Opinion
HHDCV156062863S
10-16-2017
Travelers Casualty and Surety Company v. W.A. Crosscup, Inc
UNPUBLISHED OPINION
MEMORANDUM OF DECISION RE MOTION FOR SUMMARY JUDGMENT
A. Susan Peck, Judge Trial Referee.
The plaintiff, Travelers Casualty and Surety Co., filed a complaint in two counts on October 13, 2015, against the defendant, W.A. Crosscup, Inc., alleging breach of contract, and in the alternative, quantum meruit. The complaint alleges the following facts. On March 14, 2011, the plaintiff issued a policy of workers' compensation and employer's liability insurance to the defendant providing coverage for the policy period of March 1, 2011, through March 1, 2012. Under the terms of the policy the defendant agreed to pay a final premium based upon payroll and all other remuneration paid or payable during the policy period for all employees and persons that could make the plaintiff liable under the policy. Pursuant to the policy, the plaintiff conducted an audit of the defendant's business enterprise records at the expiration of the policy term. Based upon the audit, the plaintiff calculated and determined a final earned premium in excess of $180, 338, of which the defendant paid $82, 505, leaving a remaining unpaid balance of $97, 833.
The plaintiff brings its complaint in two counts. Count one alleges breach of contract on the basis that the defendant failed to pay the entirety of the adjusted premium. Count two sounds in quantum meruit, and seeks, in the alternative, value of the insurance product provided to the defendant to the extent the agreement is deemed unenforceable. On March 21, 2016, the defendant filed its answer and special defenses. The defendant admits that it entered into an insurance policy with the plaintiff, but denies that the amount sought is proper or justified, and otherwise leaves the plaintiff to its proof. The defendant asserts two special defenses. First, that the audit conducted by the plaintiff was premised on erroneous information, as such the amount owed is less than what is being sought. Second, the defendant claims that the plaintiff has been duly paid for the reasonable value of the coverage under the terms of the policy. On April 14, 2016, the plaintiff filed a reply denying the defendant's special defenses.
On May 8, 2017, the plaintiff moved for summary judgment on the first ground of its complaint asserting that no genuine issue of material fact exists, and that it is entitled to judgment as a matter of law. Specifically, the plaintiff argues that no proof was ever provided to it that Tola Restoration & Painting, LLC (TRP), a subcontractor employed by the defendant, lawfully secured its workers' compensation obligations for persons that could make the plaintiff liable under the policy. Consequently, the plaintiff asserts that it was entitled to charge, and the defendant liable to pay, an increased premium. In support of its motion the plaintiff submitted the following evidence: (A) a certified deposition transcript of Jane Sullivan, the president of W.A. Crosscup; (B) a copy of the insurance policy issued to the defendant; (C) the signed and sworn affidavit of Steven Kidd, Traveler's regional director of eastern region premium audits, with attached audit notes; (D) a copy of a subcontractor's report and payments made by the defendant; (E) a copy of the final premium adjustment notice sent to the defendant; (F) a copy of the defendant's responses to the plaintiff's first set of interrogatories and requests for production; and lastly (G) a copy of the account detail summary of the defendant's insurance policy with the plaintiff. The defendant filed its objection on June 21, 2017. The plaintiff filed a reply on June 26, 2017. Oral argument was heard at short calendar on June 26, 2017. Thereafter, the defendant filed an amended affidavit of Jane Sullivan in opposition on that same date. The defendant submitted the following evidence with its affidavit: (A) a copy of the latest premium adjustment notice from the plaintiff; (B) a copy of a certificate of insurance for TRP that purports to show workers' compensation coverage for the policy period; and (C) a copy of an election to waive workers' compensation coverage for the sole proprietor of TRP, Duro Tola (Tola). The plaintiff filed a sur-reply on June 29, 2017, attached to which they submitted the following evidence: (A) a signed and sworn affidavit of Steven Kidd appended to which was the Acord Workers' Compensation application for TRP's purported policy, as well as search results from the National Commission of Compensation Insurance's database as to the workers' compensation coverage of TRP during the policy period.
The defendant submitted an affidavit with numerous exhibits in its original objection. Subsequently, at the short calendar hearing it became clear that the defendant had attached the wrong certificate of insurance in their papers. The defendant filed an amended affidavit with the proper exhibits on the same day.
DISCUSSION
" [S]ummary judgment shall be rendered forthwith if the pleadings, affidavits and any other proof submitted show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. In deciding a motion for summary judgment, the trial court must view the evidence in the light most favorable to the nonmoving party." (Internal quotation marks omitted.) Cefaratti v. Aranow, 321 Conn. 637, 645, 138 A.3d 837 (2016).
