Opinion
No. 2128 C.D. 2011
09-06-2012
American Zurich Insurance Company, Petitioner v. Workers' Compensation Appeal Board (Teresa Heinrichs, Frank Heinrichs, Deceased, Roofing Resource, Inc. and SWIF), Respondents
BEFORE: HONORABLE BERNARD L. McGINLEY, Judge HONORABLE RENÉE COHN JUBELIRER, Judge HONORABLE PATRICIA A. McCULLOUGH, Judge
OPINION NOT REPORTED
MEMORANDUM OPINION BY JUDGE COHN JUBELIRER
American Zurich Insurance Company (Zurich) petitions for review from an Order of the Workers' Compensation Appeal Board (Board) that affirmed the Order of the Workers' Compensation Judge (WCJ) granting the Fatal Claim Petition (Claim Petition) of Teresa Heinrichs (Claimant) based on the death of her husband, Frank Heinrichs (Decedent). In her Decision and Order, the WCJ held that Zurich was estopped from denying coverage of Decedent even though he was a sole proprietor and ordered Zurich to pay Decedent's medical and funeral expenses and $612.00 in benefits per week to Claimant. Zurich argues that because Decedent was a sole proprietor, he did not earn wages as defined by the Workers' Compensation Act (Act) and that it should, therefore, not be liable to pay Claimant fatal claim wage benefits.
Act of June 2, 1915, P.L. 736, as amended, 77 P.S. §§ 1 -1041.4, 2501-2708.
Decedent, a sole proprietor, worked as a subcontractor for a roofing company, Roofing Resources, Inc. (Roofing Resources). Decedent began working for Roofing Resources in 2002 in various states and generally met the factors to be considered an independent contractor under the Act.
While the Petition for Review in this case lists the roofing company for which Decedent subcontracted as "Roofing Resource, Inc.," all other documents in the record, including the Petition for Joinder of Additional Defendant, dated February 26, 2009, and the caption on the Board's Decision lists the company's name as "Roofing Resources, Inc." We shall use the name "Roofing Resources" throughout.
In 2008, Roofing Resources referred Decedent to Insurance and Financial [Services, Ltd.] (IFS) who was Roofing Resources['] insurance agency. Decedent applied for a workers' compensation insurance policy and IFS placed the policy with Zurich. Decedent was listed as the only employee and as a sole proprietor on the Zurich policy. Decedent did not pay the premium for the policy but Roofing Resources paid the premium on the Zurich policy.(WCJ Decision, Findings of Fact (FOF) ¶ 9.) IFS is an insurance broker/agency that provides insurance for both individual and commercial clients. Roofing Resources' employees are covered by the State Workers' Insurance Fund (SWIF), but IFS recommended to Roofing Resources that it obtain separate workers' compensation (WC) insurance for its subcontractors through Zurich. On March 3, 2008, IFS drafted a WC insurance policy for Decedent. The application for the policy listed Decedent as a sole proprietor, and the policy issued by Zurich "was silent with regard to the coverage for sole proprietors in Pennsylvania." (FOF ¶ 13.) Decedent died on September 23, 2008, when he fell through a sky light in the roof of a school in Delaware, on which he was working for Roofing Resources. The policy with Zurich was in effect at the time of Decedent's death.
On February 4, 2009, Claimant filed her Claim Petition against both Zurich and Frank David Heinrichs in which she listed Frank David Heinrichs as both decedent and employer. Zurich and Frank David Heinrichs filed an answer denying the allegations on the basis that Decedent was either an employee of Roofing Resources or, alternatively, a sole proprietor and therefore not an employee of Frank David Heinrichs at the time of his death. Zurich and Frank David Heinrichs filed a petition for joinder as additional defendant against Roofing Resources, alleging that it was the employer of Decedent at the time of his death. After Roofing Resources and its insurer, SWIF, filed an answer, the WCJ eventually denied the joinder petition. A hearing was held before the WCJ. The WCJ found the facts as described above and held that Zurich was estopped from denying coverage for Decedent, given that Decedent, Roofing Resources, and IFS all intended Decedent to be covered by the policy with Zurich; Zurich accepted the first premium for the policy; and Zurich never canceled the policy, even though the application listed Decedent as a sole proprietor. (FOF ¶ 23.) Therefore, the WCJ ordered Zurich to pay Claimant $612.00 per week in fatal claim wage benefits, based on Decedent's average earnings of $1,200.00 per week, along with medical and funeral expenses. (FOF ¶ 4, WCJ Decision and Order at 5.)
It appears that Zurich provided representation for Decedent in his capacity as his own employer.
Zurich appealed the WCJ's Decision and Order to the Board, arguing, among other things, that the Zurich policy was void because it was contrary to the Act, in that sole proprietors are not eligible for WC, and that Decedent's income could not count as wages as defined in the Act because he was a sole proprietor. (Appeal from WCJ's Findings of Fact and Conclusions of Law, Addendum, R.R. at 292a.) Zurich also argued that findings of fact relied upon by the WCJ to conclude that Zurich was estopped from denying coverage were not supported by substantial evidence. The Board interpreted Zurich's legal arguments as being that: "(1) Decedent was not entitled to benefits under the [Act] as a self-employed, sole-proprietor; and (2) the policy issued for Decedent was not viable because he was a sole proprietor." (Board Decision at 4.) The Board held that Pennsylvania case law recognizes WC insurance by estoppel and that the WCJ did not err in holding that Zurich was estopped from denying coverage. The Board also held that the WCJ's findings of fact supporting the estoppel holding were supported by substantial evidence. Zurich now appeals to this Court.
