tors” who did not file I -18s, had filed a claim afte r an injury on the job, CNA would have ha d to defe nd ag ainst the claim, to bea r the risk that the w orker

would be found to be a statutory

employ ee unde r Tenn. Code Ann. § 50-6-113, and to pay whateve r bene fits the worke rT he t r i al cour t di s cus s ed t he po l i cy provi s i ons i n det ai l and concl uded t hat t he i ns ur anc e com pany had dr af t ed 7 l anguage t h at r equ i r ed M r
. K i n g t o c ome for wa r d w i t h pr oof t h at h i s s u bcon t r ac t or s ’ w or k er s w er e n ot s t at ut o ry empl oy ee s be for e an y w or k er s c ompen s at i on s u i t , w h i ch t h e compa n y w ou l d be r equ i r ed t o de fen d, w as f i l ed. -9- was e ntitled to. Thus, as the trial court found, CNA assumed the risk to defe nd any claim broug ht by a wor ker on the job site even if that defe nse wa s to prove the injure d worke r wa s an indepe ndent contra ctor. Both the policy

and the letter

explained how Mr. King could avoid having payments to such workers i n cl u d ed in the premium base: by providing evidenc e that the subc ontrac tor had wor kers c om pen sat io n ins ur a nc e or wa s n ot s ub

je c t to theWor

ke rs Compe ns a tio n L a ws a ndthat a ll app ro priate fo rm s h a d b e e n f ile d. Mr . King didno t pr ov ideCN A w ithe vid e nce of a ny of the se c ir c ums ta nc e s. 7
It is clear that, by

the terms of the policy i t s el f, C NA wa s justified in including in the pr e miu m bas e the a mou nts paid by Mr . M un oz to his wo rk e rs on theKi ng job . CN A e xpla ine d it would include those amounts, and Mr. King did not provide the information that would have excluded them. Ba sed pure ly on contra ct princ i p l es , Mr. King would be liable f or the a dditional premium.
The issue in this case is whether CNA was entitl ed to the premium it claimed. In the contra ct of ins ur a nc e , M r. Ki ng a g re e d to pay a pr e miu m a s se t ou t th e re in. Th e pr e miu m w a s c a lc ulate d in a c c or danc e wi th the po lic y ’s e xpla natio n. Ac c or din g ly , w e c on c lud e that CN A p ro ve d it s entitlement to the additional premium.
Ho we ve r, be c aus e Mr

. Ki ng ’s prima ry arg ume nt is fo c us e d on a no the r iss ue , w e wi ll d isc us s that arg ume nt.
VI. I N D EP END ENT C ONT RACT ORS OR S T AT UT ORY E M PL OY EES ? Mr. King ’s ce ntral ar g ument on appeal is that the worke rs whose r emuner ation CNA used to calc ulate his insurance premium wer e independent contractors, not hi s employ ees. H e conte nds that a s su c h th e ir

status re nd e rs him

e xemp t f ro m a ny re sp on sib ili ty to ins ur e the m. I n o the r w or ds , he ar g ues that they

arenot “other pe rsons eng ag ed in w ork that could make [CNA] li able unde r Part One ( Workers Compensation I nsuranc e) of this poli cy .”
As weind ic a te d e arl ie r, theWor ke rs Compe ns a tio n L a w re qu ir e s a ll c on tr a c tor s e ng a g e d in the construction indust ry , even those who employ few er than five wor

kers, to obtain cove rag e for the ir employ e e s. Te nn . Co de An n. § 5 0- 6- 11 3( f) (1 ). It a lso c re a te s li abil ity fo r i nju ri e s to subcontrac tor employ ees w hen the subc ontrac tor does not have insurance