" [T]he genuine issue aspect of summary judgment requires the parties to bring forward before trial evidentiary facts, or substantial evidence outside the pleadings, from which the material facts alleged in the pleadings can warrantably be inferred . . . A material fact has been defined adequately and simply as a fact which will make a difference in the result of the case." (Citation omitted; internal quotation marks omitted.) Buell Industries, Inc. v. Greater New York Mutual Ins. Co., 259 Conn. 527, 556, 791 A.2d 489 (2002). " A genuine issue has been variously described as a triable, substantial or real issue of fact . . . and has been defined as one which can be maintained by substantial evidence." (Citation omitted; internal quotation marks omitted.) United Oil Co. v. Urban Redevelopment Commission, 158 Conn. 364, 378, 260 A.2d 596 (1969). " 'Issue of fact' encompasses not only evidentiary facts in issue but also questions as to how the trier would characterize such evidentiary facts and what inferences and conclusions it would draw from them." Id., 379.
" [I]t is only [o]nce [the] defendant's burden in establishing his entitlement to summary judgment is met [that] the burden shifts to [the] plaintiff to show that a genuine issue of fact exists justifying a trial . . . Summary judgment should be denied where the affidavits of the moving party do not affirmatively show that there is no genuine issue of fact as to all of the relevant issues of the case . . . Accordingly, the rule that the party opposing summary judgment must provide evidentiary support for its opposition applies only when the moving party has first made out a prima facie case for summary judgment . . . [I]f the party moving for summary judgment fails to show that there are no genuine issues of material fact, the nonmoving party may rest on mere allegations or denials contained in his pleadings . . ." (Citations omitted; internal quotation marks omitted.) Romprey v. Safeco Ins. Co. of America, 310 Conn. 304, 320-21, 77 A.3d 726 (2013).
In its memorandum in support of its motion for summary judgment, the plaintiff claims that there are no genuine issues of material fact in dispute. The plaintiff argues that it has the right under the insurance policy to audit and charge the defendant based on remuneration paid to uninsured employees or persons for whom they may be liable. As the plaintiff was not provided valid proof of workers' compensation insurance for TRP, the plaintiff contends that under the policy it was entitled to include the remuneration paid to TRP in its adjusted premium. Consequently, the plaintiff concludes that as the defendant failed to pay the entirety of the adjusted premium, the defendant is in breach, and the plaintiff is entitled to judgment as a matter of law. In its objection, the defendant argues that genuine issues of material fact exist that preclude summary judgment and casts doubt on the accuracy of the final calculated premium. First, the defendant contends that TRP did have workers' compensation insurance during that time period, or at least a portion of that period. Second, the defendant asserts that under the policy, remuneration as a premium basis should not include overhead or markup, rather it should only include the amount actually paid to the employees. Lastly, the defendant argues that payments made to Tola, the sole proprietor of TRP, should not be included in the adjusted premium as he elected to waive coverage. Accordingly, the defendant argues that the plaintiff's motion should be denied. By way of reply, the plaintiff argues that the defendant's contentions are without merit, the subcontractor did not have workers' compensation coverage during the policy period, and that under the policy the plaintiff was entitled to use the contract price between the defendant and TRP to calculate the insurance premium.
" An insurance policy is to be interpreted by the same general rules that govern the construction of any written contract . . . In accordance with those principles, [t]he determinative question is the intent of the parties, that is, what coverage the . . . [insured] expected to receive and what the [insurer] was to provide as disclosed by the provisions of the policy . . . If the terms of the policy are clear and unambiguous, then the language from which the intention of the parties is to be deduced, must be accorded its natural and ordinary meaning . . . Under those circumstances, the policy is to be given effect according to is terms . . . When interpreting [an insurance policy], we must look at the contract as a whole, consider all relevant portions together and, if possible give operative effect to every provision in order to reach a reasonable overall result." National Grange Mutual Ins. Co. v. Santaniello, 290 Conn. 81, 88-89, 961 A.2d 387 (2009).
