Opinion
1 CA-IC 12-0024
03-21-2013
DAVE H. STOPKE, Petitioner, v. THE INDUSTRIAL COMMISSION OF ARIZONA, Respondent, SUN WATER COMPANY, LLC, Respondent Employer, HARTFORD CASUALTY INSURANCE CO., Respondent Carrier.
Taylor & Associates, PLLC By Roger A. Schwartz And Thomas C. Whitley Attorneys for Petitioner Andrew F. Wade, Chief Counsel Industrial Commission of Arizona Jardine Baker Hickman & Houston, PLLC By Charles G. Rehling, II Attorneys for Respondent Employer and Respondent Carrier
NOTICE: THIS DECISION DOES NOT CREATE LEGAL PRECEDENT AND MAY NOT BE CITED
EXCEPT AS AUTHORIZED BY APPLICABLE RULES.
See Ariz. R. Supreme Court 111(c); ARCAP 28(c);
Ariz. R. Crim. P. 31.24
MEMORANDUM DECISION
(Not for Publication -
Rule 28, Arizona Rules
of Civil Appellate
Procedure)
Special Action - Industrial Commission
ICA Claim No. 20091-320362
Carrier Claim No. YKX58644C
The Honorable Harriet L. Turney, Administrative Law Judge
AWARD AFFIRMED
Taylor & Associates, PLLC
By Roger A. Schwartz
And Thomas C. Whitley
Attorneys for Petitioner
Phoenix Andrew F. Wade, Chief Counsel
Industrial Commission of Arizona
Phoenix Jardine Baker Hickman & Houston, PLLC
By Charles G. Rehling, II
Attorneys for Respondent Employer and Respondent Carrier
Phoenix OROZCO, Judge ¶1 Petitioner Dave H. Stopke (Stopke) seeks special action review of an Industrial Commission of Arizona (ICA) Decision upon Review Affirming the ICA's Decision upon Hearing and Findings and Award Establishing Average Monthly Wage. As a sole proprietor, Stopke argues on appeal that the administrative law judge (ALJ) erred in calculating his average monthly wage pursuant to Arizona Revised Statutes (A.R.S.) section 23-901.6(i) (2012).
Throughout the record, there are variations of Petitioner's name; such as, Dave H. Stopke and Hernan D. Stopke. For consistency purposes, we use the variation Dave H. Stopke consistent with Petitioner's opening brief and the captions on court documents from the proceedings below.
Absent material revisions, we cite to the current version of the statute.
JURISDICTION AND STANDARD OF REVIEW
¶2 This court has jurisdiction pursuant to A.R.S. §§ 12-120.21.A.2 (2003) and 23-951.A (2012) and Arizona Rule of Procedure for Special Actions 10. In reviewing ICA decisions, we defer to the ALJ's factual findings but review questions of law de novo. Young v. Indus. Comm'n, 204 Ariz. 267, 270, ¶ 14, 63 P.3d 298, 301 (App. 2003). We consider the evidence in a light most favorable to upholding the ALJ's decision. Lovitch v. Indus. Comm'n, 202 Ariz. 102, 105, ¶ 16, 41 P.3d 640, 643 (App. 2002).
FACTUAL AND PROCEDURAL HISTORY
¶3 On April 17, 2009, Stopke was injured while working for Sun Water Company, LLC (SWC). Respondent Carrier Hartford Casualty Insurance Company (Hartford) accepted Stopke's industrial injury claim. On June 30, 2009, the ICA issued a Notice of Average Monthly Wage, establishing Stopke's monthly wages at $600. Stopke requested a hearing on the issue of the average monthly wage award, and three hearings were held. ¶4 The pertinent statute is A.R.S. § 23-901.6(i), which allows a sole proprietor of a business to be considered an employee for purposes of receiving benefits through an insurance carrier. It states that
[t]he basis for computing premium payments and compensation benefits for the sole proprietor shall be an assumed average monthly wage of not less than six hundred dollars nor more than the maximum wage provided by § 23-1041 and is subject to the discretionary approval of the insurance carrier. Any compensation for permanent partial or permanent total disability payable to the sole proprietor shall be computed on the lesser of the assumed monthly wage agreed to by the insurance carrier on the acceptance of the application for coverage or the actual average monthly wage received by the sole proprietor at the time of injury.A.R.S. § 23-901.6(i) (emphasis added). ¶5 At the first hearing on October 27, 2011, Jesse Stopke (Jesse), the manager of SWC at the time of Petitioner's injury, testified that it was the company's practice during the annual audit to report wage and tax information to A-Z Tax (AZT), who then reported the information to Hartford. Donald Caudill (Caudill), the managing member of AZT, echoed Jesse's testimony and stated that at the