This Court's scope of review "is limited to determining whether there has been a constitutional violation or an error of law and whether the findings of fact are supported by substantial evidence." Maurer v. Workmen's Compensation Appeal Board (American Trans Freight, Inc.), 541 A.2d 436, 437 n.1 (Pa. Cmwlth. 1988).
On appeal, Zurich argues, inter alia, that the WCJ erred in awarding Claimant fatal claim wage benefits because Decedent's income does not meet the definition of "wages" under the Act and, thus, Decedent's average weekly wage was zero. Where, as here, a decedent leaves a widow, but no children, the fatal claim wage benefit to the widow is 51% of the decedent's "wages," per Section 307(2) of the Act, 77 P.S. § 561(2). This Court has long held, pursuant to Section 309(e) of the Act, 77 P.S. § 582(e), that earnings from a sole proprietorship may not be used in calculating an employee's average weekly wage. Bixler v. Workers' Compensation Appeal Board (Walden Books), 837 A.2d 1278, 1281 (Pa. Cmwlth. 2003). Section 309(e) describes calculating an employee's wage or average weekly wage solely in terms of money received through employee/employer relationships. 77 P.S. § 582(e). "Since 'wages' are paid to an employee by an employer, it is . . . impossible to receive 'wages' if one is self-employed." Borough of Honesdale v. Workmen's Compensation Appeal Board (Martin), 659 A.2d 70, 76 (Pa. Cmwlth. 1995). See also Guthrie v. Workers' Compensation Appeal Board (The Travelers' Club, Inc.), 854 A.2d 653, 661 (Pa. Cmwlth. 2004) ("An independent contractor is not entitled to benefits because of the absence of a master/servant relationship."). The WCJ apparently based her calculation of benefits on the amount Decedent was paid weekly by Roofing Resources, for whom Decedent worked full-time at the time of his death. (FOF ¶ 4.) However, there is no dispute in this case that Decedent was a self-employed "subcontractor," or independent contractor, of Roofing Resources. (FOF ¶ 19). Because Decedent did not earn wages as defined by the Act, his average weekly wage is necessarily zero.
Zurich argues in its Petition for Review to this Court that the Zurich policy is void because Decedent was an independent contractor and that the Board erred in holding that Zurich is estopped from denying coverage. (Petition for Review ¶¶ 6-7.) However, Zurich does not develop these arguments in its brief, arguing only that Decedent's average weekly wage should have been calculated to be zero. (Zurich Br. at 4, 17.) In addition, in its brief, Zurich requests only that the Board's Order be reversed as to the fatal claim wage loss benefits, not as to funeral and medical expenses. (Zurich Br. at 17, 25.) Thus, Zurich has waived any argument that the Board erred in the first instance by applying the equitable principle of estoppel to its policy for Decedent. Pa. R.A.P. 2119(a); Van Duser v. Unemployment Compensation Board of Review, 642 A.2d 544, 548 n.3 (Pa. Cmwlth. 1994) ("Issues not briefed are waived.").
Section 309(e) provides in relevant part:
The terms "average weekly wage" and "total wages," as used in this section, shall include board and lodging received from the employer, and gratuities reported to the United States Internal Revenue Service by or for the employe for Federal income tax purposes, but such terms shall not include amounts deducted by the employer under the contract of hiring for labor furnished or paid for by the employer and necessary for the performance of such contract by the employe, nor shall such terms include deductions from wages due the employer for rent and supplies necessary for the employe's use in the performance of his labor, nor shall such terms include fringe benefits, including, but not limited to, employer payments for or contributions to a retirement, pension, health and welfare, life insurance, social security or any other plan for the benefit of the employe or his dependents: Provided, however, That the amount of any bonus, incentive or vacation payment earned on an annual basis shall be excluded from the calculations under clauses (a) through (d.2). Such payments if any shall instead be divided by fifty-two and the amount shall be added to the average weekly wage otherwise calculated under clauses (a) through (d.2).77 P.S. § 582(e) (emphasis added).
Where the employe is working under concurrent contracts with two or more employers, his wages from all such employers shall be considered as if earned from the employer liable for compensation.
Claimant did not name Roofing Resources as Decedent's employer in her Claim Petition; rather, she listed Decedent as his own employer. (Claim Petition at 1, R.R. at 4a.). Claimant does not argue that Decedent should be considered an employee of Roofing Resources, that Roofing Resources should be estopped from denying an employment relationship with Decedent, or that the WCJ erred by denying the joinder of Roofing Resources.
