Opinion
BOARD Nos. 034345-89, 08183089, 074661-89
Filed: June 25, 1996
REVIEWING BOARD DECISION
(Judges Kirby, Smith and Maze-Rothstein)
APPEARANCES:
Deborah G. Kohl, Esquire, for the employee
Carol Calliotte, Esquire, for the Trust Fund
Charles W. Dixon, Esq., Karyn Polito, Esq.
and Paul Benoit, Esq. for Aetna
This is an appeal by the Workers' Compensation Trust Fund ("Trust Fund") seeking reversal of an administrative judge's decision dismissing the claims against Aetna Insurance Company ("Aetna") and ordering the Trust Fund to pay the employee workers' compensation benefits from July 21, 1989 to date and continuing. The Trust Fund raises two arguments. We find one dispositive. It contends that Aetna is liable for payment of compensation under G.L.c. 152 because it failed in its attempt to cancel its policy of insurance to the employer in accordance with the provision of G.L.c. 152, § 65B. We agree with the Trust Fund and find that the judge's application of § 65B was erroneous as a matter of law. We therefore reverse the judge's decision and order Aetna to assume responsibility of workers' compensation payments in accordance with the judge's orders.
Section 65B, as appearing in St. 1986, c. 662, § 45, sets forth the requirements for policies issued under § 65A for assigned risks. It reads as follows:
If, after the issuance of a policy under section sixty-five A, it shall appear that the employer to whom the policy was issued is not or has ceased to be entitled to such insurance, the insurer, with the approval of the department, may cancel such policy in the manner provided in this chapter; provided, that any insurer desiring to cancel such a policy shall give notice in writing to the department and the insured of its desire to cancel the same. The department may approve such cancellation unless the employer shall within ten days after the receipt of such notice file with the department objections thereto, and, if such objections are filed, a member of the department shall hear and decide the case within a reasonable time thereafter, subject to review as provided where a claim for a review referred to in section eight is filed.
G.L.c. 152, § 65B, as amended by St. 1986, c. 662, § 45 (emphasis added).
Background
James Armstrong sustained back, leg and ankle injuries on July 21, 1989, when a staging on which he was working collapsed, and he fell approximately fourteen feet to the ground. (Dec. 7.) He filed four claims for compensation: against Aetna and the Trust Fund each naming Town Country Carpentry ("Town Country") as the employer; against Aetna naming Rafter Gabler Properties, Inc. ("RGP") as the employer under G.L.c. 152, § 18; and against American Mutual naming RGP as the employer under § 18. (Dec. 5; Trust Fund Brief, 1.)
Section 18 is an umbrella provision which affords coverage to uninsured employers of independent contractors or subcontractors under the workers' compensation policy of an insured general contractor. See Mobil Oil Corp. v. Roumeliotis, 38 Mass. App. Ct. 245 (1995).
Following a conference on these claims, the judge denied them except as against the Trust Fund, which was ordered to commence G.L.c. 152, § 34 temporary total weekly compensation and G.L.c. 152, § 30 medical benefits from July 22, 1989 and continuing. (Dec. 6.) The Trust Fund appealed for a hearing de novo.
The employee withdrew his claim against American Mutual at the December 6, 1990 hearing. (Dec. 6, 1990 Tr. 4.) On that date and on February 14, 1990, the hearing proceeded against all other parties.
On October 21, 1991, the administrative judge filed his decision finding the Trust Fund was liable for payment of compensation to the employee under G.L.c. 152, finding Aetna had given proper notice of insurance cancellation to Town Country, the employer. (Dec. 13, 14-15.) In addition, the judge found that Aetna was not liable for any compensation payments as insurer of RGP, because that firm was not the general contractor on the job at which the employee was injured. (Dec. 14.) He ordered the Trust Fund to pay § 34 temporary total incapacity benefits at the weekly rate of $240.00 based upon an average weekly wage of $360.00 from July 21, 1989 to date and continuing. (Dec. 15.)
ISSUES
The Trust Fund appeals from this decision. It raises two issues: 1) whether Aetna properly cancelled its policy of workers' compensation insurance with Town Country; and 2) whether RGP, which Aetna also insured, was in fact the general contractor on the job, and therefore responsible for payment of any compensation due if Town Country was uninsured. We do not reach the Trust Fund's second issue because we find that Aetna's policy was not properly cancelled under the provisions of G.L.c. 152, and the policy remained in effect on the date of Armstrong's injury at Town Country. We, therefore, reverse the judge's order against the Trust Fund and order Aetna to assume liability for compensation payments to the employee in accordance with this opinion.
THE POLICY
At the time of the employee's injury, Charles Dunton was president of Town Country Carpentry, Inc. which was incorporated in 1987. (Dec. 10; Trust Fund Ex. 1.) Prior to this time, and perhaps longer, Town Country operated as a partnership. Town Country was an assigned risk to Aetna by the Workers' Compensation Rating and Inspection Bureau ("Rating Bureau"). See G.L.c. 152, § 65A. (Insurer's Ex. 5.) Aetna issued a workers' compensation policy on May 13, 1988 for coverage from that date until May 13, 1989. (Dec. 10; Insurer's Ex. 2 (Policy Number 06JC903588880CAA.) It is this policy providing coverage from May 1988 to May 1989 that is at issue in this case.