time SWC's Worker's Compensation policy was written with Hartford, the wage and tax information was provided "so [Hartford] could determine what the initial premium would have been in year one, which would have been the auditable premium at the end of that year." ¶6 Caudill testified that between June of 2008 and June 25, 2009, he was never contacted by Hartford to provide additional information concerning SWC's taxes and wages. He stated that Hartford contacted him after Stopke's injury, and he subsequently provided Hartford with one year's worth of SWC's payroll records before Stopke's injury. Caudill testified that he calculated Stopke's weekly earnings for 2008 as $1146 based on average weekly draws taken out of SWC by Stopke and provided this information to Hartford. ¶7 Contrary to Caudill's testimony, at a subsequent hearing on January 20, 2012, Leah Frymire (Frymire), an auditor at Hartford, testified that she performed an audit on SWC on July 23, 2008, in order to ensure that SWC employees were properly classified according to their job duties and its payroll. Frymire explained that when a company makes an application for a worker's compensation policy, the premiums for the policy are based on the company's estimates of its payroll for the upcoming year. As an auditor for Hartford, Frymire would audit payroll and tax records and adjust policy premiums based on actual wages paid during the policy period. ¶8 Frymire testified that her report showed that she spoke with Jesse, and he told her that Stopke had annual gross wages of $3000 paid during the reporting period of April 1, 2007 through March 31, 2008. She stated that she verified Stopke's wages based on information from SWC's Form 941s. She further testified that she sets the classification for a business and its employees in the computer based on the duties performed. Frymire contends that when she input the $3000 annual wage and Stopke's duties into the computer program used to generate the audit, the program automatically changed the wages to $7200 annually, or $600 monthly, and classified him as an officer of the company to bring him up to the minimum wage required by Arizona statute for insurance coverage. See A.R.S. § 23- 901.6(i). ¶9 At the final hearing on February 2, 2012, Randall Sorensen (Sorensen), a certified public accountant and financial forensics expert for Hartford, testified that from 2005 to 2010, there were no wages reported for Stopke on his tax returns. He stated that the owner draws Stopke made from SWC over the years did not represent his actual income. Sorensen explained that there is usually no relationship between actual profit of a company and owner draws taken. He testified that based on Stopke's tax returns, SWC showed a profit of approximately $9400 in 2008. Contrary to Caudill's testimony, Sorensen alleged that based on SWC's annual profit in 2008 of $9400, Stopke's income as one half owner of the business was $4700, with his wife as 50% owner, and at the most $9400 if he did not include Stopke's wife's share. ¶10 After the final hearing, the ALJ found that Stopke had not met his burden of proof to show that the "assumed average monthly wage" is any figure other than the $600 figure that the policy premium payments were based on. She found that Stopke had "not presented persuasive evidence that the 'assumed average monthly wage' changed before the date of injury."
Stopke and his wife are the sole proprietors of SWC.
Frymire testified that a Form 941 is a quarterly report filed with the Internal Revenue Service declaring the amount of wages that the company paid to employees during the given quarter.
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DISCUSSION
¶11 On appeal, Stopke argues that the ALJ erred in finding that his "assumed average monthly wage" was $600 at the time of the injury. Specifically, he alleges that there is no credible evidence supporting Frymire's testimony that Stopke's annual wages were reported as $3000 for the policy period of April 2007 to March 2008. Stopke also contends that the ALJ erred by ignoring our supreme court's holding in Mail Boxes, etc., U.S.A. v. Industrial Commission, 181 Ariz. 119, 888 P.2d 777 (1995), when he failed to accurately calculate Stopke's "assumed average monthly wage."
