Juana Polanco Urena v. A&D Freight Logistics, LLC ( 2024 )

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
This opinion shall not "constitute precedent or be binding upon any court ." Although it is posted on the
internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-2302-21
JUANA POLANCO URENA,
Petitioner-Respondent,
v.
A&D FREIGHT LOGISTICS, LLC,
Respondent-Respondent/
Cross-Appellant,
and
TRIPLE STAR TRANSPORT,
Respondent-Respondent,
and
RIO SERVICES, INC.,
Respondent,
and
A&D CONTAINER LOGISTICS, LLC,
Respondent-Respondent.
_________________________________
HARTFORD UNDERWRITERS
INSURANCE COMPANY,
Respondent-Appellant/
Cross-Respondent,
and
NEW JERSEY CASUALTY
INSURANCE COMPANY,
Respondent.
_________________________________
Argued October 30, 2023 – Decided July 29, 2024
Before Judges Mawla, Marczyk, and Chase.
On appeal from the Division of Workers'
Compensation, New Jersey Department of Labor and
Workforce Development, Claim Petition Nos. 2017-
10893, 2017-11163, 2017-11217, and 2017-22658.
David J. Dering argued the cause for appellant/cross-
respondent Hartford Underwriters Insurance Company
(Leary, Bride, Mergner & Bongiovanni, attorneys;
David J. Dering, of counsel and on the briefs).
Keith E. Nagy argued the cause for respondent/cross-
appellant A&D Freight Logistics, LLC (Capehart &
Scatchard, PA, attorneys; Keith E. Nagy, on the briefs).
William T. Freeman argued the cause for respondent
A&D Container Logistics, LLC (Brown & Connery,
LLP, attorneys; William T. Freeman, on the brief).
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Richard J. Williams, Jr., argued the cause for
respondent New Jersey Casualty Insurance Company
(McElroy, Deutsch, Mulvaney & Carpenter, LLP,
attorneys; Richard J. Williams, Jr., of counsel and on
the brief).
Ricky Edward Bagolie argued the cause for respondent
Juana Polanco Urena (Bagolie Friedman, attorneys;
Ricky Edward Bagolie, on the brief).
PER CURIAM
Hartford Underwriters Insurance ("Hartford") appeals from a February 15,
2022 order by the Department of Labor and Workforce Development, Division
of Workers' Compensation, denying its motion to dismiss petitioner Juana
Polanco Urena's claim for lack of coverage. The workers' compensation court
held Hartford did not comply with statutory requirements to effectively cancel
its policy. A&D Freight Logistics, LLC ("Freight") cross-appeals from the
court's January 19, 2022 and February 15, 2022 orders finding that it was liable
for dependency benefits as decedent's employer. We affirm.
I.
A.
This case involves a coverage dispute involving multiple carriers:
Hartford, New Jersey Property Liability Insurance Guarantee Association
("NJPLIGA"), New Jersey Casualty Insurance Company ("NJCIC"), and New
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3
Jersey Manufacturers Insurance ("NJM"). The dispute arises out of a fatal
accident involving decedent Carlos Urena Valverde, which occurred on March
31, 2017.
Decedent was the owner-operator of Triple Star Transport, LLC ("Triple
Star"). He was assigned to transport materials through the companies A&D
Container Logistics, LLC ("Container") and Freight. Container was insured by
NJCIC. Freight was insured by NJPLIGA. 1 Triple Star was insured by Hartford.
Petitioner, decedent's wife, filed separate claim petitions for dependency
benefits against Triple Star, Container, and Freight, later amending them to
include their insurers (Hartford, NJM, and NJPLIGA, respectively). Hartford
filed an answer claiming the policy issued to Triple Star was cancelled prior to
the date of the fatal accident. NJM, NJCIC, and Container filed separate answers
claiming Freight, not Container, was the employer of decedent. Freight filed an
answer denying it employed decedent. Hartford moved to dismiss for lack of
coverage.
The court consolidated the various claim petitions and proceeded with
testimony to address the issues regarding compensability, employment, and
1
Freight was previously insured by Guarantee Insurance Company
("Guarantee"), which is now insolvent. NJPLIGA replaced Guarantee as the
insurer for Freight.
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Hartford's motion regarding coverage. On January 29, 2020, following the
testimony of petitioner, defendants conceded the issue of dependency. 2
After Hartford presented witnesses on the issue of cancellation, the court
found Hartford "failed to establish that it properly effectuated cancellation of its
policy with Triple Star" on February 17, 2021. 3 The court also found decedent
worked for Freight and further determined Hartford, Freight, and Container were
responsible to pay dependency benefits. It concluded, under dual employment
principles, that all three carriers were equally liable to provide dependency
benefits to petitioner.
Hartford moved for reconsideration on the cancellation issue and was
permitted to reopen discovery to present additional witness testimony. The court
thereafter withdrew its original decision concerning the cancellation of
Hartford's policy. The court subsequently took testimony from additional
2
The court also issued an interim order that Hartford shall pay petitioner
benefits without prejudice, subject to an order of reimbursement, should the
court later determine another party liable for such benefits.