Section 65A provides:
Any employer whose application for workmen's compensation insurance has been rejected or not accepted within five days by two insurers may appeal to the department, and if it shall appear that such employer has complied with or will comply substantially with all laws, orders, rules and regulations in force and effect relating to the welfare, health and safety of his employees, and shall not be in default of payment of any premium for such insurance, then the department shall certify to the commissioner of insurance that such employer is entitled to workmen's compensation insurance. The commissioner of insurance shall thereupon designate an insurer who shall forthwith, upon the receipt of the payment for the premium therefore, issue to such employer a policy of insurance contracting to pay the compensation provided for by this chapter. The commissioner of insurance shall make equitable distribution of such risks among insurers in such manner that, so far as practicable, no insurer will be assigned a larger proportion of premiums under assigned policies during any calendar year than that which the total of workmen's compensation premiums written in the commonwealth by such insurer during the previous calendar year bears to the total workmen's compensation premiums written in the commonwealth by all insurers during the previous calendar year.
G.L.c. 152, § 65A (as amended by St. 1986, c. 662, § 44).
The business address of Town Country at the time of incorporation in 1987 was 135 Mendon Street, Blackstone, Mass., which was also the home of Mr. Dunton's parents where Dunton lived until some time later in 1987. (Dec. 11.) On November 8, 1988, Mr. Dunton signed a document addressed to Aetna giving 117 Mendon Street, Blackstone, Mass. as the correct address, and also noting the change of names from C. Dunton M. Therrien d/b/a Town Country Carpenters (the partnership) to Town Country Carpentry, Inc. (the corporation). (Trust Fund Ex: 1; Insurer's Ex. 5.) Dunton's agent forwarded the change of name and address notice to Aetna on November 18, 1988. On November 22, 1988, Aetna forwarded the name change to the Rating Bureau. (Insurer's Ex. 5.) Aetna then had full knowledge of the correct name and address of the insured employer. Under these circumstances, the same policy that formerly had covered the partnership continued that same coverage under the new corporate name. SeeSchinkel v. Maxi Holding, 30 Mass. App. Ct. 41, 47 (1991) (parties may modify agreements by conduct or writing).
Aetna's records of Dunton's business address at the time of Town Country's application for coverage are not in evidence. The Rating Bureau's records of Town Country's application are in evidence and show an address of 130 Mendon Street, a vacant lot. There was testimony that Dunton's insurance agent filled out the forms that were sent to the Rating Bureau and mistakenly wrote in Town Country's address as being 130 Mendon Street. (Feb. 14, 1991 Tr. 41-42.) Dunton testified that he had given 135 Mendon Street as the correct address at that time. (Dec. 6; 1990 Tr. 84-85.) See Greenberg v. Flaherty, 306 Mass. 95, 100-101 (1940) (even under motor vehicle insurance law, which is arguably less regulated than workers' compensation assigned risk policies, where an agent erroneously submits an incorrect address to the insurer, the error is not fatal to the continuation of coverage). There is evidence that Aetna had the correct addresses of Town Country at 135 Mendon Street and 117 Mendon Street at other relevant times.
The dissent, footnote 9, distinguishes Greenberg saying there the agent was an "authorized agent" of the insurer. The court did not base its decision on or discuss the point, nor did it discuss what "authorized agent" meant in the context.
Aetna sent a notice by certified mail, postmarked November 14, 1988, "for payment of an additional premium," charging Town Country's policy number 06JC903588880CAA for the amount of $1,090.55. This notice to C. Dunton M. Therrien d/b/a Town Country Carpentry, the name of the company before incorporation, was addressed to 130 Mendon Street, an incorrect address. (Insurer's Ex. 5, 6.) The notice stated that if payment was not promptly received, the attached notice of cancellation would become effective as of November 28, 1988. (Insurer's Ex. 6.) The notice was returned to Aetna unclaimed on December 1, 1988. (Insurer's Ex. 6.)
Despite having received the correct address of its insured employer by November 22, 1988, there is no evidence that Aetna ever attempted to re-bill or send another notice of cancellation at that correct address. Aetna issued a notice addressed to the Department of Industrial Accidents in a document dated January 10, 1989, stating that the Town Country policy had been terminated, over one month before, on November 28, 1988. (Trust Fund Ex. 6.) The notice was stamped received on January 12, 1989. Id. The records of the Department indicate that Town Country's policy was cancelled on November 28, 1988, but the cancellation notice or the Department records in evidence do not evidence any explicit approval of the cancellation by the Department. Id.; see Insurer's Ex. 2, 3; Trust Fund Ex. 3 (O'Dea Affidavit).
There was testimony that the notice addressed to the Department and dated January 10, 1989 was received by the Rating Bureau on January 12, 1989. (Feb. 14, 1991 Tr. 33.)
There is no evidence in the record indicating who stamped the notice.
Thereafter, on July 12, 1989, nine days before Armstrong's injury, Dunton received an incorrect premium invoice for payment in the amount of $32,626.00 for an inapplicable period of coverage between March 28, 1988 and March 28, 1989 with an inaccurate Policy Number JC 9671 57890. The envelope in which this erroneous premium arrived was addressed to DBA Town Country Carp., C. Dunton M. Therrien at 135 Mendon Street, Blackstone, Mass., the former correct address. (Dec. 10; see Trust Fund Ex. 2). But the incorrect invoice contained in the envelope indicated that the total was due by September 21, 1989 but that payment must be received by the expiration of the current policy which was March 28, 1989, three and one half months prior to the notice. (Trust Fund Ex. 2.) This invoice was for a policy issued to a completely different entity, John Rutecki d/b/a Town Country Home Care Center Acoustical Cleaning, from March 28, 1988 to March 28, 1989. (Dec. 2-3; Trust Fund Ex. 2.) As noted above, Town Country's policy number 06JC903588880CAA was for the period from May 13, 1988 to May 13, 1989. The record reveals no further effort by Aetna to assure compliance with the requirements of § 65B to cancel its policy with Town Country Carpentry.
Relative to the dissent's assertion that there was no evidence of any other address Aetna had when sending the employer a cancellation, we note that almost simultaneously Aetna received the employer's new address at 117 Mendon Street; and further that in July 1989 Aetna used the former correct address, 135 Mendon Street, which had then been superceded.