.In i t s o ral f i nd i ngs f rom the b ench, the t ri al co urt s t at ed t hat t he i ss ue was not “cl ear- cut ” and i t wo ul d have 8
t ake n a l aws ui t t o es t abl i s h w het her s uch wor ker s wer e i ndependen t cont r act ors or s t at ut ory empl oy ees
. T he cour t not ed tha t, in t h is situa tio n , su c h a la w su it w o u ld n o t h a v e b e e n frivo lo u s, b e c a u se it “c o u ld a rg u a b ly ha v e go n e e ithe r w a y w ith regard t o t he st at us o f t hese em p l o y ees. ” N o net hel ess , t he co urt al so fo und “ as a f i nd i ng of f act ” t hat t he wo rkers of M r. K ing ’s su b c o n tra c to rs w e re ind e p e n d e n t c o n tra c to rs
. M r. K ing h a s re m ind e d u s o f th is fin d ing . H o w e v e r, w h e n the fac ts are ess ent i al l y undis p ut ed , whet her or no t a n indi vi d ual is a n indep end ent c o nt ract o r i s a q uest i o n of l aw f o r t he t ri al co urt ra the r th a n a q u e stio n o f fa c t. St r at t on , 6 9 5 S .W .2 d a t 9 5 3 ; Seal s v . Zol l o, 32 7 S.W

. 2 d 4 1 , 4 4 ( T e n n . 19 5 9 ). U nl i ke find ing s o f fa c t b y the trial c o u rt, it s c o n c lus io n s o f l a w a re re v ie w e d o n a p p e a l de no vo , w i t ho ut a n y pr es u mpt i on of
c o rr e c tne ss. See T e n n . R . A p p . P . 1 3 (d ); S a llee v . B a rre tt , 1 7 1 S .W .3 d 8 2 2 , 8 2 5 (T e n n . 2 0 0 5 ); P h ill ip s v . A &H C o n st. C o. , Inc. , 13 4 S.W

. 3 d 14 5 , 14 9 (T enn. 20 0 4 ).

So l e p rop ri et o rs and pa rt ners are not requi red t o carry wo rkers co m p ensat i o n i nsur ance o n t hem sel ves. T enn. 9 C o d e A nn. § 5 0

- 6

- 1 1 3 (f ). -10- Be causeof this last provision, wh en a worker submits a claim under the Workers Compen satio n L a w, ou r c ou rt s a reof te n c a lle d u po n to de te rm inewh e the r o r n ot the c la imant i s e lig ibl e to r e c ov e r u nd e r the la w a s a statut ory e mpl oy e e . Si nc e no inj ury c la im w a s f

ile d inthi s case , the trial court was not requir ed to make a definiti ve dete rmination as to the leg al status of the wo rk e rs inv olv e d, a nd the c ou rt sp e c if ic a lly re c og nize d that th a t qu e sti on wa s c los e un de r the fa c ts of this case

. It also note d that CNA would have been r equire d to defe nd any suits bythe worke rs 8 had they been injure d during the period the policy was e nforc ed. When an injured worker files a claim for a workplac e inj ury , the burden of proving that the worke r is an indepe ndent contra ctor rather than an employ ee r ests on the employ er . Galloway v. Mem phis Drum Servic e , 8 22 S.W. 2d58 4, 58 6 ( Te nn . 1 99 1) ; Jones v. Crenshaw , 645 S.W .2d 238, 240 (Tenn. 1983)

. Cro mw e ll G e ne ra l Co ntr ac tor s v . Ly tle , 439 S.W .2d 598 (Tenn. 1969) . Where there is any

doubt as to whether

the worke r is an employ ee or an indepe ndent contra ctor, the doubt must resolved in favor

of the former. Se als , 327 S.W .2d at 44. Both pa rties have cited this court’s opinion in Roy al I ns ur an c e v . R & R D ry wal l , No. M2002-00791-COA- R3-CV, 2003 WL 21302983 (Tenn. Ct. App. J une 6, 2003)( no Tenn. R. App. P. 11 application filed), and we a g ree t h at i t is relevant to the issues he rein. CNA insists that the controlling principles in that ca se we re the same a s in the prese nt case , and that they requirethe court to gr ant judg ment to the insurancecompany . Mr. King arg ues that the fa ctual distinctions between that caseand this one invalidate any such conc lusion. As in the prese nt case , Roy al In su ra nc e v . R & R D ry wal l involved a re trospective premium assessed agai n s t a gene ral c ontrac tor by a wor kers c ompensation ca

rrier afte r an audit of the contra ctor’s books r evealed that its subcontrac tors employ ed workers that the gene ral c ontrac tor had not declar ed. The g ener al contra ctor arg ued that these additional worke rs wer e not employ ees, but members of de facto partne rships. I n support of t h i s arg ument, the contra ctor noted that all the 9
wo rk e rs e xec ute d I -1 8 forms an d ha nd -w ri tte n state me nts de c lari ng that th e y we repa rtne rs wh o s pli t the proc eeds w hich the lea d partne r re ceive d from the g ener al contra ctor.-11-