3
The court initially determined Hartford failed to sustain its burden that it
properly cancelled the policy issued to Triple Star because Hartford failed to
present testimony from a corporate representative with factual knowledge
regarding the circumstances surrounding the cancellation of the Hartford policy.
Accordingly, Hartford could not establish that it complied with N.J.S.A. 34:15 -
81.
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witnesses Hartford presented in March 2021. On January 19, 2022, the court
rendered a supplemental decision and opinion concluding Hartford had not
properly cancelled the policy issued to Triple Star. Pursuant to the decisions
rendered on February 17, 2021, and January 19, 2022, the court entered an order
denying Hartford's motion to dismiss for lack of coverage and determined that
Triple Star through Hartford, Freight through NJPLIGA, and Container through
NJM were to pay dependency benefits in equal shares.
B.
By way of background, Triple Star obtained insurance with Hartford
through the New Jersey Workers' Compensation Insurance Plan ("the Plan").
The Plan is a program established by the New Jersey Compensation Rating and
Inspection Bureau ("the Bureau") to ensure that all employers in New Jersey
have a source from which they can obtain statutorily mandated workers'
compensation insurance. When three insurance carriers have declined to write
coverage for an employer, that employer is then permitted to apply to the
Bureau, who will then assign an insurer to issue the policy to the employer under
the Plan.
In May 2016, Triple Star applied to the Bureau for coverage under the
Plan with the assistance of the licensed insurance broker, Chadler Solutions
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("Chadler"). Michael Iannoconi, the CEO of Chadler, testified regarding the
application for insurance made on behalf of Triple Star. Iannoconi identified
Triple Star's application for insurance through the Plan. He explained that
applications to the Plan contain the following language:
I AGREE TO MAKE AVAILABLE ALL RECORDS
NECESSARY FOR A CARRIER OR RATING
BUREAU AUDIT AND TO PERMIT THE AUDITOR
OR OTHER REPRESENTATIVE TO MAKE A
PHYSICAL INSPECTION OF OUR
PREMISES/OPERATIONS. I UNDERSTAND THAT
FAILURE TO DO THIS MAY RESULT IN
TERMINATION OF THE COVERAGE PROVIDED,
CIVIL PENALTIES AND/OR CRIMINAL
PROSECUTION.
The application further requires the producer to explain the procedures
to the applicant. It notes:
I HEREBY CERTIFY THAT I HAVE READ AND
UNDERSTAND THE INSTRUCTIONS RELATED
TO THIS FORM AND HAVE FULLY EXPLAINED
THE RULES AND PROCEDURES OF [THE PLAN]
TO THE INSURED.
The policy also contained a "Workers' Compensation Insurance Eligibility
Endorsement." This document stated the insured agreed to allow the insurance
provider to "examine and audit [the insured's] records and otherwise fully
cooperate with [the insurer's] attempts to conduct premium audits or inspect the
workplaces." It continues in bold type to advise the insured: "Your compliance
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with each eligibility condition is material to the continuation of coverage
through the . . . Plan. [The insurer] may, to the extent allowed by the . . . Bureau,
initiate a mid-term cancellation, if you fail to comply with any of these policy
conditions."
Iannoconi explained Chadler generally followed certain procedures to
ensure applicants like Triple Star acknowledged the above language quoted from
the application. He also stated that it was the practice of his brokerage
employees to discuss with the clients that they need to be prepared for an audit.
After Triple Star's application to the Plan was submitted, the Bureau
assigned Hartford to write a policy for Triple Star, and Hartford issued a policy
to cover Triple Star from May 5, 2016 to May 5, 2017. Hartford contracted with
Travelers Indemnity Company ("Travelers") to administer their policies under
the Plan, and an underwriting employee of Travelers, Joanne Sadler, was
assigned to underwrite the Hartford policy.
Sadler testified that, upon receipt of the assignment of the policy issued
to Triple Star, she determined the policy required a preliminary audit based on
"[p]articular codes and premium thresholds." Sadler explained she did not have
a personal recollection of the steps taken to audit the policy. Based on her
review of the records, auditors at Travelers called Triple Star multiple times to
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schedule the audit. On July 16, 2016, Hartford sent a "Notice of Noncooperation
with Physical Audit" to Triple Star via certified mail. Sadler confirmed the
notice sent to Triple Star was returned by the U.S. Postal Service with a notation:
"unclaimed unable to forward." Sadler then sent a letter to the Bureau informing
them of Triple Star's noncooperation and requesting they "intercede and
instruct" Triple Star that cooperation is necessary under the Plan.
On October 25, 2016, the Bureau in turn sent a letter to Triple Star stating
its "failure to cooperate will jeopardize [its] continued right to coverage." This
letter notified Triple Star that it had twenty days "to make arrangements to
complete the required audit." It noted that "[f]ailure to contact the carrier within
this time frame [would] result in [the Bureau's] authorization to cancel [Triple
Star's] coverage." On the same day, the Bureau sent a letter to Hartford advising
the Bureau had notified Triple Star and stating: "Please notify our office if the
requirements are met. If you do not hear from the employer within the time
frame stipulated in the attached letter, you may proceed to issue a notice to
initiate cancellation of coverage for non-compliance with [the Plan] rules."