" When the language of a contract is ambiguous, the determination of the parties' intent is a question of fact . . . [W]here there is definitive contract language, [however] the determination of what the parties intended by their contractual commitments is a question of law." (Citation omitted; internal quotation marks omitted.) Cruz v. Visual Perceptions, LLC, 311 Conn. 93, 101, 84 A.3d 828 (2014). " In determining whether a contract is ambiguous, the words of the contract must be given their natural and ordinary meaning . . . A contract is unambiguous when the language is clear and conveys a definite and precise intent . . . The court will not torture words to impart ambiguity where ordinary meaning leaves no room for ambiguity . . . Moreover, the mere fact that the parties advance different interpretations of the language in question does not necessitate a conclusion that the language is ambiguous." Id., 102-03. " In contrast, a contract is ambiguous if the intent of the parties is not clear and certain from the language of the contract itself . . . [A]ny ambiguity in a contract must emanate from the language used by the parties . . . The contract must be viewed in its entirety, with each provision read in light of the other provisions and every provision must be given effect if it is possible to do so . . . If the language of the contract is susceptible to more than one reasonable interpretation, the contract is ambiguous." (Citation omitted; internal quotation marks omitted.) Id., 103. There is a general recognition that uninsured subcontractors hired by an insured can result in a higher premium charged because the insurer theoretically had increased risk to pay claims, irrespective of whether such claims were actually made or paid. See Hartford Accident & Indemnity Co. v. Capitol Home Improvement Company, 2 Conn.Cir.Ct. 664, 205 A.2d 192 (1964). See also Compassionate Care, Inc. v. Travelers Indemnity Co. 147 Conn.App. 380, 83 A.3d 647 (2013) (risk exposure of insurance company allowed for charge of premium particularly in light of duty to defend); National Fire Ins. Co. of Hartford v. Beaulieu Co., LLC, 140 Conn.App. 571, 59 A.3d 393 (2013) (insurance carrier entitled to assess premium based on individuals who could bring or file claims and who fell within ambit of policy).
Under the workers' compensation act, an employer must secure workers' compensation for its employees. General Statutes § 31-284. General Statutes § 31-275(9)(A)(I) defines an " employee" as any person who has " entered into or works under any contract of service or apprenticeship with an employer." General Statutes § 31-291 provides in relevant part: " When any principal employer procures any work to be done wholly or in part for him by a contractor, or through him by a subcontractor, and the work so procured to be done is a part or process in the trade or business of such principal employer, and is performed in, on or about premises under his control, such principal employer shall be liable to pay all compensation under this chapter [of the act] to the same extent as if the work were done without the intervention of such contractor or subcontractor . . ." " [I]f an employer . . . meets the three requirements of the first sentence of [§ 31-291], it becomes liable to pay workers' compensation benefits to an employee of its independent subcontractor, who was injured in the course of his employment." (Footnote omitted.) National Fire Ins., Co. of Hartford v. Beaulieu Co., LLC, supra, 140 Conn.App. 582.
Thus, whether an employer is liable for workers' compensation depends in part on if the employer exercises control over the party in question. " Whether an employer-employee relationship exists for purposes of the act is a question of the right to control, and not whether an employee is a direct employee . . ." Id., 582-83. " The term 'control' in [the context of § 31-291] has a specific meaning. It is merely descriptive of the work area and is used instead of such words as 'owned by him' or 'in his possession' in order to describe the area in a more inclusive fashion." Samaoya v. Gallagher, 102 Conn.App. 670, 676-77, 926 A.2d 1052 (2007). One who is primarily responsible for dealing with the owner or possessor of the work site and is " ultimately responsible to them for the satisfactory completion of the work" controls the premises for purpose of principal contractor responsibility under § 31-291. Hebert v. RWA, Inc., 48 Conn.App. 449, 454, 709 A.2d 1149 (1998).
The insurance policy between the plaintiff and defendant, attached as plaintiff's exhibit B, provides that the plaintiff will defend and indemnify the defendant as to workers' compensation claims. Part Five of the insurance policy enables the plaintiff to charge a premium which includes remuneration or payroll if certain conditions are met. Part Five of the policy subsection C specifically provides as follows: " Premium for each work classification is determined by multiplying a rate times a premium basis. Remuneration is the most common premium basis. This premium basis includes payroll and all other remuneration paid or payable during the policy period for the services of: 1. All your officers and employees engaged in work covered by this policy; and 2. All other persons engaged in work that could make us liable under Part One (Workers' Compensation Insurance) of this policy. If you do not have payroll records for these persons, the contract price for their services and materials may be used as the premium basis. This paragraph 2 will not apply if you give us proof that the employers of these persons lawfully secured their workers' compensation obligations."