The Board stated in its Opinion, and Claimant argues, that Pennsylvania case law recognizes WC insurance by estoppel and Zurich should, therefore, be required to pay Claimant WC death benefits based upon the amounts that Decedent received from Roofing Resources. In support, Claimant cites Overhead Door Company of Lewistown, Inc. v. Workers' Compensation Appeal Board (Gill), 819 A.2d 635 (Pa. Cmwlth. 2003), Tri-Union Express v. Workers' Compensation Appeal Board (Hickle), 703 A.2d 558 (Pa. Cmwlth. 1997), and American Insurance Company v. Workmen's Compensation Appeal Board (Barnhart), 606 A.2d 655 (Pa. Cmwlth. 1992). Each of these cases, however, is distinguishable.
In Barnhart, the claimant originally worked for Aero Trucking (Aero) as an independent contractor truck driver. A former employee of Aero formed a new corporation, Truck Services, Inc. (Truck Services), for the purpose of obtaining WC insurance for Aero's drivers. Truck Services obtained WC coverage from an insurer that "knew the exact nature of Truck Services' business." Barnhart, 606 A.2d at 656. After Truck Services informed Aero that it had obtained WC coverage, Aero sent a letter to its independent contractor drivers, including the claimant, informing them that even though they were independent contractors, it had found a way to provide them with WC coverage. Aero's independent contractors became independent contractors for Truck Services, which then brokered their services back to Aero, and the drivers signed new leasing and brokerage agreements. After the claimant was injured, the insurance carrier denied coverage on the basis that the claimant was not an employee of Truck Services, but an independent contractor. The WCJ determined, and the Board and this Court affirmed, that, due to Aero's actions and its relationship with Truck Services, neither Aero nor Truck Services could deny that the claimant was an employee of the company and, therefore, Truck Services' policy covered the claimant. Id. at 658.
In Tri-Union, this Court held, based on Barnhart, that a trucking company was estopped from arguing that the claimant, an independent driver, was not an employee based on representations made to the claimant by third party agents of the trucking company. Tri-Union, 703 A.2d at 563. The third party agents, who had the authority to bind the trucking company, represented to the claimant that he would be covered by the trucking company's WC insurance, and the claimant relied upon that representation in accepting a driving position. Id.
Finally, in Overhead Door Company, unlike the other two cases, the question was not whether the claimant was an employee, but whether an insurance company, which did not challenge its responsibility for an alleged work-related injury and actively defended the claim for more than a year, was estopped from later claiming it was not the responsible insurer. This Court held, citing Barnhart and Tri-Union, that the WCJ had the power to hold the insurance company liable, based on estoppel, for coverage because of the insurance company's representations that it was the responsible insurer throughout the ongoing litigation. Overhead Door Company, 819 A.2d at 639.
In each of the above cases, there was, or was held to be, an employment relationship based upon which the claimants' average weekly wages could be calculated. In Overhead Door Company, there was no dispute that the claimant was an employee; rather, the insurance company was estopped from denying responsibility for the employer's liability for its employee because the insurance company had participated in litigation in defense of the employer, as if it were liable, for over a year. In Barnhart, the employer sought out and purchased WC insurance for its independent contractors and represented to them that they were covered by such insurance even though they were independent contractors; thus, the employer was estopped from arguing that its independent contractors were not its employees. Similarly, in Tri-Union, the employer was estopped from denying that the claimant was its employee due to representations made by its agents that the claimant was covered by Tri-Union's WC insurance. Had Roofing Resources been successfully joined as an additional employer, and had Roofing Resources' liability been at issue, Barnhart and Tri-Union might have been on-point such that an employment relationship could have been established through estoppel. Here, however, the WCJ and the Board attempted to simply hold Zurich liable to Claimant without any employment relationship between Decedent and an employer. This is not in line with prior case law or the Act. As this case stands, no employer/employee relationship exists because the WCJ denied the joinder of Roofing Resources and did not find that Decedent was an employee of Roofing Resources. Without an employment relationship, there can be no wages, pursuant to Section 309(e). Without wages, there can be no fatal claim wage benefits, pursuant to Section 307(2). Decedent, as the sole proprietor of his business, did not receive wages as defined by the Act. No additional employer has been joined that could be estopped from denying an employment relationship with Decedent. Thus, Decedent had no wages upon which to calculate fatal claim wage benefits under the Act.
Zurich appealed the WCJ's denial of the joinder of Roofing Resources to the Board; however, the Board did not address this issue. Zurich raised the issue again in its Petition for Review to this Court; however, Zurich did not argue this issue in its brief to this Court and, therefore, the issue is waived. Pa. R.A.P. 2119(a). --------
Therefore, as the Act stands, we are constrained to reverse the Order of the Board insofar as it awards Claimant $612.00 per week in fatal claim wage benefits.
/s/ _________
RENÉE COHN JUBELIRER, Judge Judge McCullough dissents. ORDER
NOW, September 6, 2012, the Order of the Workers' Compensation Appeal Board in the above-captioned matter is hereby REVERSED insofar as it awards Teresa Heinrichs fatal claim wage benefits. The remainder of the Order is hereby AFFIRMED.
/s/ _________
RENÉE COHN JUBELIRER, Judge