JUDGE'S DECISION
Based on the documentary evidence and the hearing testimony, the judge concluded that since Mr. Dunton questioned the $32,626.00 cost of the July 1989 premium, he was aware of Town Country's coverage period, and that there was actual knowledge that the coverage expired on March 28, 1989, as stated in the invalid invoice dated July 12, 1989. (Dec. 13.) He further found that since Town Country made no further payment beyond March 28, 1989, it had both constructive and actual knowledge of the lack of coverage subsequent to March 28, 1989. Id. On these findings, the judge found that the Trust Fund was liable for payment of all compensation. These findings, however, were made despite the judge's other finding that the employer did not receive the November 1988 cancellation notice as it was returned to Aetna unclaimed and despite the fact that Aetna's subsequent July 1989 cancellation notice pertained to a different employer for an entirely different coverage period.
Dunton testified that he contacted the insurer to question the $32,626.00 premium as he had only three employees. He further testified that the insurer stated it would respond, but did not. As noted above, this premium invoice was erroneously sent to him and was for John Rutecki, d/b/a Town Country Home Care Center Acoustical Cleaning. (Dec. 10; Feb. 14, 1991 Tr. 3-5.)
LEGAL DISCUSSION
A workers' compensation insurance policy may be cancelled for non-payment as may other insurance contracts.Altinovitch's Case, 237 Mass. 130, 134 (1921); see Frost v. David C. Wells Ins. Agency, 14 Mass. App. Ct. 305, 312 (1982), and cases cited from other jurisdictions. Because insurance plays an essential role in the workers' compensation scheme and due to the serious potential effects of non-insurance on both employers and employees, requirements for cancellation of such insurance are exacting and strictly construed and applied. Frost, supra at 307 (citing Brown v. Leighton, 385 Mass. 757, 760 (1982), and cases cited). Notice of cancellation must be given by the required means. Use of a slightly erroneous address, failure to use registered mail, specifying a cancellation date earlier than that permitted by statute by even one day, failing to notify a third party entitled to notice, or giving oral assurances that the cancellation was a mistake have all been held to vitiate attempted cancellations. 4 A. Larson, Workmen's Compensation § 92.31 (1992). Workers' compensation "assigned risk" policies are even more closely regulated by § 65B than the standard workers' compensation insurance governed by § 63. See L. Locke, Workmen's Compensation § 130 (2nd. 1981). The Frost court held that under G.L.c. 152, § 63, an attempted cancellation is vitiated and coverage continues where exact and literal compliance with the cancellation requirements are lacking. Frost, supra at 308-309.
General Laws c. 152, § 65B sets forth the requirements for cancellation of a policy of insurance issued pursuant to § 65A, commonly known as "assigned risk policy." Once an employer has obtained a policy through the assigned risk pool, it can be cancelled only if the requirements in § 65B are met. Town Country's workers' compensation insurance was such a policy under § 65A.
It is the law in effect at the time of the issuance of the employer's policy that applies to cancellations under § 65A. Quintal v. Berube, 9 Mass. Workers' Comp. Rep. 375, 382 (1995). On the date of the injury in 1989 and when Aetna issued Town Country's policy on May 13, 1988, the applicable version of § 65B provides in pertinent part as follows:
If, after the issuance of a policy under section sixty-five A, it shall appear that the employer to whom the policy was issued is not or has ceased to be entitled to such insurance, the insurer with the approval of the department, may cancel such policy in the manner provided in this chapter, provided that any insurer desiring to cancel such a policy shall give notice in writing to the department and the insured of its desire to cancel the same. The department may approve such cancellation unless the employer shall within ten days after the receipt of such notice file with the department objections thereto, and, if such objections are filed, a member of the department shall hear and decide the case within a reasonable time thereafter, subject to review as provided where a claim for a review referred to in section eight is filed.
G.L.c. 152, § 65B, as amended by St. 1986, c. 662, § 45.
This 1986 revision of § 65B applies here and requires insurers to provide 1) written notice to both the insured employer and the Department of Industrial Accidents of the insurer's desire to cancel any assigned risk policy and 2) to obtain approval by the Department unless the employer shall within 10 days after receipt file an objection with the Department. Notice and receipt of the notice by the employer and notice to and approval by the department are mandatory conditions precedent to any valid cancellation. G.L.c. 152, § 65B; see Quintal, supra at 377-378, 383. Where any one of these four conditions are not satisfied, a valid cancellation cannot be effectuated. See A. Larson, supra §§ 92.30-92.33.
Section 65B in St. 1986, c. 662, § 45 was amended by St. 1991, c. 132, § 2 and St. 1991, c. 398, § 90A, but these amendments have no application to policies issued before their effective dates as they are substantive provisions and have only prospective effect. See Quintal, supra at 382-383.
In the instant case, Aetna attempted to cancel the policy at issue with Town Country in November 1988, but failed to give the appropriate notice required under § 65B. In November 1988, Aetna sent notice by certified mail addressed to C. Dunton M. Therrien d/b/a Town Country, but addressed the notice to an incorrect address, a vacant lot at 130 Mendon Street. The notice was returned unclaimed, and therefore, the requirement of "receipt" by the employer mandated by § 65B as a condition precedent to any cancellation was not satisfied.
Our dissenting member, citing a "mailbox rule" from motor vehicle insurance statutes, would ignore the "receipt" requirement of § 65B. Coverage cancellation under § 65B of G.L.c. 152 differs from the motor vehicle statutes in this particular. SeeLiberty Mutual Ins. Co. v. Wolfe, 7 Mass. App. Ct. 263, 265 (1979) (discussing "mail-box" rule in G.L.c. 175, § 113A(2) pertaining to auto insurance). Section 113A(2) has been amended since this case making the mail-box provisions more strict. See G.L.c. 175, § 113A(2), as amended by St. 1987, c. 255; St. 1990, c. 287, § 1.