Sadler could not recall if Triple Star responded to the requests, and she did not
recall if she was the only underwriter assigned to Triple Star's file. She also did
not know if the policy issued to Triple Star was paid in full. On November 30,
A-2302-21
9
2016, Hartford sent the notice of cancellation to Triple Star with an effective
cancellation date of January 20, 2017.
Marcia Coke, the output manager of Travelers' mailing/data center located
in Georgia, explained her department handled the mailing of cancellation notices
to employers like Triple Star in New Jersey. She noted the data center was
responsible for mailing two to three million items per month. Coke did not
personally mail the notices related to Triple Star, but she performed a
supervisory role in the mail center. The employee who signed the certification
for the "direct notice of cancellation list" mailing purportedly sent to Triple Star
was Nicole Halliday (who did not testify). Coke testified the certification page
on the cancellation notice sent to Triple Star indicated it was mailed on
November 30, 2016. She explained a U.S. Postal Service employee would come
to her facility and sign and stamp the form prepared by Travelers as a
certification that the post office received the mailings.
Gregory Johnson, a senior compliance consultant with Travelers,
explained members of his compliance team were responsible for the standard
certification process of the cancellations sent to the Bureau. He wrote and
electronically signed an email to the Bureau informing them Hartford had
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cancelled Triple Star's policy. 4 Johnson signed a certification, which stated, "the
undersigned on behalf of the carrier further certifies that notice to terminate the
stated contracts of insurance have been given to employers in accordance with
the requirements." Johnson explained Hartford regularly emails its cancellation
list to the Bureau and includes the policy details, the date the cancellation was
mailed to the employer, and the date of the intended cancellation. He had no
specific knowledge if the notice of cancellation was mailed to Triple Star.
Importantly, he added he was not involved in the decision to cancel Triple Star's
policy.
C.
Petitioner testified she believed decedent was an employee of Freight
prior to his accident. She explained decedent received paychecks from Freight
and Container. Decedent owned Triple Star, which consisted of a truck and a
trailer. When presented with a photograph of the vehicle depicting the "A&D
Freight Logistics, LLC" decal on the side of decedent's truck, petitioner stated:
"That's the company my husband worked for." Additionally, decedent was using
and displaying Freight's Department of Transportation ("DOT") number to
4
Triple Star was one of several entities listed on an Excel spreadsheet sent to
the Bureau.
A-2302-21
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legally transport loads across state lines for Freight. She also testified decedent
did not deliver freight for any companies other than Freight or Container.
Decedent was also required to undergo drug testing pursuant to Freight's drug
testing policy.
Triple Star and Freight entered into a lease agreement in April 2016. The
lease provided that Triple Star would transport goods for Freight for a period of
one year subject to automatic renewal "unless terminated earlier by either party."
The lease noted that Triple Star was solely responsible for the operation of the
equipment and transportation of freight on behalf of Freight. It required Triple
Star to "remain licensed and authorized by the [DOT] to provide interstate
transportation services," as well as notify Freight if its "[o]perating [a]uthority
[was] revoked, suspended[,] or rendered inactive." The lease also stated Triple
Star may not "re-lease, assign[,] or subcontract . . . without written consent." It
further stated the relationship between the parties "shall, at all times, be that of
an independent contractor, and nothing in this Agreement shall be construed to
create an employee employer relationship."
The Occupational Safety and Health Administration Investigation Report
pertaining to decedent's accident stated decedent kept a driver's "daily log" for
Freight in the truck. Driver settlement statements from Freight showed Freight
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deducted $140 per week from decedent's pay for workers' compensation
coverage. Freight issued a 1099-MISC documenting $127,545.24 in income
paid to Triple Star in 2016. Photographs of the truck decedent was operating on
the day of the accident showed a clearly visible decal that read "A&D Freight
Logistics, LLC."
Michael Mastrangelo, an owner of Freight, explained that Freight (a
freight-hauling business) and A&D Logistics (a garbage-hauling business) were
originally insured together under a single workers' compensation policy issued
by Guarantee, but the owners of the companies believed Guarantee was going
to "[get] rid of" the insurance policy for Freight. Mastrangelo stated Freight
attempted to purchase its own workers' compensation policy, but it was denied
by several insurance companies due to the common ownership between Freight
and Logistics. In December 2016, Mastrangelo and his partners formed
Container, a new entity, for the "sole purpose" of obtaining workers'
compensation coverage for the owner/operators that worked for both companies
because it was determined that certain of the owner/operators were not
maintaining workers' compensation coverage despite their contracts with
Freight requiring them to maintain same. Iannoconi testified Container created
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an umbrella policy for owner/operators, which became effective in December
2016, and was in effect on March 31, 2017.
D.
