Opinion ID: 886211
Heading Depth: 1
Heading Rank: 9

Heading: Were the Montana Department of Labor and Industry's (DLI) hearing officer's findings of fact supported by substantial credible evidence in the record?

Text: ¶ 31 The next issue presented is whether the DLI hearing officer's findings of fact were supported by substantial evidence in the record. While this is an appeal from a WCC decision, in order to determine if the WCC properly complied with § 2-4-704, MCA, we must review the entire record and determine whether the findings of fact made by the DLI hearing officer were supported by substantial evidence. Only then can we determine whether the WCC erred. Grenz v. Fire and Cas. of Connecticut (1996), 278 Mont. 268, 924 P.2d 264. As indicated above, in January 1999, the DLI hearing officer issued his findings of fact and conclusions of law in favor of the Client Companies. We must now decide by applying the three prong test from Lee Rost Logging (1992), 252 Mont. at 102, 827 P.2d at 88, if those findings of fact were clearly erroneous. ¶ 32 The primary question before the DLI hearing officer was whether the Client Companies were uninsured for workers' compensation purposes during the time periods for which the UEF seeks to assess penalties. The UEF asserted that Dynamics failed to properly insure several Montana companies for periods of time ranging from six weeks to eleven months, rendering these Client Companies uninsured employers for those periods. Dynamics asserted that the Client Companies were insured without interruption. After conducting a two-day hearing at which the president of Dynamics, the counsel for Resources, and various representatives of the UEF testified, the hearing officer issued 25 specific factual findings. Many of those factual findings are undisputed and as such will not be analyzed in this decision. Several others, on the other hand, were incorrectly classified as findings of fact when they were, in actuality, mixed statements of fact and law. As such they will be reviewed for legal correctness. Farmers Union Cent., 272 Mont. at 474, 901 P.2d at 563. ¶ 33 It is undisputed that each of the Client Companies was adequately insured up to the time it contracted with Dynamics. It is further undisputed that each company did not carry workers' compensation coverage in its own name while under contract with Dynamics. It is also undisputed that each company was insured after the time it signed a policy filing card with Resources. Therefore, this case centers upon the UEF's determination that each of these companies was uninsured during its contract term with Dynamics. ¶ 34 As the parties have done, for analysis purposes, we divide the potentially uninsured time into three periods: January 1April 1, 1994; April 1September 30, 1994; and October 1November 10-15, 1994. ¶ 35 January 1April 1, 1994. Dynamics maintains that after it was informed by the UEF in June 1994, that it was not adequately insured for workers' compensation purposes, it arranged for retroactive workers' compensation coverage through CGIC Policy Number SWC-00. CGIC was the insurer of Resources, the Dallas-based company with whom Dynamics was then negotiating a sale/purchase arrangement. According to the policy, the effective term of coverage was March 23, 1993 to April 1, 1994. Therefore if this policy covered Human Dynamics Corporation and if it provided retroactive coverage, the Client Companies could have been insured from January 1 through March 31, 1994. ¶ 36 Upon review of the SWC-00 policy for compliance with Montana's workers' compensation program, the Fund had several concerns, the primary concern being that the policy did not name Human Dynamics Corporation as an insured. It did, however, name HDC, Inc. in addition to several other companies that appeared to have no relation to Dynamics. Neither the Secretary of State nor DLI could confirm that Dynamics had operated as HDC, Inc. in Montana. Relevant documents to which the UEF had access referred to Human Dynamics Corporation or HDC but never HDC, Inc. The UEF therefore requested additional information from Dynamics in August 1994, confirming that HDC, Inc. and Human Dynamics Corporation were the same company. Dynamics did not respond to this inquiry for four years then, during the hearing in 1998, the president of Dynamics testified by telephone that HDC, Inc. on the policy endorsement was his company, Yes [the technical name of our corporation is Human Dynamics Corporation] but it is, you know, our acronym HDC, Inc., is our trade mark name, our name that we use, you know, we are known as HDC. However, confirming trademark documentation was not provided. ¶ 37 Dynamics' president further testified that Resources had provided this coverage through its insurer while Dynamics and Resources were negotiating their sale/purchase transaction, and that Resources had paid the premium for the coverage. Again, no document supporting payment by Resources to CGIC for this coverage or confirmation from CGIC that HDC, Inc. was Human Dynamics Corporation was presented. ¶ 38 After Dynamics' president testified at the hearing, the general counsel for Resources testified, also by telephone. He stated that he did not believe that HDC, Inc. on the insurance endorsement was Human Dynamics Corporation but conceded that he was not certain one way or the other. He also testified that Resources did not own or was not affiliated with any other company named HDC, Inc. or Human Dynamics Corporation. ¶ 39 The hearing officer found that HDC, Inc. was the same company as Dynamics and that Policy