Furthermore, the July 12, 1989 notice of cancellation for a period from March 28, 1988 to March 28, 1989, sent to 135 Mendon Street does not suffice as proper notice of the policy issued to Town country because it was notice referring to policy number 9671 57890, issued to Town Country Home Care Center Acoustical Cleaning, a totally different entity.
While an "absence of a policy" may reasonably put an employer on notice, it was error under the circumstances here for the judge to infer from this notice and lack of payment that Dunton had both constructive and actual knowledge of lack of coverage after March 28, 1989 where the July 12, 1989 notice was not even about Town Country's policy or its coverage period. See Frost, supra at 309.
Moreover, there is no evidence in the record that the Department received the cancellation notice prior to the November 1988 purported cancellation. The plain language of § 65B requires that "any insurer desiring to cancel such a policy shall give notice in writing to the department . . . of its desire to cancel the same." See supra, note 1 (text of § 65B). The statute thus requires notice of its desire or intent to cancel prior to cancellation and not after the fact. Here, the January 10, 1989 notice addressed to the Department was stamped "received" on January 12, 1989, over a month too late. There is also no evidence in the record that the Department approved the alleged cancellation, as required by § 65B.
The dissent takes issue with our review of each of the statutory elements. We see no other way to examine compliance where the statute mandates multiple requirements. This is not a game of "gotcha," but a process of strict statutory compliance for the protection of the workers of the Commonwealth.
We conclude that Aetna's attempted cancellation of Town Country's policy was ineffective because the evidence does not establish that each of the four key provisions in § 65B were satisfied. Coverage by Aetna, therefore, continued where there was noncompliance with the statutory provisions.Frost, supra at 309 and cases cited.
The many unusual circumstances among the facts of this case assure that our decision is not a precedent for the result described in the lead sentence of the dissent. Further, because the dissent disagrees with the above analysis and outcome, unnecessary excursions are taken into the areas of estoppel, waiver, and G.L.c. 152, § 18. Where the cancellation itself was vitiated, these interesting but ancillary issues are of no moment.
SUMMARY AND ORDER
We find that Aetna provided coverage to Town Country on the date of Armstrong's injury because its attempted cancellation was vitiated by the lack of compliance with § 65B. The judge erred as a matter of law in ruling that the cancellation was effective. We further find that Aetna is liable for the payment of workers' compensation benefits to the employee because the evidence demonstrates neither proper notice, the receipt of notice by the employer, nor approval by the Department.
Accordingly, we vacate and reverse the coverage decision of the administrative judge and order Aetna to assume the payment of compensation under G.L.c. 152. Aetna is to reimburse the Trust Fund for all monies paid under the judge's decision and order.
So ordered.
________________________ Edward P. Kirby Administrative Law Judge
________________________ Susan Maze-Rothstein Administrative Law Judge
Filed: June 25, 1996
By rejecting the doctrine of constructive receipt, the majority opinion permits an employer to provide an insurer with an inaccurate business address, not pay the premiums and not claim the certified mail notification of policy cancellation for nonpayment, but gain coverage because the employer did not receive the notice! Such a result cannot be compelled as a matter of law. However, because a key finding on the issue of nonpayment was not made, we cannot determine whether the judge correctly ruled that, at the time of the injury, Aetna did not insure the direct employer of this injured worker, Town Country Carpentry, Inc. (T C).
Similarly, the judge's findings of fact regarding Aetna's liability under G.L.c. 152, § 18 as the insurer of Rafter-Gabler Properties, Inc. (RGP), an alleged general contractor, are inadequate. Remand is required for factual findings regarding the alleged common control of RPG and Golden Acres Realty Trust, the owner of the property for whom the injury-work was being performed. See G.L.c. 152, § 11C (The reviewing board may, when appropriate, recommit a case before it to an administrative judge for further findings of fact).
FACTS
On July 21, 1989, Armstrong was injured in the employ of Town Country Carpentry, Inc. when the staging on which he was working collapsed at a house in a 71 lot subdivision in Holliston. The subdivision was originally owned by Holliston Preserve Corporation. The lot where the employee was injured had been conveyed by the developer, Holliston Preserve Corporation, in lieu of payment of salary, to Craig Rafter who then conveyed it to Golden Acres Realty Trust. (Tr. 55.) Craig Rafter was a co-owner of Rafter-Gabler Properties, Inc. (RGP) with Bernard Keith Gabler. (Tr. 53.)
See (Employee Ex. 2) (corporate form used for W-2).
At the time of the injury, RGP was the only entity with workers' compensation insurance coverage in this group of interrelated companies. RGP was insured by Aetna. (Dec. 14.) Aetna had previously insured T C. The judge found that Aetna had terminated its T C policy the previous November. (Dec. 13.)
CANCELLATION
The trust fund contends, and the majority agrees, that Aetna failed to comply with G.L.c. 152, § 65B and thus its purported cancellation of T C's workers' compensation insurance coverage was ineffective. The judge found to the contrary. Our review of the administrative judge's decision is narrow. We may consider only whether the judge properly applied the law and whether the decision is not "arbitrary or capricious", in the sense of having adequate evidentiary and factual support and disclosing reasoned decision making within the workers' compensation requirements. Scheffler's Case, 419 Mass. 251, 258 (1994). While an administrative judge's decision must contain "conclusions which are adequately supported by subsidiary findings which are not 'lacking in evidential support . . . or tainted by error of law'", see G.L.c. 152, § 11B and Ballard's Case, 13 Mass. App. Ct. 1068, 1069 (1982), an administrative judge's findings need not be detailed or searching but rather need only be sufficient to allow a reviewing court to determine with reasonable certainty "whether the [administrative judge] applied correct principles of law." See Johnson's Case, 355 Mass. 782, 783 (1968).