Regarding Freight's argument it was not a special employer of decedent,
the court concluded decedent was operating a truck, which he owned and for
which he maintained workers' compensation coverage with Hartford at the time
of the March 31, 2017 accident. The court noted "decedent worked or hauled
for [Freight,] which also maintained workers' compensation insurance and for
which deductions were being made directly from the decedent's wages for the
express purpose of paying workers' compensation insurance under the
[Container] policy underwritten by [NJM]." The court also noted the policy was
in effect on March 31, 2017.
The court stated decedent was driving his truck for Freight under "its lease
agreement with Triple Star," and the truck was insured not only through the
Hartford policy with Triple Star but also through the Container policy.
Accordingly, decedent was an employee of Freight at the time of his death.
Relying on Vitale v. Schering-Plough Corp., 447 N.J. Super. 98, 116 (App. Div.
2016), the court noted that New Jersey workers' compensation law "recognizes
that an employee may have two employers, both of which may be liable for
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compensation." The court further relied on the three-prong test for establishing
a special employment relationship under Volb v. G.E. Capital Corp., 139 N.J.
110, 116 (1995).
The court determined, "by virtue of the lease agreement between Triple
Star . . . and [Freight] and the fact that [Freight] deducted $140 per week . . .
from the decedent's pay for workers' compensation coverage," decedent was an
employee of Freight. Further, because decedent was hauling for Freight to a
Freight customer located in Maryland on the day of the accident, the work was
"essentially that of the special employer and in a truck bearing [Freight's] decal
and . . . [DOT] number." It ruled that Freight "controlled the details of the work
being performed by the decedent, including the amount to be paid for the haul,
the materials being hauled or transported, the customer being delivered to, and
the time and place where the freight had to be delivered." Additionally, the court
noted that Freight "paid all of the wages earned by the decedent based upon the
unrebutted testimony of . . . [p]etitioner and a review of [his] tax returns."
Moreover, Freight "had the power to discharge [decedent] in this matter,
notwithstanding the right of either party by the terms of the lease agreement, to
terminate the lease upon written notice." Furthermore, decedent worked
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exclusively for Freight, and he died in a work-related accident while employed
by Freight.
The court next addressed Hartford's arguments that it properly cancelled
Triple Star's policy. The court considered the testimony of three additional
witnesses from Hartford. Relying on N.J.S.A. 34:15-81 and the New Jersey
Employer's Liability Insurance Manual, Part 3, § 13, it held that Hartford "failed
to sustain its burden to establish that it properly cancelled the policy with . . .
Triple Star." The court noted Hartford failed to comply with the "strict
prescriptions" set forth in N.J.S.A. 34:15-81 and the New Jersey Employer's
Liability Insurance Manual. It determined, "the . . . testimony presented by the
three corporate representatives of . . . Hartford lacked sufficient factual
knowledge regarding the submitted documents in support of the cancellation ."
Despite Sadler's knowledge regarding the underwriting of the policy, the court
noted it was unable "to present sufficient factual evidence" regarding the
cancellation of Hartford's policy with Triple Star.
The court further noted that Sadler did not make any of the calls directly
to Triple Star, and she did not know "whether there was ever a response by the
insured arranging for the audit." It determined Sadler was not aware of whether
she was the only underwriter or if the policy was paid off. Although Hartford
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presented Coke's testimony, she could not certify the documents "were in fact
presented to the [U.S. Postal Service] because A. Davis," was the only person
competent to testify the documents were presented to the post office.
Accordingly, the court determined Hartford could not satisfy its burden under
N.J.S.A. 34:15-81(a).
The court further determined Hartford failed to establish under N.J.S.A.
34:15-81(b) that it provided the Bureau with a "certified statement" that the
notice of cancellation was given to the employer by registered mail. It noted
Johnson "did not have personal knowledge that the notice of cancellation was
sent to Triple [Star] . . . and the only person competent to testify . . . as required
by . . . N.J.S.A. 34:15-81, that the notice provisions were complied with was
Nicole Halliday, a witness not presented." The court concluded that Hartford
failed to establish it effectuated a valid cancellation of its policy with Triple Star.
II.
On appeal, Hartford argues as follows:
POINT I: THE ORDER BELOW SHOULD BE
REVERSED AS THE EVIDENCE ESTABLISHED
THE REQUIRED ELEMENTS OF CANCELLATION
BY A PREPONDERANCE OF THE EVIDENCE.
POINT II: HARTFORD COMPLIED WITH ALL
REQUIREMENTS FOR CANCELLATION OF THE
POLICY AT ISSUE UNDER THE STATUTES AND
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ADMINISTRATIVE REGULATIONS WHICH ARE
ACTUALLY APPLICABLE TO THIS
CANCELLATION.
POINT III: THE COURT BELOW WAS CORRECT
IN DETERMINING THAT [FREIGHT] WAS AN
"EMPLOYER" OF THE DECEDENT FOR
PURPOSES OF LIABILITY FOR WORKERS'
COMPENSATION BENEFITS.