In the present case, the defendant is liable for an additional premium, although genuine issues of fact exist as to the exact amount that remains due. Per the insurance policy, remuneration may be included in the premium basis if two criteria are met: (1) the party in question is engaged in work that could make the plaintiff liable under the policy for workers' compensation claims, and (2) the plaintiff is not provided with proof that these persons lawfully secured their workers' compensation obligations for the policy period. Per the affidavit of Jane Sullivan and her deposition, the defendant is engaged in the work of commercial painting, and employed TRP to perform that work. See Sullivan Dep. 15:20-16:7; 35:17-36:8. This work was performed on premises under the defendant's direction, and hence control. See Hebert v. RWA, supra, 48 Conn.App. 454 (party responsible for completion of work controls premises). Accordingly, as the defendant procured work from TRP, employed them to perform work in their trade or field, and exercised control over them, the plaintiff was potentially liable for the work performed by TRP under the policy. See National Fire Ins. Co. of Hartford v. Beaulieu Co., LLC, supra, 140 Conn.App. 582. The defendant does not dispute that Tola was a party that could make the plaintiff potentially liable. See Sullivan Dep. 53:3-53:13. As the plaintiff was potentially liable for work performed by TRP, the plaintiff may charge a premium if TRP's workers' compensation obligations were not lawfully secured. See National Fire Insurance Co. of Hartford v. Beaulieu Co., LLC, supra, 140 Conn.App. 583 n.11 (coverage under similar policy included defendant's employees as well as contract labor employees of the defendant and employees of subcontractors of the defendant).
The plaintiff has shown that TRP's workers' compensation obligations were not lawfully secured. The defendant offered a certificate of insurance bearing policy number 28018520, attached to the affidavit of Jane Sullivan as exhibit A, that purports to show coverage for the relevant policy period, but the plaintiff has demonstrated that this certificate is inaccurate. Per the affidavit of Steven Kidd, attached as exhibit B to the plaintiff's sur-reply, the plaintiff was the carrier for this policy and its policy period was from May 5, 2012 to August 7, 2012; it does not cover the policy period in the instant matter. Furthermore, the plaintiff has offered search results from the National Council on Compensation Insurance database showing that TRP was not covered by any insurance carrier during the policy period. The defendant has not offered any rebuttal evidence in response. Accordingly, as no valid proof was provided to the plaintiff showing that TRP's workers' compensation obligations were lawfully secured, the plaintiff assumed risk that it is entitled to charge for under the policy in the form of an adjusted premium. See Hartford Accident & Indemnity Co. v. Capitol Home Improvement Co., supra, 2 Conn.Cir.Ct. 669 (" [i]t is the assumption of this burden of paying possible compensation that gives the plaintiff the right to charge premiums"). Consequently, the plaintiff was able to use remuneration paid to TRP to calculate the new premium.
Although the exact amount remains in dispute, it is clear that the plaintiff is entitled to an increase in premium. Per Jane Sullivan's affidavit and deposition, as well as counsels' representations, the defendant previously estimated a premium, and that premium could go up or down to the extent potentially liable payroll fell under the policy. See Sullivan Dep. 23:7-24:2. As it is clear that TRP was not insured during the policy period, and its remuneration or payroll was not previously considered in the premium, the plaintiff is entitled to an increase, although genuine issues of material fact exist as to the precise amount. As such, the plaintiff is entitled to judgment as to liability. See Practice Book § 17-50 (" [a] summary judgment, interlocutory in character, may be rendered on the issue of liability alone, although there is a genuine issue as to damages").
Genuine issues of fact exist that preclude judgment as to the issue of damages. Under the policy, premiums are calculated by taking the work classification of the employees in question and multiplying it by a premium basis. Per the Kidd affidavit, plaintiff's exhibit C, this premium was calculated as follows. Payments by the defendant to TRP totaled $652, 430. The exposure classification of TRP fell under the painting classification which carries a premium rate of $17.15 per $100.00. As TRP did not secure workers' compensation insurance, the payments to TRP were used to compute the premium. Payments of $652, 430 to TRP were multiplied by the premium rate of .1715 which equals $111, 891.75 in premium for the insurance provided to the defendant for TRP. The final adjusted earned premium amounted to $180, 338 in earned premium, of that the defendant paid $82, 505, leaving a remaining balance of $97, 833.
The defendant argues that as the plaintiff has moved for judgment as to liability and damages, they have foregone moving to the former alone. This argument is unavailing. The defendant offers no cases in support of this assertion. There are numerous cases, however, in which judgment has been bifurcated as to liability and damages, and not simply at the moving party's request. See CNA v. Roofs by Welch, Inc., Superior Court, judicial district of Hartford, Docket No. CV-12-6027764-S (May 2, 2014, Scholl, J.) [58 Conn. L. Rptr. 143, ] (court entered judgment on damages after previously being granted as to liability); Elevator Service Co., Inc. v. Regional Scaffolding & Hoisting Co., Inc., Superior Court, judicial district of Waterbury, Docket No, CV-10-6004188-S (March 27, 2013, Shapiro, J.) (55 Conn. L. Rptr. 748, ) (judgment rendered as to liability; issue remained as to damages in commercial contract payment dispute). Furthermore, as noted previously, it is clear that the plaintiff is entitled to an increased premium.