When we compare the judge's findings of facts with the elements of proof imposed by § 65B, it is unclear whether Aetna properly terminated its insurance coverage six months prior to this industrial accident. We therefore should remand for further findings of fact, applying the legal principles discussed below.
There is no evidence of cancellation after November 1988.
Chapter 152, § 65B, enacted December 29, 1986, states in pertinent part:
The 1991 amendment to § 65B by St. 1991, c. 132 is inapplicable to this case, as the workers' compensation insurance policy in question was issued prior to its effective date of October 7, 1991. St. 1991, c. 132, § 3; Quintal v. Berube, 9 Mass. Workers' Comp. Rep. 375 (1995).
If, after the issuance of a policy under section sixty-five A, it shall appear that the employer to whom the policy was issued is not or has ceased to be entitled to such insurance, the insurer, with the approval of the department, may cancel such policy in the manner provided in this chapter; provided that any insurer desiring to cancel such a policy shall give notice in writing to the department and the insured of its desire to cancel same. The department may approve such cancellation unless the employer shall within ten days after the receipt of such notice file with the department objections thereto, and, if such objections are filed, a member of the department shall hear and decide the case within a reasonable time thereafter, subject to a review as provided where a claim for review referred to in section eight is filed.
G.L.c. 152, § 65B (as amended by St. 1986, c. 662, § 45) (emphasis supplied).
Section 65B (1986) requires the following elements of proof for effective termination:
1. An employer to whom policy was issued.
The judge found that T C was the insured. (Dec. 13.) It is irrelevant whether this was Town Country Carpentry, Inc. or Charles A. Dunton Maurice Therien D/B/A Town Country Carpentry because it is undisputed that at all relevant times, the policy in question (insuring first the partnership and then the corporation) was policy number 006JC903588880CAA.
The original policy named the partnership as the insured. (Notice of Assignment, Ins. Ex. 5.) Although the business had been incorporated in 1987, in 1988 the partnership applied for the insurance coverage. (Application for Workers' Compensation Insurance, dated June 16, 1988, Ins. Ex. 5.) The request for the change of the named insured from the partnership to the corporation (Confidential Request for Information), dated November 8, 1988, was sent by the employer's independent insurance agent to Aetna on November 16, 1988 ("Miscellaneous Memo", Ins. Ex. 5) and was apparently received by Aetna on November 22, 1988 (Datestamp on "Miscellaneous Memo" and Interoffice Communication, Ins. Ex. 5) after the notice of cancellation was sent. (Notice of Cancellation dated and mailed November 14, 1988, Ins. Ex. 6.) On that date, November 22, 1988, Aetna endorsed the policy to substitute the corporation as the named insured. (Interoffice Communication from Aetna to Mass. Workers' Comp Bureau, Ins. Ex. 5.)
2. The insurer has ceased to be entitled to such insurance.
The judge found that no premiums were paid after March 28, 1989. (Dec. 13.) This factual finding may evidence a misperception of the applicable law by the judge. Although there was some evidence that a policy covering the employer would have expired on that date, under § 65B the coverage nevertheless would have remained in effect. Section 65B requires an additional notice to terminate an assigned risk policy on its expiration date. Frost v. David C. Wells Ins. Agency, Inc., 14 Mass. App. Ct. 305, 308, 438 N.E.2d 1086, 1087-1088 (1982). If the policy had not been effectively cancelled, it would have been automatically renewed because the employer had not been notified of its nonrenewal. SeeRowe v. Middlesex Ins. Co., 1994 Mass. App. Div. 209, 1994 WL 606181 (1994) (automobile insurance cancellation).
There is no record evidence of any attempted termination after November 1988. Therefore, the only termination which could have occurred was in November 1988. And in fact, this was the insurer's position. Aetna maintained that the only policy insuring this employer was the one terminated for nonpayment of premiums, effective November 28, 1988. (Tr. 4; Insurer's Issues Statement.)
The issue in controversy, therefore, is whether the additional premiums due on November 3, 1988 (as evidenced by the certified letter of cancellation admitted as Ins. Ex. 6) were timely paid. In order to prevent effective cancellation, the employer had to have paid the outstanding premiums on or before November 28, 1988. The record does not compel the conclusion that it did so. Compare (Tr. 85-87 [testimony of Charles Alfred Dunton regarding payment]) with (Ins. Ex. 6 [Aetna notice of cancellation for nonpayment]). On remand, the judge should make a factual decision about this issue. He may, in his sole discretion, exercise his investigatory power provided by § 11 and require from the employer documentary evidence of full payment on or before November 28, 1988.
The total premium for the policy in question was $5,396, of which $2,758 was required to be paid as a deposit premium, and the balance quarterly, according to the Notice of Assignment dated 7/12/88. (Ins. Ex. 5.) The amount of premium overdue as of November 3, 1988 was $1,090.55 according to the letter of cancellation mailed November 14, 1988. (Ins. Ex. 6.)
Noticeably absent from the record are cancelled checks of the insurer to Aetna for premium payment between June 16, 1988 and November 28, 1988. On remand, the judge may permit or require their production, or other more indirect evidence of payment such as tax returns showing such expense as a business deduction, audited books of the corporation, etc.
3. Notice in writing to the department.
The appellant does not contend that the cancellation was ineffective because of some defect in notification to the department. This issue has not been briefed or argued by the parties. Yet the majority sua sponte, without soliciting comment from the parties, creates this issue of first impression regarding statutory interpretation and uses it to reverse the judge's decision. The appellate process given the parties falls far short of that which is due. Nevertheless, because it is a cornerstone of the majority opinion, the argument must be addressed.