On the cross-appeal, Freight argues as follows:
POINT II-A: THE TRIAL COURT ERRED IN
FINDING [FREIGHT] LIABLE AS A SPECIAL
EMPLOYER AS TRIPLE STAR WAS AN
INDEPENDENT CONTRACTOR WITH AN ACTIVE
POLICY ISSUED BY . . . HARTFORD.
POINT II-B: THE TRIAL COURT ERRED IN
FINDING THAT THE POLICY ISSUED TO
[FREIGHT] IS LIABLE FOR BENEFITS AS THE
INTENTION OF THE PARTIES WAS FOR THE
POLICY ISSUED TO [CONTAINER] TO BE LIABLE
FOR BENEFITS IN THE EVENT OF LOSS FOR AN
UNINSURED SUBCONTRACTOR.
Appellate courts review the factual findings made by a workers'
compensation court with "substantial deference" in recognition of the
compensation court's expertise and opportunity to hear witnesses and assess
their credibility. Goulding v. N.J. Friendship House, Inc., 245 N.J. 157, 167
(2021). Therefore, review "is limited to 'whether the findings made could
reasonably have been reached on sufficient credible evidence present in the
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record, considering the proofs as a whole.'" Sager v. O.A. Peterson Constr., Co.,
182 N.J. 156, 163-64 (2004) (quoting Close v. Kordulak Bros., 44 N.J. 589, 599
(1965)). The applicable standard of appellate review requires that we defer to a
workers' compensation judge's findings when those findings "reasonably could
have been reached on the basis of sufficient credible evidence in the record, with
due regard to the agency's expertise." Brock v. Pub. Serv. Elec. & Gas Co., 149
N.J. 378, 383 (1997). We likewise defer to a compensation judge's findings that
the evidence adduced was not credible, sufficient, or persuasive.
"An agency's interpretation of a statute, however, although entitled to
some weight, is not binding on the reviewing court." Goulding, 245 N.J. at 167
(quoting Brock, 149 N.J. at 383). Rather, "courts remain the 'final authorities'
on issues of statutory construction and [need not] 'stamp' their approval of the
administrative interpretation." Ibid. (alteration in original) (quoting Koch v.
Dir., Div. of Tax'n, 157 N.J. 1, 8 (1999)).
In applying provisions of the Workers' Compensation Act, N.J.S.A.
34:15-1 to -147 ("the Act"), it is long-settled that it "is humane social legislation
designed to place the cost of work-connected injury upon the employer who may
readily provide for it as an operating expense." Ibid. (quoting Tocci v. Tessler
& Weiss, Inc., 28 N.J. 582, 586 (1959)). Accordingly, courts must "liberally
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constru[e] the Act to implement the legislative policy of affording coverage to
as many workers as possible." Ibid. (alteration in original) (quoting Brower v.
ICT Grp., 164 N.J. 367, 373 (2000)).
A.
1.
Hartford argues the court held it to an unreasonably high standard and
failed to recognize the burden of proof applicable to Hartford's cancellation
claim was merely that of a preponderance of the evidence. Hartford contends it
cancelled the workers' compensation policy it issued to Triple Star and,
therefore, it should not be required to defend the claim made by petitioner for
injuries that led to decedent's death.
Hartford asserts the court erred when it faulted Sadler's testimony on the
basis that she was not the actual employee who made the audit calls to Triple
Star. According to Hartford, the court incorrectly concluded that because Sadler
did not make the calls to Triple Star, those calls could only be proven by
testimony from the actual callers, rather than the business records of the calls.
Hartford argues Sadler's testimony falls under the business record exception to
the hearsay rule. N.J.R.E. 803(c)(6). It emphasizes the New Jersey Supreme
Court in Mahoney v. Minsky mandated courts "cease to be pedantic and
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endeavor to be practical" in their application of the business record exception.
39 N.J. 208, 217 (1963) (quoting 5 Wigmore on Evidence, § 1530, p. 379 (3d
ed. 1940)). Hartford asserts there is no requirement that the foundation witness
possess any personal knowledge of the act or event recorded. State v. Martorelli,
136 N.J. Super. 449, 453 (App. Div. 1975). Additionally, petitioner did not
introduce any evidence to rebut Sadler's testimony.
Hartford further argues the court erred in concluding it presented no
evidence that the Bureau gave permission to cancel its policy issued to Triple
Star. It notes that after it notified the Bureau of Triple Star's non-compliance,
the Bureau responded: "If you do not hear from the employer within the time
frame stipulated in the attached letter, you may proceed to issue a notice to
initiate cancellation of coverage for non-compliance . . . ."
Hartford claims the court erred in concluding it had not met the notice
requirement. It argues the onus was on Triple Star to update its address with its
insurers. Hartford cites Cardinale v. Mecca, claiming the insurer may rely on
the address given to it by the insured for all notices regarding policy, even if the
mail is returned undeliverable. 175 N.J. Super. 8, 12 (App. Div. 1980). Because
Triple Star never updated its address, Hartford was justified in relying on the
address.