This court noted, howe ver, that all the documents the g ener al contra ctor re lied upon had bee n e xec ute d a ft e r the aud it andthea sse ssm e nt o f the a dd iti on a l pr e miu m. We d e te rm ine d th is p os tpolicy materia l was not conv i n cing beca use if one of

those worke rs had be en injured on the job during the policy

period, he would have ha d littl e ince ntive at that time to waive his rig hts to workers compensation benefits an d t he insurer ’s obligation of payment. Our re asoning , as set out in the fo llo wi ng pa ssa g e , a

pp lie s w ithe qu a l f

or c e to the pr e se nt c a se : We thus see t he contractor a s try ing to ha ve it both way s. During the disputed policy period, whe n it was still pos sible that one of the dry wall " p ar t n ers" could ha ve inj ur e d h ims e lf on the job , R & R c ou ld ha ve inv ok e d thepr ote c tio ns of thewo rk e rs ' compensation law and of its policy . Now that the policy period ha s passed with no cl ai m s h av i n g b e e n f

i l ed , t h e c o n tra ct o r a rgu es t h att h e w o rk er s h ad n o co v er age un de r its po lic y , a nd the re fo re that it sh ou ld n ot h a ve to p a y a n a dd iti on a l pr e miu m. As the tri al court points out, “[t] he audit to determine the cur rent pre mium was intended to examine the ac tual risk which Roy al I n s uranc e undertook during the policy period, not a risk which was de fined only afte r the policy

period e nded." Royal Insurance v. R & R Drywall, 2003 WL 21302983, at *4.
I n that opinion we also re lied upon Tenn. Code Ann. § 50- 6-114(a ), which rea ds in pertinent part, “ [n] o contra ct or a g ree ment, written or implied, or rule , reg ulation or other de vice, sha ll in any ma nn e r o pe rate to re lie ve a ny e mpl oy e r, in w ho le or

in p art , o f any

ob lig a tio n c re a te d b y

thi s chapte r.” A fter disc ussing the documents cre ated afte r the c overa g e period, we conc luded that they constituted just such a deviceused to avoid a premium associate d with a risk that had since closed.
Mr . King arg ue s th a t t he worke rs a t is su e he re in w e reind e pe nd e nt c on tr a c tor s a nd , th us , CN A b or e no ri sk

wi th r e g ardto the m. H e re fe rs us to T e nn . Co de An n. § 5 0- 6- 10 2( 11 ), wh ic h s e ts out a list of fac tors for the courts t o consider w hen called upon to disti ng uish betwee n employ ees on the one hand and subcontra ctors or indep en d en t contra ctors on the other . Many of these f

actor s involve the de gre e o f control that the e mploy er c an exerc ise over its worke rs. Masiers v. Arrow Transfer & Storage Co. , 639 S.W .2d 654, 656 (Tenn. 1982) . Howeve r, “[i] n determining whe ther one is an independe nt c ontrac tor or an employ ee, the vital test is not whether the rig ht to control was exercised, but whe ther it exist ed.” Jones , 64 5 S.W. 2da t 24 0- 24 1; Stratton , 695 S.W .2d at 953. M r. King and Mr. Munoz both testified that they exercised no c ontrol over the m an n er i n which the roofing work wa s perf

ormed, but there was no evidenc e that they did not have the rig ht to control such work if

they wished.
Fro m th e re c or d a s a

wh ole , it app e ars to u s th a t Mr . King wi sh e d to a void the e xpe ns e involved in furnishing worke rs compensation insurance for roofer s who worked on his jobs, but t hat he wa s require d by the contractor for t his projec t to provide such insurance. T o achie ve the e nd of low premiums, he first stated hehad no employ ees, did not use subc ontrac tors, and did not sublet without pr oof of insurance. H e also tried to e stablish informal ag ree ments with subcontrac tors that would g ive the appe arance of a hands- off a

pproac h.M r
. K i n g n ot es t h at i n Se pt embe r of 2004 t h e T en n es s ee D epa r t men t of La bor di s con t i n u ed t h e u s e of I