There appears to be no dispute that the department was given notice of the insurer's November 1988 intention to cancel. (Ins. Ex. 2.) The records of the department, admitted as Ins. Exs. 2 3, indicate notice of a policy termination on November 28, 1988 and no reinstatement thereafter. No evidence of notice to the department of any subsequent intentions to cancel appear in the record.
The majority contends that the insurer's cancellation fails because the insurer has not produced evidence of the date when it notified the department. The majority opinion cites no cases to support this proposition. Nor does the language of the statute compel the majority's interpretation. I disagree that the insurer had any burden to produce such date evidence.
Section 65B does not require a return receipt or other proof of service on the department. The language of § 65B is clear and unambiguous. The legislature required insurance companies to send the department a copy of its notice to the employer of its intent to cancel the policy. The legislature, however, did not go so far as to impose on insurance companies an additional requirement that it produce evidence of the date of mailing to the department in order to achieve a valid cancellation of an insurance policy. To interpret the clear and unambiguous language of G.L.c. 152, § 65B in such a manner so that it requires insurance companies to maintain return receipts would increase their burden for establishing a prima facie evidence of the sending of a notice of cancellation. See Wengenroth v. Liberty Mut. Ins. Co., 1991 Mass. App. Div. 138, 1990 WL 305999 (1991) (automobile insurer not required to produce return receipt to establish proof of mailing).
Here, the records of the department show that it was notified and do not indicate any irregularity in the notification. If the notification were late or otherwise defective, one would assume that the department records would not reflect, as they do, a termination effective November 28, 1988. See (Ins. Exs. 2, 3).
We cannot impose on the insurer a responsibility to create the contents of department records. The practice of the department was not to record the date upon which it received notice from the insurer. (Ins. Ex. 3.) If the majority's contention were correct, the department would be unable to ascertain from its records whether an employer had coverage. Because the department is empowered to bring complaints against employers for failing to provide coverage, G.L.c. 152, § 25C, knowledge of the facts concerning an employer's coverage is essential to the department's enforcement responsibilities. There is no reason to assume that the department records would be inadequate to fulfill this statutory duty. Furthermore, by requiring it to keep a file of the dates of receipt of all insurers' cancellation notices, the majority would impose on the department a more onerous record keeping system than the one it has customarily employed. For these reasons I reject the majority view and conclude that the insurer had no burden of showing the date of the department's receipt of its cancellation notice.
By the admission of Insurer Exhibits 2, 3, 6, the insurer established a prima facie case that it properly notified the department. This evidence, coupled with that from the Rating Bureau (February 14, 1991 Tr. 33-34; Cancellation Card, Ins. Ex. 5) would support a factual conclusion that the department was notified in November 1988, more than six months prior to the industrial accident. The record contains no evidence which would rationally support any inference other than proper notification to the department.
James O'Dea, in his capacity as Manager of Insurance of the Department of Industrial Accidents, made a thorough search of all records pertaining to this employer and reported that the department computer records revealed that the relevant policy was terminated by Aetna Casualty on November 28, 1988. (Ins. Ex. 2.)
James O'Dea, in his capacity as Manager of Insurance of the Department of Industrial Accidents, reiterated the information that the department records showed that "a notice of termination of coverage was submitted by Aetna Casualty Surety with an effective date of 11/28/88 on policy # 06JC903588880CAA." (Ins. Ex. 3.)
The letter from Aetna to the insured stated: "If payment is not received, the attached cancellation notice will go into effect. All cancellations are required by law to be reported to the Industrial Accident Board." (Ins. Ex. 6.)
4. Notice in writing to the insured.
The insured gave the address of 130 Mendon Street on its June 16, 1988 application for workers' compensation coverage. (Ins. Ex. 5.) This is the address used by the insurer for its notice of cancellation mailed November 14, 1988. (Ins. Ex. 6.) This address was a vacant lot on the same street as, and adjacent to, the "correct" address. See (December 6, 1990 Tr. 34-35, 45, 81-85; February 14, 1991 Tr. 4-5, 17-18; Ins. Ex. 6). The certified letter sent to this address was returned unopened by the post office, as "unclaimed." Id. Although the corporation had provided a new address to its insurance agent when it requested the endorsement to change the named insured from the partnership to the corporation (see [Ins. Ex. 5]), the record is clear that this information was not transmitted to the insurer by the employer's insurance agent until November 16, 1988, after the notice of cancellation was mailed. Id.
There is no evidence in the record which compels a conclusion that the insurer was on notice that the address it used was incorrect. The certified mail was not returned as "undeliverable." The return by the post office as "unclaimed" imposed no burden of the insurer to take further notification action. On this record, the judge could rationally conclude that the employer received the notice of attempted delivery of the certified mail cancellation and refused to pick up the certified mail. See (February 14, 1991 Tr. 4-6, 16-18).
On remand, the judge should make a factual finding about whether the employer received notice of the attempted certified mail delivery from the post office. If it did, then the law should impose on the employer the consequences of its failure to pick up the notice. See Liberty Mut. Ins. Co. v. Wolfe, 7 Mass. App. Ct. 263, 264, 386 N.E.2d 1303, 1304 (1979) (notice of auto insurance cancellation sent certified mail and returned unclaimed was effective to cancel the policy).
If the employer did not actually receive notice of the attempted mail delivery, then the legal question becomes whether a notice of cancellation mailed to an incorrect address provided by the insured, and returned "unclaimed," should satisfy the notification requirement of § 65B. I conclude that it must, because to rule otherwise would create fertile ground for fraud.