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Hartford further asserts the court held it to an unreasonable burden on
establishing the cancellation notice was mailed to Triple Star. It asserts "there
is nothing in [the] Workers' Compensation Statute which speaks to the requisite
proofs required to demonstrate compliance with the statute's provisions."
Hartford instead points to similar provisions in the auto insurance statute
requiring the insurer to maintain a U.S. Postal Service date-stamped proof of
mailing showing the name and address of the insured and to retain a duplicate
copy of the mailed notice which is certified to be a true copy by an employee of
the insurer. N.J.S.A. 17:29C-10. Hartford claims this standard was adopted by
the Legislature in response to an "unjustifiably heightened standard of proof"
established by the New Jersey Supreme Court in Weathers v. Hartford Insurance
Group, 77 N.J. 228 (1978). This guidance from the auto insurance statute
influenced Hartford's mailing practices in this matter.
Hartford adds, relying on Waite v. Doe, 204 N.J. Super. 632 (App. Div.
1985), it is practical to reject such a high standard of proof because "[t]he mass
mailing of insurance notices by a national insurance company is not akin to the
proofs and recollections which are regularly available to those who mail single,
specific items." Given the volume of mailings and employment turnover,
Hartford urges us to employ a more reasonable standard, such as that utilized by
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the Supreme Court in SSI Medical Services, Inc. v. State, Department of Human
Services, 146 N.J. 614, 624 (1996). There, the Court stated:
[W]here the business organization is large, the nature
of the business operations is complex, and the items
mailed on a daily basis are voluminous, it may not be
possible for individuals engaged in mailing activities to
recall actual mailing of a document or whether the
custom or practice of mailing was followed on a given
day. . . . In such cases, other corroborating proof
creating the reasonable inference that the custom was
followed on the given occasion may suffice to establish
proof of mailing.
[Ibid.]
Additionally, Hartford argues the court erred in concluding it did not
comply with the certification requirement of N.J.S.A. 34:15-81(b), because the
employee who submitted the certification lacked personal knowledge as to the
actual mailing of the cancellation notice. It argues the certification requirement
means the carrier is only responsible for showing that an individual at the carrier
can verify the cancellation notice was sent, but the individual need not have
personal knowledge of the mailing. Hartford claims New Century Financial
Services, Inc. v. Oughla, 437 N.J. Super. 299, 326 (App. Div. 2014), supports
that the affiant may rely upon records kept in the regular course of business as
the basis for their knowledge. It contends that although its certifying employee,
Johnson, "may not have had personal knowledge as to the mailing of the notice
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of cancellation, he had sufficient knowledge to be the employee charged with
certifying the company's information . . . pursuant to N.J.R.E. 803(c)(6)."
2.
In Sroczynski v. Milek, the Court noted that because of the public policy
favoring workers' compensation insurance, insurers must strictly comply with
N.J.S.A. 34:15-81 to avoid allowing a carrier to evade their obligation to provide
workers the coverage to which they are entitled. 197 N.J. 36, 41-43 (2008)
(affirming substantially for the reasons expressed in the judge of compensation's
opinion). The cancellation of workers' compensation insurance is governed by
N.J.S.A. 34:15-81, which provides in relevant part:
Any contract of insurance issued by a stock
company or mutual association against liability arising
under this chapter may be canceled by either the
employer or the insurance carrier within the time
limited by such contract for its expiration.
No such policy shall be deemed to be canceled
until:
a. At least ten days' notice in writing of the
election to terminate such contract is given
by registered mail by the party seeking
cancellation thereof to the other party
thereto; and
b. Until like notice shall be filed in the
office of the commissioner of banking and
insurance, together with a certified
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statement that the notice provided for by
paragraph "a" of this section has been
given; and
c. Until ten days have elapsed after the
filing required by paragraph "b" of this
section has been made.
[(Emphasis added).]
In short, a carrier effectuates a cancellation after providing both notice of
cancellation by registered mail to the insured and "like notice" to the Bureau
with a certified statement confirming notice was sent to the insured.
Pursuant to its authority under N.J.S.A. 34:15-90.2, the Bureau set forth
requirements for cancellation in the Bureau Manual, which allows insurers to
conduct audits and terminate a policy for non-compliance by following this
procedure:
(a) Written documentation to the . . . Bureau citing the
Endorsement provision(s) in violation, to include
certified mailing delivery confirmation to the employer
and producer, if any, for compliance.
(b) After review, and upon the . . . Bureau's satisfaction
of the carrier's efforts, the . . . Bureau will notify the
employer, and producer, if any, in writing, of the
carrier's formal request for termination. Such
notification will allow the employer an additional
[twenty] business days to comply with the policy
provisions and authorize the carrier to begin
cancellation if the carrier is not contacted within
[twenty] business days.
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(c) Issuance by the carrier of the approved notice of
cancellation shall provide the employer with [thirty]
days advance notice of termination.
(d) Resultant compliance by the employer prior to, or
within [thirty] days after, the effective date of
cancellation shall result in reinstatement or issuance of
short[-]term insurance as provided for in 3:14-8(14)(a),
(b) and (c) of the Plan.