Number SWC-00 provided retroactive workers' compensation coverage for Dynamics from January 1994 to April 1, 1994. It is conceivable that during early negotiations between Dynamics and Resources, Dynamics requested that Resources immediately add it to its insurance coverage. It is also possible that Resources attempted to do this and that the incorrect listing of HDC, Inc. on Policy Number SWC-00 was the result of this attempt. This is pure speculation, however, and the UEF must determine statutory compliance on the basis of more than speculation. ¶ 40 The applicable statute, § 39-71-117(3), MCA (1993), requires rebutting parties, in this case Dynamics and the Client Companies, to present substantial credible evidence of coverage. Such evidence if it existed, was within Dynamics' control. However, after eight years, it produced no corrected endorsement from CGIC, or any other confirmatory documentation of coverage. The only proof offered by Dynamics was the unpersuasive, self-serving testimony of Dynamics' president. While the hearing officer found this testimony convincing, we conclude the WCC was correct in concluding it did not constitute substantial credible evidence that Dynamics was actually insured under the CGIC policy. ¶ 41 Thus, we conclude the UEF met its burden of proof that Dynamics was not the statutory employer, and that Dynamics failed to establish that it was insured for the period of time from January 1 to April 1, 1994. Therefore any Client Company who had contracted with Dynamics and canceled its workers' compensation coverage during this period of time was also uninsured. The hearing officer's determination that Dynamics and the Client Companies were insured between January 1, 1994 and March 31, 1994, was not supported by substantial evidence and therefore was clearly erroneous. ¶ 42 April 1September 30, 1994. In early October, Dynamics presented to the UEF an ACORD Certificate of Insurance issued to Human Dynamics Corporation as the Certificate Holder, and CGIC Policy Number SWC-01. Dynamics argued that both the ACORD Certificate and Policy Number SWC-01 insured the Client Companies from April 1, 1994 to April 1, 1995. The UEF reviewed both the ACORD Certificate and the policy to determine if singly or together they extended coverage to Dynamics in compliance with Montana's workers' compensation program. ¶ 43 The ACORD certificate purported to extend Policy Number SWC-00 which had expired on March 31, 1994, through April 1, 1995. It was, therefore, characterized as a renewal of the original SWC-00 policy. Neither Human Dynamics nor HDC was listed as a named insured on the ACORD Certificate. The Certificate also contained a disclaimer stating that the Certificate did not grant to the Certificate holder, i.e., Human Dynamics Corp., any rights nor did it amend, extend, or alter the coverage of Policy Number SWC-00. (However, typed in the Description of Operations/Locations, was Human Dynamics Corporation covering any and all operations in Montana.) The UEF concluded, based on the plain language of the ACORD Certificate, that the Certificate did not extend coverage to any entity that was not a named insured and that Dynamics was not a named insured. ¶ 44 Compounding the confusion, Policy Number SWC-01 also purported to be the renewal policy for SWC-00. Thus, two policies purporting to represent renewal of SWC-00 were presentedone with Policy Number SWC-00 and one with Policy Number SWC-01. Dynamics argued that Policy Number SWC-01 also provided coverage for the Client Companies beginning April 1, 1994. The effective term of coverage under Policy Number SWC-01 was April 1, 1994 to April 1, 1995. The policy identifies as insureds only HRC, HRC Services, HRC ARMCO, Inc., Alliance Employee Leasing of Florida, Inc., and Allied Resource Management of Florida, Inc., none of which are even Client Companies. Neither Human Dynamics Corporation nor HDC was listed as an insured on this policy. Moreover, the company named HDC, Inc. which had been listed on Policy No. SWC-00, was no longer listed as an insured. The UEF determined that it could not endorse Policy Number SWC-01 on its face because Human Dynamics Corporation was not listed as an insured. Again, we agree. ¶ 45 Dynamics failed to present substantial credible evidence establishing that it was an insured under policy SWC-00 for the time period of April 1 through September 30, 1994. Because the evidence did not support a finding that Dynamics was an insured under original Policy Number SWC-00 expiring March 31, 1994, Dynamics cannot be an insured on any renewal of that policy unless it had been specifically added to the policy as a named insured during the interim. There is no evidence that Dynamics was added to Policy Number SWC-00. We therefore conclude that the hearing officer's finding that Dynamics was covered by workers' compensation coverage under this ACORD Certificate between April 1, 1994 and September 30, 1994, is clearly erroneous and is not supported by substantial evidence. We therefore affirm the WCC on this issue. ¶ 46 We now must determine whether Resources (as opposed to Dynamics) provided workers' compensation coverage for the Client Companies during this time period. Resources contends that on the date each individual Client Company signed the policy filing card and became an employee of Resources, that Client Company was retroactively covered under Policy Number SWC-01. Unfortunately, again no substantial credible evidence of such retroactive coverage was provided. The UEF had expressed throughout 1994 and 1995 its willingness