The employer has an obligation to provide the insurer with a correct address so that the notification provision of the statute can be implemented. See Bogosian v. New York Life Ins. Co., 315 Mass. 375, 381, 53 N.E.2d 217, 220 (1944) (insured had the duty to see that insurance application was properly made out and filed). The employer should not be permitted to render impossible cancellation for nonpayment, thereby benefiting from its own error. This position is similar to that taken by the court with respect to cancellation of compulsory motor vehicle insurance policies. See Paloeian v. Day, 299 Mass. 586, 588, 13 N.E.2d 398, 399 (1938) (notice to cancel sent to policy address, not received by the insured, returned by the post office marked "addressee unknown", was effective to cancel the policy as of the cancellation date in the notice); Greenberg v. Flaherty, 306 Mass. 95, 100-101, 27 N.E.2d 683, 686 (1940) (insurer's agent wrote wrong address on application; cancellation occurred when notice of cancellation for nonpayment sent to policy address and returned "unclaimed" and "unknown" but insurer estopped to deny coverage).
Greenberg cannot support the view that this insurer is estopped from denying coverage, because here the insurance agent was independent and acted as agent for the employer; in Greenberg, the agent acted on behalf of the the insurer. Here the mistake in address was made either by the employer or its agent. InGreenberg, the mistake in address was made by the insurer's agent.
The sufficiency of the statutory notice sent to this employer must be measured as of the date of mailing, because actual mailing satisfies the statutory notice requirement regardless of actual receipt by the addressee. Liberty Mut. Ins. Co. v. Wolfe, 7 Mass. App. Ct. at 265, 386 N.E.2d at 1304. Judged by this criteria, there is no question that the notice was sufficient and therefore valid. The record supports the judge's factual finding that Aetna mailed the cancellation notice to the address which was listed with the proper authorities. (Dec. 13.) There is competent evidence in the record from which the judge could rationally conclude that, as of November 14, 1988 (the date of mailing), the insurer knew only one address, the one it used in the cancellation notice. Therefore, I dissent from the majority view that cancellation was ineffective because the insurer failed to establish actual (as opposed to constructive) receipt of the cancellation notice by the insured, and from its view that later acquired knowledge of a different address imposes a further notification burden on the insurer.
5. Department approval of the cancellation.
The record contains competent evidence which, if believed, compels a conclusion that the department was properly notified and did approve the cancellation. See (Ins. Ex. 1-3.) The employer's time to contest the termination began to run at least by the date when it failed to claim the November 14, 1988 cancellation notice. The record contains no evidence of any employer objections having been filed with the department. Department records clearly reflect an effective termination on November 28, 1988. (Ins. Exs. 1-3.) It would be arbitrary and capricious to infer from the records of the department admitted as Ins. Ex. 2-3, that the department did not approve the cancellation.
ESTOPPEL OR WAIVER OF CANCELLATION
Finding an effective cancellation does not end the case, however, because if Aetna subsequently accepted premiums, it may be estopped from denying coverage. Acceptance of a premium may create a waiver or estoppel as to a previous failure to pay. SeePaloeian v. Day, 299 Mass. at 590, 13 N.E.2d at 400. The unconditional acceptance of premiums by an insurance company, after full knowledge of a policy lapse for nonpayment of premiums, ordinarily constitutes a waiver of the lapse. Where payment is made for the purpose of reviving a lapsed policy and is accepted by the company on that basis, the policy becomes operative upon acceptance of the payment. Bogosian v. New York Life Ins. Co., 315 Mass. at 382, 53 N.E.2d at 221. However, where payment is made and accepted only for the amount due up to the date of the expiration of the grace period, here November 28, 1988, then estoppel can not be maintained. See R F Micro Tool Co. Inc. v. Gen. American Life Ins. Co., 23 Mass. App. Ct. 694, 505 N.E.2d 539 (1987) (insurer's receipt of delinquent premiums from employer after termination but only for the amount due up to the date of termination did not constitute a waiver of the termination).
Any conceivable estoppel would not create coverage after a loss had occurred and prior to the tender of payment. Here the loss occurred in July 1989, months after some evidence of further coverage by Aetna.
The record contains some evidence, but does not compel a conclusion of continued coverage after November 28, 1988. On February 8, 1989, the Massachusetts Rating Bureau rendered a new rating for the employer and Aetna. (Attachment to Letter to Massachusetts Worker's Compensation Insurance Pool, dated June 23, 1989, Ins. Ex. 5.) Charles Dunton testified about payments. (Tr. 85-87.) On remand, in order to decide the waiver and estoppel issue, the judge should determine whether any payments were made subsequent to November 28, 1988. If so, then the judge should decide whether such payments were made for an audit on account of the liability incurred up to November 28, 1988 or were made for continuing coverage thereafter.
SECTION 18 COVERAGE
At hearing, the Trust Fund contended that even if Aetna properly terminated the policy of insurance with T C, Aetna remains liable for payment of workers' compensation benefits to the employee because it insured the general contractor on the job at which the employee was injured. The judge found that "[t]he relationship of RGP and T C [was] not one of general contractor and subcontractor since payment for services by T C were specifically made by Golden Acres Realty Trust . . . In order to find liability with RGP, this court would be forced to attribute the acts of Golden Acres Realty Trust to RGP. This result is contrary to the facts and beyond the jurisdiction of the court." (Dec. 14.) In so ruling, the judge evidenced a misapprehension of the applicable law. We may disregard the shell of purportedly discrete legal persons engaged in business when there is active and pervasive control of those legal persons by the same controlling person and there is a confusing intermingling of activity among the purportedly separate legal persons while engaging in a common enterprise. My Bread Baking Co. v. Cumberland Farms, Inc., 353 Mass. 614, 620-621, 233 N.E.2d 748 (1968); Commonwealth v. Beneficial Finance, 360 Mass. 188, 289-292, 275 N.E.2d 33, 91-93 (1971); Evans v. Multicon Constr. Corp., 30 Mass. App. Ct. 728, 732-733, 574 N.E.2d 395 (1991), rev. denied, 410 Mass. 1104, 577 N.E.2d 309 (1991).