[N.J. Comp. Rating & Inspection Bureau, N.J. Workers
Comp. & Emps. Liab. Ins. Manual, Part 3 § 14.8(11)
(2021).]
Pursuant to these guidelines, Hartford sent the letter to the Bureau
explaining Triple Star was not cooperating with the audit attempts. This letter
included copies of the certified mailings to Triple Star and Chadler. On October
25, 2016, Hartford received the Bureau's response permitting them to initiate
cancellation if they did not hear from Triple Star within the time frame provided.
On November 30, 2016, Hartford sent the notice of cancellation to Triple Star
with an effective cancellation date of January 20, 2017. To comply with the
"like notice" requirement in N.J.S.A. 34:15-81(b), Hartford emailed spreadsheet
data including the cancellation of its policy issued to Triple Star, with a
certification statement signed by Johnson.
We begin by addressing Hartford's compliance with N.J.S.A. 34:15-81(b).
The New Jersey Supreme Court addressed the certified statement requirement
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from N.J.S.A. 34:15-81(b) in Sroczynski. 197 N.J. at 43. There, an insurer sent
notice of cancellation by certified mail to the employer but filed its "like notice"
with the Bureau via an electronic file transfer protocol as advised in the Bureau
Manual. Id. at 39-41. The Court found the insurer did not effectively cancel the
policy because it failed to file a certified statement when it electronically
transmitted the data. Id. at 44. The Court stated:
[T]he Legislature did not simply require notice to the
Commissioner but also commanded that the insurer
provide a certification by an employee attesting to the
truthfulness of the fact that proper notice was afforded
the insured. Although the legislative history of the Act
is sparse, it seems obvious that the purpose of that
provision was to place personal responsibility on an
employee of the insurer to assure that proper notice of
cancellation was given and to require that employee to
certify to that fact, recognizing the legal implications
of a false certification. The electronic provision of
information to the Commissioner, without a
certification, completely defeats the notion of personal
responsibility that the certification provision was
intended to secure.
[Id. at 44.]
Sroczynski differs from the matter before us because that matter involved
a failure to provide a certification accompanying the notice to the Bureau. Id.
at 41. Here, Hartford did have a practice of sending a signed certification to the
Bureau via email and followed that practice when effecting the cancellation of
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its policy issued to Triple Star. Hartford also produced an employee, Johnson,
who testified to signing the certification. However, the Court in Sroczynski was
concerned about the person executing the certification having knowledge that
the proper notice of cancellation was provided and, therefore, determined that
without a proper certification there would be no one assuming personal
responsibility by recognizing the legal implications of a false certification. Id.
at 44.
Notably, Johnson testified to not knowing if the notice of cancellation was
sent to the employer:
[FREIGHT'S COUNSEL]: I just wanted to clarify . . .
did you have any actual knowledge that the mailing for
this particular policy notice of cancellation went out?
[JOHNSON]: I'm not involved in that procedure at all.
[FREIGHT'S COUNSEL]: Then I just want to refer
you back to [an exhibit] wherein just above your
signature it states that, "the undersigned on behalf of
the carrier further certifies that notice to terminate the
stated contracts of insurance have been given to
employers in accordance with the requirements," but
you had no knowledge as to whether or not the mail
went out?
[JOHNSON]: That's correct. Not my responsibility.
My responsibility is to send the electronic file.
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In accordance with Sroczynski, the certification of the "like notice" to the
Bureau must "place personal responsibility" on the signatory. Ibid. The
signatory must be aware of the "legal implications of a false certification." Ibid.
Here, Johnson was not competent to certify to the Bureau that the notice of
cancellation was mailed to Triple Star, as he did not have the requisite personal
knowledge required by Sroczynski. Given the foregoing, Hartford did not have
in place an adequate procedure that would satisfy the requirement in N.J.S.A.
34:15-81(b).
The court did not err in finding Hartford failed to comply with N.J.S.A.
34:15-81(b). It determined the testimony offered was insufficient to carry
Hartford's burden to show a cancellation under N.J.S.A. 34:15-81(b), when
viewed in light of the public policy that favors the continuation of coverage
unless the insurer strictly complied with all statutory and regulatory
requirements. We decline to second-guess its evaluation of the testimony and
other evidence. Clowes v. Terminix Int'l, Inc., 109 N.J. 575, 588-89 (1988).
The court's decision was amply supported by the record, and we discern no basis
to disturb its finding regarding the cancellation issue. Because Hartford failed
to establish compliance with N.J.S.A. 34:15-81(b), we need not address whether
it complied with N.J.S.A. 34:15-81(a).
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B.
1.
Freight argues the court erred in finding it was liable, through NJPLIGA,
for dependency benefits to petitioner under the "special employee relationship"
theory. The lease agreement between Triple Star and Freight stated the
responsibilities of Freight were limited to the arrangement of transportation of
goods on behalf of its customer. Other restrictions in the agreement noted
Freight did not have any responsibilities in transporting the goods or controlling
the means or methods that Triple Star used to transport them.