The defendant provides three separate bases for attacking the accuracy of the premium alleged to be owed to the plaintiff: (1) the premium does not account for the period where TRP may have been covered; (2) the amount calculated does not include markup; and (3) the amount charged should not include payments directly to Tola who, as a sole proprietor, waived coverage. The first two arguments are unavailing, the third leaves an unresolved issue of fact.
As to the first basis, the plaintiff has shown that TRP was not covered during the relevant policy period, and the defendant has failed to offer any rebuttal evidence. Accordingly, this argument fails.
The second argument, that the premium charged should not include markup is unpersuasive. In making this argument, the defendant notes that markup does not entail risk that the plaintiff was exposed to in insuring the defendant. As such, it should not be included in the calculated premium, rather only actual remuneration or payroll should be used. The premium to be charged in this matter, however, is ultimately controlled by the language of the policy. Section Five C of the policy provides that " [i]f you do not have payroll records for these persons [that could make us liable for workers' compensation], the contract price for their services and materials may be used as a premium basis ." (Emphasis added.) There is no evidence suggesting that these records were provided. The employees of TRP are of a type that could make the defendant liable for workers' compensation; accordingly, the contract price for their services can be used to calculate the premium.
Lastly, the defendant argues that the premium should not include amounts payable to Tola directly as he waived coverage for himself as a sole proprietor. The defendant is correct regarding this issue. A sole proprietor may waive coverage under the workers' compensation act. See General Statutes § 31-275(10). See also See CNA v. Roofs by Welch, Inc., Superior Court, judicial district of Hartford, Docket No. CV-12-6027764-S (May 2, 2014, Scholl, J.) [58 Conn. L. Rptr. 143, ] (" [b]oth parties agree that a sole proprietor . . . is not required to have workers' compensation insurance coverage for himself but only for his employees"). The term " sole proprietor" is not specifically defined under the act. Black's Law Dictionary (9th Ed. 2009) defines " sole proprietorship" as " [a] business in which one owns all the assets, owes all the liabilities, and operates in his or her personal capacity" or " [o]wnership of such a business." The affidavit of Jane Sullivan, attests that Tola is the owner and sole proprietor of TRP. Furthermore, the defendant submitted evidence showing that Tola elected to waive coverage. See defendant's exhibit C. Accordingly, as Tola was a sole proprietor, he was able to, and did, waive workers' compensation coverage. The plaintiff does not appear to dispute that Tola is a sole proprietor, nor that he could elect to waive coverage. There is no indication in the record as presented that such payments are not included in the final premium. Furthermore, the deposition of Jane Sullivan indicates that they provided the plaintiff's auditor with Tola's election to waive coverage. See Sullivan Dep. 41:20-42:2. Consequently, if payments directly to Tola were included in the premium, they should not have been.
The plaintiff argues that it does not matter whether payments to Tola are included as the premium; it is entitled to charge the contract price of services if payroll records are not provided. This argument is belied by the language of the policy. Section Five C of the policy provides that a premium can be calculated using payroll or remuneration for persons that " could make us liable . . ." (Emphasis added.) Furthermore, the policy provides that " [i]f you do not have payroll records for these persons, the contract price for their services and materials may be used as the premium basis." Interpreting the language of this policy, the plaintiff may only use the contract price for persons that could make the plaintiff liable . A court dealing with identical language in an insurance policy noted that the premium to be calculated is based on remuneration paid to persons that actually expose the insurer to liability. See CNA v. Roofs by Welch, Inc., Superior Court, Docket No. CV-12-6027764-S. No such risk exists here as Tola waived coverage. Accordingly, a genuine issue of material fact exists concerning the amount of damages.
CONCLUSION
Accordingly, for the foregoing reasons, the plaintiff's motion for summary judgment is hereby granted as to liability only on count one. Because this case is decided on the basis of a valid contract between the parties, there is no need for the court to address count two. See Gagne v. Vaccaro, 255 Conn. 390, 401, 766 A.2d 416 (2001), on appeal after remand, 80 Conn.App. 436, 835 A.2d 491 (2003), cert. denied, 268 Conn. 920, 846 A.2d 881 (2004) (lack of a remedy on a contract is a precondition for recovery based on either unjust enrichment or quantum meruit). Finally, the plaintiff must claim this matter for a hearing in damages to resolve the issue of the balance due to the plaintiff concerning the adjusted premium.