In "rare particular situations to prevent gross inequity," disregard of separate corporate entities may be warranted. My Bread Baking Co., 353 Mass. at 620. The occasion for doing so arises when (1) there is active and pervasive control of related business entities by the same controlling persons and there is a fraudulent or injurious consequence by reason of the relationship among those business entities; or (2) there is "a confused intermingling of activity of two or more corporations engaged in a common enterprise with substantial disregard of the separate nature of the corporate entities, or serious ambiguity about the manner and capacity in which the various corporations and their respective representatives are acting." Id. at 619, 233 N.E.2d 748; Evans, 30 Mass. App. Ct. at 732-733. The record contains some evidence which might, if believed, support such a conclusion.
In order to decide whether to penetrate the legal forms and impose workers' compensation liability on RGP as general contractor on the project at which the employee was injured, the case should be remanded and the judge instructed to make factual findings about the relationships between Golden Acres Realty Trust, Keith Gabler, Craig Rafter, RGP and Holliston Preserve on the following twelve issues: (1) common ownership; (2) pervasive control; (3) confused intermingling of business activity assets, or management; (4) thin capitalization; (5) nonobservance of corporate or trust formalities; (6) absence of corporate or trust records; (7) no payment of dividends; (8) insolvency; (9) siphoning away of assets by the dominant shareholders or trustees; (10) nonfunctioning of officers, directors or trustees; (11) use of the corporation or trusts for transactions of the dominant shareholders or trustees; (12) use of the corporation or trusts to avoid the obligation of providing workers' compensation insurance coverage. See Pepsi-Cola Metropolitan Bottling Co. v. Checkers, Inc., 754 F.2d 10, 14-16 (1st Cir. 1985).
Having made specific factual findings on these factors, the judge should then weigh, not count, the indicators and form an opinion whether the over-all structure and operation misleads. There is present in the cases which have looked through the corporate form an element of dubious manipulation and contrivance, finagling, such that corporate identities are confused and third parties cannot be quite certain with what they are dealing. Thus, in My Bread Baking Co., 353 Mass. at 620-621, a principal dealt through satellite corporations in such a confusing manner that third parties would reasonably think that the principal was dealing on behalf of the parent, where the assets were. Similarly, in Commonwealth v. Beneficial Fin. Co., 360 Mass. 188, 289-294, 275 N.E.2d 33 (1971), cert. denied sub nom. Farrell v. Massachusetts, 407 U.S. 910, 92 S. Ct. 2433, 32 L.Ed.2d 683, and sub nom. Beneficial Fin. Co. v. Massachusetts, 407 U.S. 914, 92 S. Ct. 2434, 32 L.Ed.2d 689 (1972), the picture was confusing and third parties thought of themselves as dealing with Beneficial. The judge here should decide whether T C could reasonably believe that it was doing work for RGP.
The purpose of G.L.c. 152, § 18 is to prevent an employer from shedding a portion of its business in order to evade its responsibility for providing workers' compensation insurance for its employees. Dubois v. Soule Mill, 323 Mass. 472, 474, 82 N.E.2d 886, 887-888 (1948); Report of the Massachusetts Commission on Compensation for Industrial Accidents (1912), 52. The label which the parties attach to their relationship should be given due weight. However, just calling RGP a subcontractor of Golden Acres Realty Trust, rather than the general contractor, in an attempt to evade responsibility for workers' compensation coverage will not defeat an general contractor relationship which in actuality exists. See Mac Tavish v. O'Connor Lumber Co., 6 Mass. Workers' Comp. Rep. 174, 179 (1992) (discussing tests for employment versus independent contractor relationship). The judge may look beyond the separate business forms if he finds that they were used to defeat the public policy of requiring workers' compensation insurance and that equity compels him to do so to remedy the employee's injury. See Gurry v. Cumberland Farms, 406 Mass. 615, 626, 550 N.E.2d 127 (1990) [material issue of whether entities were engaged in a joint venture and therefore subject to treatment as a single employer under G.L.c. 152, § 1 (5)].
If on remand, the judge determines that the separate business entities can be disregarded and their activities attributed to RGP, then RGP's workers' compensation insurance coverage may become available for payment of the employee's claim. To invoke this insurance coverage, § 18 requires a further determination that the work contracted out to T C was the kind of work customarily carried on as part of the business in which the contracting entity was engaged. See Mobil Oil Corp. v. Roumeliotis, 38 Mass. App. Ct. 245, 250, 647 N.E.2d 69, 73 (1995); rev. denied, 426 Mass. 1102, 648 N.E.2d 1285 (1995). To reach a general conclusion on the § 18 issue, the judge should make the specific findings on the following questions: 1. Was the work to be done by T C under its contract merely ancillary or incidental to the trade or business of the contracting entity? 2. Was T C's work a part of or a process in the business of the contracting entity? 3. Was the work to be done by T C merely ancillary or incidental to the trade or business of the contracting entity? If the answer to the first two questions is "yes" and the last question "no", then Aetna is liable to the employee under § 18.
SUMMARY
In conclusion, because the judge's opinion appears tainted by legal error and does not contain adequate factual findings applying the correct legal standards, the case should be recommitted. As the record could support more than one result, depending on the facts found by the judge, reversal is not appropriate. See Medeiros v. San Toro Mfg., 7 Mass. Workers' Comp. Rep. 66, 68 (1993) and cases cited therein (reverse, rather than remand, only where the evidence, including all rational inferences which may be drawn therefrom, can only support one result). I therefore dissent from the majority's reversal of the coverage decision and its award of benefits by Aetna.
________________________ Suzanne E.K. Smith Administrative Law Judge
Filed: June 25