Conflicting Evidence
¶12 We "affirm a Commission decision if it is reasonably supported by the evidence." Lovitch, 202 Ariz. at 105, ¶ 16, 41 P.3d at 643. It is the duty of the ICA to resolve conflicts in the evidence presented and to determine which of the conflicting evidence is more probably correct. Lazarin v. Indus. Comm'n, 135 Ariz. 369, 373, 661 P.2d 219, 223 (1983). If findings of fact were made, our review is limited to determining "whether or not such findings of fact support the award, order or decision." A.R.S. § 23-951.B. We will not disturb the ALJ's findings unless they cannot be supported on any reasonable theory of the evidence. Nelson v. Indus. Comm'n, 134 Ariz. 369, 376, 656 P.2d 1230, 1237 (1982). ¶13 In this case, the record shows a conflict in the testimony of Caudill, Frymire and Sorensen concerning Stopke's wages for the policy period of April 2007 to March 2008. Caudill testified that Stopke's wage information was to be calculated based on the owner draws Stopke took from SWC. He alleged that Stopke's earnings based on the draws would amount to a weekly wage of $1146. However, in a letter dated June 2009 to a Hartford agent, Caudill wrote that Stopke is "the sole proprietor who does not take a W-2 wage from the business but is covered under the policy under the standard wage for sole proprietors." ¶14 Sorensen testified that it was his opinion that Stopke's wages for the policy year period before his injury were no more than $9400 based on SWC's reported profits for that year. He stated that Stopke's draws from SWC did not represent Stopke's actual income as there is no relationship between draws and profits. In addition, Frymire testified that Jesse reported to her for policy premium purposes that Stopke's annual wages for the prior policy period in 2008 were $3000. She stated that she had confirmed this amount based on tax forms and subsequently adjusted his wages to $7200 to reach the statutory minimum wage for insurance coverage. ¶15 In resolving conflicting testimony, the ALJ may consider qualifications and backgrounds of the expert witnesses and whether the testimony is speculative. Carousel Snack Bar v. Indus. Comm'n, 156 Ariz. 43, 46, 749 P.2d 1364, 1367 (1988) (weighing conflicting medical testimony). After considering all the evidence, the ALJ determined that the conflict in evidence regarding the consideration of wages was in favor of Sorensen's opinion that draws were not wages. The ALJ also referenced Frymire's testimony in deciding that Stopke had not met his burden of proof to show that the "assumed average monthly wage" is any number different than $600. ¶16 Because it is the ALJ's duty to resolve such conflicts in the evidence, the ALJ's decision will not be disturbed on appeal. See Pac. Fruit Express v. Indus. Comm'n, 153 Ariz. 210, 214, 735 P.2d 820, 824 (1987) (reasoning that the appellate court does not reweigh the evidence and considers it in the light most favorable to sustaining the ALJ's decision). Application of Mail Boxes ¶17 Stopke argues that his wages should be considered equivalent to the market value of his services. He contends that the ALJ failed to recognize our supreme court's decision in Mail Boxes that held "that the 'actual average monthly wage' of a sole proprietor is measured by the market value of services rendered." 181 Ariz. at 123, 888 P.2d at 781. Mail Boxes is distinguishable from this case for two reasons. ¶18 First, Stopke's claim that his wages should be based on the market value of his services is not consistent with the holding in Mail Boxes, which addressed the calculation of an applicant's wages for purposes of computing the "actual average monthly wage" and not the "assumed average monthly wage." Id. at 122-23, 888 P.2d at 780-81. Unlike Stopke, the applicant in Mail Boxes was not disputing the "assumed average monthly wage" as it had been previously agreed upon with the insurance carrier at the time the policy premiums were set. See id. at 122, 888 P.2d at 780. In this case, the ALJ did recognize the relevance of the holding in Mail Boxes and stated that "[t]he Court's analysis in [its] holding does not address 'assumed average monthly wage', because it was predetermined between [the carrier] and Applicant when the policy was obtained." ¶19 Second, Stopke's claim is still open, and he is receiving temporary disability benefits at this time. In Mail Boxes, the applicant's claim was closed, and he was receiving permanent disability benefits. Id. at 120, 888 P.2d at 778. At the conclusion of the final hearing on February 2, 2012, the ALJ correctly noted that there could be a different agreement between SWC and Hartford as to the wages at some point if and when Stopke's temporary disability benefits evolve into permanent disability benefits. ¶20 We conclude that the ALJ did not err in failing to apply the analysis of Mail Boxes in calculating Stopke's wages for the purpose of establishing temporary disability benefits. The statute is clear that the premium payments and compensation benefits for a sole proprietor are based on an "assumed average monthly wage" of not less than $600, and not more than the maximum wages provided by statute, and it is subject to the discretionary approval of the insurance carrier. A.R.S. § 23-901.6(i). Also, the ALJ found that based on the proceedings, Stopke had not provided persuasive evidence to show that there had been a change in the "assumed average monthly wage" from the time the policy was obtained to the date of the injury. ¶21 Even if Stopke could establish an "actual average monthly wage" higher than the $600 "assumed average monthly wage," Hartford is mandated by statute to provide benefits based on the lesser amount of the two, which in this case would be the latter as reflected by Frymire's testimony. See i.d. (Compensation made to the sole proprietor for permanent partial or permanent total disability "shall be computed on the lesser of the assumed monthly wage agreed to by the insurance carrier on the acceptance of the application for coverage or the actual average monthly wage received by the sole proprietor at the time of the injury."). ¶22 The evidence supports the ALJ's determination that Stopke did not provide persuasive evidence that warrants a change of the $600 "assumed monthly average wage" award.
CONCLUSION
¶23 For the foregoing reasons, we affirm the ICA Review, which affirmed the ICA Decision, denying Stopke's petition to change the temporary disability benefit monthly award.
___________
PATRICIA A. OROZCO, Presiding Judge
CONCURRING: ___________
PETER B. SWANN, Judge
___________
ROBERT CARTER OLSON, Judge Pro Tempore*
*The Honorable Robert Carter Olson, Presiding Judge of the Pinal County Superior Court, is authorized by the Chief Justice of the Arizona Supreme Court to participate in the disposition of this appeal pursuant to Article 6, Section 3, of the Arizona Constitution and A.R.S. §§ 12-145 to -147 (2003).