Freight contends both parties recognized the relationship was an
independent contractor relationship. It asserts this is supported by Mastrangelo,
who stated Triple Star was free to reject loads for shipping. It contends the
evidence does not support a conclusion that an employee-employer relationship
existed because the three elements set forth in Volb are not present. 139 N.J. at
116. Relatedly, Freight contends the court erred in finding it liable under the
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"control test" or the "business-furtherance test" for finding a "special employee"
relationship. See Galvao v. G.R. Robert Const. Co., 179 N.J. 462, 468 (2004).5
Freight argues Triple Star was not doing the work of Freight or furthering
its business because Freight's work was "limited to the arrangement of
transportation of freight on behalf of its customers." It further contends Triple
Star was "solely responsible for the operation of the equipment and
transportation of [the] freight," and Freight did not control the means of work,
but only the result, which was the delivery of the freight.
NJCIC argues the trial court correctly found a "special employee"
relationship between Freight and decedent. 6 This is because the lease
constituted an express "contract of hire," Freight took workers' compensation
deductions from decedent's pay, decedent engaged in work that was "literally
and exclusively" the work of Freight, and Mastrangelo's testimony demonstrated
Freight "controlled" aspects of the work such as delivery dates and times.
While decedent was frequently compensated by paychecks issued by
Container to Triple Star, Mastrangelo confirmed Freight provided the funds for
5
Similarly, a "control test" and a "relative nature of the work test" are used for
determining if an independent contractor relationship exists. See Lesniewski v.
W.B. Furze Corp., 308 N.J. Super. 270, 280 (App. Div. 1998).
6
Container adopts NJCIC's arguments.
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all owner/operator paychecks issued by Container. Additionally, Freight had
the power to discharge decedent because the lease expressly stated the
agreement "may be terminated without cause at any time by either [p]arty."
These facts, NJCIC argues, satisfy two additional factors in finding a "special
employee relationship," in addition to the elements from Volb. See Vitale, 447
N.J. Super. at 117-18 (quoting Hanisko v. Billy Casper Golf Mgmt., Inc., 437
N.J. Super. 349, 361 (App. Div. 2014) ("Two additional factors may also be
considered: (1) whether the special employer pays the employee's wages; and
(2) whether the special employer 'has the power to hire, discharge or recall the
employee.'")).
2.
An employee is defined as someone who performs a service for an
employer for financial consideration. N.J.S.A. 34:15-36. The definition of
employee is construed broadly to bring as many workers as possible within
coverage. Hannigan v. Goldfarb, 53 N.J. Super. 190, 195 (App. Div. 1958). It
is well-established that the "workers' compensation law recognizes . . . an
employee may have two employers, both of which may be liable for
compensation." Vitale, 447 N.J. Super. at 116; see also Blessing v. T. Shriver
& Co., 94 N.J. Super. 426, 429-30 (App. Div. 1967) ("There is no question that
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in this jurisdiction an employee, for the purposes of workmen's compensation,
may have two employers, both of whom may be liable to him in
compensation . . . .").
To establish a special employee relationship, three factors must be
present. Volb, 139 N.J. at 116. Volb states:
When a general employer lends an employee to a
special employer, the special employer becomes liable
for workmen's compensation only if:
(a) The employee has made a contract of hire, express
or implied, with the special employer;
(b) The work being done is essentially that of the
special employer; and
(c) The special employer has the right to control the
details of the work.
[Ibid. (quoting Blessing, 94 N.J. Super. at 430).]
Courts may also consider whether the special employer "pays the
employee's wages," Vitale, 447 N.J. Super. at 117-18, and whether the special
employer "has the power to hire, discharge[,] or recall the employee." Ibid.(quoting Hanisko, 437 N.J. Super. at 361). Ultimately, "the most important
factor in determining a special employee's status is whether the borrowing
employer had the right to control the special employee's work." Volb, 139 N.J.
at 116.
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Here, the court concluded decedent was a special employee based on the
following: (1) the lease agreement was a "written contract of hire" between
Freight and decedent; (2) Freight's settlement statements showed deductions of
$140 per week from decedent's pay for workers' compensation coverage; (3)
decedent was hauling for Freight on the day of the accident, and the work being
done "was essentially that of the special employer"; (4) decedent's truck bore
the decal and DOT number for Freight; (5) Freight "controlled the details of the
work being performed by the decedent" and determined when and where to
deliver the freight; (6) Freight paid decedent's wages; and (7) Freight had the
power to discharge decedent because the lease expressly stated the agreement
"may be terminated without cause at any time by either [p]arty." Thus, the court
determined the three prongs set forth in Volb were satisfied, along with the
Vitale factors.
There was ample evidence in the record to support the court's decision.
While the lease agreement provided that Triple Star was to be considered an
independent contractor, the lease does not overcome the substantial evidence
that Freight was the special employer of Triple Star.
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To the extent we have not specifically addressed any other arguments
raised on the appeal and cross-appeal, we conclude they lack sufficient merit to
warrant discussion in a written opinion. R. 2:11-3(e)(1)(E).
Affirmed.
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