- 18 10 fo rms fo r a num b er o f

reas o ns, i ncl ud i ng i naccurat e repo rt i ng and “ use of t he fo rm t o s ho w no n- co verage b y wo rkers who s ho ul d pro b ab l y be co vered as em p l o y ees rat her t han subco nt ract o rs w hen t he cri t eri a set fo rt h i n T enn. C o d e A nn. § 5 0- 6- 10 2( 11 ) a r e a pp l i e d. ” H e a r g u e s t h a t t h e Dep a r t me n t ’ s a c t i on r e n de r s h i s w or k e r s ’ f a i l u r e s t o e x e c u t e I

- 18 for ms i nc o nse q ue nti al and st ren gthe ns his argu m en t t ha t t he y are ind ep en d en t co ntrac t o rs, b a se d u p o n t he st atuto ry fac t o rs. H o w ev er, i t i s no t at all clea r t o us t ha t t he eli m i na t i o n of t he I- 1 8 fo rm i n 2 0 0 4 wo uld ha ve ap p rec i ab l y red uc ed t he ri sk to the insu re r in 2 0 0 1

. -12- Ce rt a inl y , M r. Ki ng a ndMr . M un oz claime d a re mark able de g re e of no n- inv olv e me nt w ith the work f

or which e ach was getting paid. This court is not inclined to give its im primatur to such a devic e a s a w a y o f a v o id in g w o rk e r s c o mp e n s a ti o n li ab il ity b e c au s e it w o u ld b e c o n tr ary to the purpose of the Workers Compensation L aw “to insure as far as possible to all workers pay ment of benef its when they [are] injured i n the cour se of their employ ment.” Stratton , 695 S.W .2d at 951.
I n the case befor e us, howeve r, the question is not whether Mr. King sufficie ntly distanced himself from the worke rs and the work to be able to avoid r esponsibility as a statut o ry em ploy er. I nstead, it is whether

he is liable for

the pre mium assessed. CNA told him i n t h e poli cy what wo rk e rs wo uldbe inc lud e d inthepr e miu m ba se a s “ oth e r p e rs on s e ng a g e d inwo rk that c oul d make CNA liable . . . .”
I f any of the wor

kers ha d been injure d on the job, they could have submitt ed a c laim for worke rs compensation that Mr. King would have had t o answe r as the arg uable e mploy er or statutory e m p l o y e r o f t h o s e w o rk e r s
. A s h i s i n s u r e r , C N A u n d e rt o o k t h i s r i s k d u r i n g t h e p o l i c y

p e r i o d

. It should be noted t hat M r. King not ified C NA of an inj ury afte r the policy

period, a ppare ntly expecting cover ag e. Therewer e other

methods he could ha ve used to re duce the siz e of th e premium that was assessed. T he policy

itself allowed him to avoi d p ay ing a premium for subc ontrac tors’ pay roll or pay me nt f

or se rv ic e s to wo rk e rs “ if y ou g ive us pr oo f that th e e mpl oy e rs of the se pe rs on s la wf

ull y secur ed their w orker s compensation oblig ation.” He could have required t h at his subcontrac tors car ry worke rs compensation insurance. H e also c ould have aske d every one who wor ked for him or his subcontrac tors to execute I -18 forms, thereby strengt h en i n g the ar g ument that no worke rs c omp e ns a tio n in su ranc e wa s r e qu ir e d o f the m. 10
Since he took none of

these actions, the i nsuranc e company was oblig ated unde r the policy to de fe nda t it s o wne xpe ns e a ny c la im a g a ins t Mr . King ari sin g fr om i nju ry to tho se wo rking fo r h im or his subcontrac tors and to pay benef its for those injuries, if such wa s require d. The pre mium was assessed on the basis of the potential mag nitude of that oblig ation.-13- VII. C ONCL US I ON
T h e j u d gm en t of the trial court is affirmed. T he ca se is remanded to the Circuit Court of C h ea t h am C o u n t y
. C o s t s o n ap p ea l ar e t ax ed t o t h e ap p el l an t , W i l l i am Ki n g.

____________________________________ PATRI CI A J . COTTRELL , J UDGE