to accept a policy reflecting retroactive coverage, but no proof that such a policy existed was ever provided. Resources could have provided a letter from CGIC plainly confirming that the Client Companies were insured from April 1, 1994 to April 1, 1995, upon the November 1994 signing of the policy cards. It did not. Thus, we must conclude there was no substantial credible evidence establishing such coverage. ¶ 47 October 1November 10-15, 1994. Dynamics maintains that as of the October 1, 1994 effective date of its contract with Resources, it became Resources' responsibility to provide workers' compensation coverage for the Client Companies. Resources disagrees. It contends that under a contract provision, the parties agreed that Resources would begin providing coverage at a later date. ¶ 48 Our understanding of the hearing officer's findings is that Resources was responsible for providing coverage as of October 1, and that when the Client Companies became Resources' employees in mid-November, they were retroactively covered by Policy Number SWC-01 beginning on October 1. ¶ 49 The conflict over the effective date of the contract between Dynamics and Resources and which of these two leasing companies had the obligation to provide workers' compensation insurance to the Client Companies after October 1, 1994, is not ours to resolve. The issue to resolve is whether the Client Companies had workers' compensation insurance after October 1, 1994, not who was responsible for providing it. We have already concluded that the hearing officer's findings that Dynamics provided insurance for the Client Companies from January 1 to September 30, 1994, was clearly erroneous and was not supported by the evidence. There was likewise no credible evidence that Dynamics insured the Client Companies beyond September 30. Accordingly, if the Client Companies were insured at all, it would have been through Resources. ¶ 50 Resources argued that when the Client Companies became Resources' employees by signing the policy filing cards, the Client Companies were then retroactively insured to April 1, 1994, under Policy Number SWC-01. However, as discussed above, there was no evidence supporting a finding that such coverage was retroactive to either April 1 or October 1. Correspondence between Resources' workers' compensation insurance carrier and the UEF presented at the hearing, established that the employees of the Client Companies were not covered by Resources' policy until the Client Companies signed the necessary forms to become clients of Resources. Each Client Company signed the necessary form between November 10 and November 15, 1994. If there was an understanding between Resources and CGIC that upon becoming employees of Resources by signing the policy filing cards, the Client Companies would enjoy retroactive coverage from April 1, 1994, evidence of it was not presented. ¶ 51 Additionally, substantial evidence existed to establish a November 10-15 commencement for insurance coverage. Despite Dynamics maintaining that Resources was responsible for providing coverage after October 1, Dynamics paid Unemployment Insurance (UI) taxes on over $300,000 in wages for the Client Companies during the fourth quarter of 1994, which began on October 1. These taxes amounted to approximately 30% of the wages reported during the fourth quarter. This high percentage of wages for which Dynamics paid UI taxes supports a conclusion that Dynamics knowingly retained responsibility for the Client Companies for at least several weeks into the fourth quarter. ¶ 52 Moreover, an employee of one of the Client Companies was injured on November 8, 1994. The case with this employee was ultimately settled by Resources assuming responsibility as an uninsured employer. The settlement form acknowledged that the insurer was the UEF and not CGIC, confirming that Resources had not yet begun insuring this Client Company and particular employee through its CGIC-provided workers' compensation coverage as of November 8, 1994. ¶ 53 The hearing officer found that coverage existed under Policy Number SWC-01 from October 1, 1994, forward. We conclude there was no credible evidence to support such a finding and as such it is clearly erroneous. We thus affirm the WCC in this regard, and conclude that the Client Companies were uninsured employers from October 1, 1994, until each company signed the policy filing card with Resources in mid-November. ¶ 54 In an attempt to prove to the UEF that it had insured the Client Companies, Dynamics provided copies of insurance policies, certificates of insurance and corporate officer testimony all of which are part of the evidentiary record in this case. Also part of the evidentiary record are the numerous documents generated by the UEF explaining why the insurance policies and certificates of insurance failed to satisfy the UEF's standards for compliance with the law. The UEF's explanations are credible and its requests for satisfactory coverage documentation were prudent. The UEF's requirements in this case do not appear unreasonablea current, dated and signed insurance policy written by a carrier licensed to do business in Montana, issued to or naming Human Dynamics Corporation as an insured, with proof that any notification provisions had been satisfied. Despite numerous requests for documentation meeting the above requirements, Dynamics never, throughout these eight years, provided it to the UEF. We therefore affirm the WCC's conclusion that the DLI hearing officer's findings of fact in this regard were not supported by substantial evidence.