LM Insurance Corporation v. Wilkinson Roofing and Siding, Inc.

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE
LM INSURANCE )
CORPORATION, )
)
Plaintiff, )
)
v. ) C.A. NlSC-07-236 PRW
)
WILKINSON ROOFING AND )
SIDING, INC., )
)
Defendant. )
Submitted: August 28, 2017
Decided: September 27, 2017
VERDI§ §T AFTER TRlAL
Amy D. Brown, Esquire, Margolis Edelstein, Wilmington, Delaware, Attorney for
Plaintiff.
James S. Green, Sr. Esquire, Seitz, Van Ogtrop & Green P.A., Wilmington,
Delaware, Attorney for Defendant.
WALLACE, J.
I. INTRODUCTION
Plaintiff Liberty Mutual Insurance Corporation (“LM”) filed suit against
Defendant Wilkinson Roofing and Siding, Inc. (“Wilkinson”) for breach of its
insurance coverage contract with LM. LM alleges that Wilkinson owes it an
additional premium from the period it supplied Wilkinson with workers’
compensation insurance coverage for certain jobs performed in Maryland, New
Jersey, and Pennsylvania, along with jobs in Delaware where LM claims Wilkinson
misrepresented the nature of its work in order to secure a lower premium from LM.
Wilkinson denies it owes LM any additional premium. Wilkinson argues it had
workers’ compensation coverage in Maryland, New Jersey, and Pennsylvania, and
therefore LM had no obligation under the terms of the policy to provide coverage in
those states. Wilkinson says little of its admitted (or otherwise proven) falsification
or non-documentation of its work in Delaware and other states.
Af``ter a bench trial and supplemental post-trial briefing by the parties, the
Court finds that Wilkinson is liable for the extra premiums related to Wilkinson’s
failure to properly classify its Delaware job site employees Too, the Court finds
that Wilkinson is liable for additional premiums for out-of-state work performed by
Wilkinson employees sent from Delaware.
II. FACTUAL AND PROCEDURAL BACKGROUND
A. LM CoNTRACTs To PRovIDE WoRKERs’ CoMPENsATloN
CovERAGE To WILKINsoN.
On or about August l, 2010, LM and Wilkinson entered into an insurance
policy contract known as # WC5-33S-344540-020 (the “Policy”).' Wilkinson was
not able to obtain insurance through the voluntary contracting of an Insurer, so it
was placed in a high-risk pool based on the type of work it did.2 Wilkinson was
assigned to LM for insurance.3 The Policy was to cover the period from August l,
2010, to August l, 2011. It stated that LM would provide workers’ compensation
insurance to Wilkinson, and in return, Wilkinson would pay LM for that coverage.
The initial premium quoted in the Policy and paid by Wilkinson was only an
estimate.4 The final premium is calculated at the Policy’s end. The Policy states
that “[i]f the final premium is more than the premium paid to [LM initially], [the
client] must pay [LM] the balance” when the Policy ends.5
l Trial Ex. Binder at EXOOOIS.
2 Tr. at 65.
3 Tr. at 66.
4 Tr. at 5-6, 108-09 (“Those payroll exposures are estimated in the beginning of the policy
period so that we can develop a premium, since the premium is paid prior to the policy expiring,
or ending. The auditor’s job is to go out, either during that policy or after the policy expires, to
obtain the actual payrolls and actual class codes that were applicable to that policy period . . . .”).
5 Trial Ex. Binder at EXOOO42.
The Policy also outlined what Wilkinson had to do in order to comply with
LM’s initial and final premium audits.6 lt states that LM required policy-holders to
“maintain appropriate records . . . to facilitate a thorough audit,” and to “cooperate
with [LM’s] auditors . . . .”7 The Policy also explained how LM calculated the
premium after it gathered Wilkinson’s information through the audits.8
The Delaware Workers’ Compensation Ratings Bureau enumerates codes that
are used to classify employees and the type of work they do.9 Certain types of work
are rated higher than others. Roofing work, for example, is rated higher than clerical
office work because the risk of a roofing employee getting injured or having more
serious injuries is higher than a clerical office employee.‘0 “The premium that is
associated with each one of [the classification codes] is calculated by the payroll that
the insured would incur. . . . [T]he more payroll [the insured] ha[s], the more
exposure [the insured] would have, and therefore, the more premium [the insured]
would pay.”]'
6 Trial Ex. Binder at EX00025.
7 Id.
8 Trlal EX. Binder at EXOOO42~EXOOO43.
9 Tr. at 7.
10 Id_
ll Id
In order to calculate the preliminary premium estimate, LM looks at federal
quarterly payroll reports, the insured’s payroll records, job contracts, and payroll by
job.12 LM takes the information from the insured and makes sure that it matches
generally with what was reported for the insured’s tax returns. Then, LM discusses
with the insured the company’s operations and work.'3
Workers’ compensation for construction companies is broken down by actual
trade, due to the variety of work that comprises construction projects.14 Instead of
having one classification code apply to the entire company, each individual
employee is classified in order to calculate the premium.15 The Delaware Workers’
Compensation Rating Manual (the “Rating Manual”) states:
Each distinct type of construction or erection
operation at a job or location shall be assigned to the
classification which specifically describes such operation
provided separate payroll records are maintained for each
operation. Estimated or percentage allocation of payroll is
not permitted.
Any such operation for which separate payroll
records are not maintained shall be assigned to the highest
Bureau loss cost classification which applies to the job or
location where the operation is performed.
'2 Tr. at ll.
'3 Tr. at 12.
14 Tr.at14.
15 Tr. at 14, 17-18; Trial Ex. Binder at EX00095.
A separate construction or erection classification
shall not be assigned to any operation which is within the
scope of another classification assigned to such a job or
location which is assignable to a construction
classification designated “all work to completion.” All
operations of the insured contractor at that job or location
shall be assignable to such classification.16
The Policy adopted the Rating Manual structure.17 In essence, this required
Wilkinson to keep separate payroll records in order to break down its construction
jobs into distinct trades. If it did not, Wilkinson would be charged the highest trade
premium for all of`` its employees on that job site.
B. LM CONDUCTS ITS INITIAL AUDIT OF WILKINSON.
Shortly after LM issued Wilkinson the Policy in August 2010, it began an
initial audit. LM’s auditor spoke with Wilkinson employee Rachel Bleacher, who
furnished the payroll and other documentation to LM for that initial audit. Upon
looking through the documents, the LM auditor noted that only one roofer was listed,
and all other employees purportedly did siding work.18 During that meeting, the LM
16 Trial Ex. Binder at EXOOO95.
17 Trial EX. Binder at Ex00022 (“WHAT WE ExPECT FRoM YoU [regarding
Underwriting & Policy Issuance]: Make your agent aware of any significant changes in your
operations, including payroll estimates, legal status and classification of duties, so that your policy
can be updated accordingly.”); Id. at EX00025 (“WHAT TO EXPECT FROM US [regarding
Premium Auditing]: We may perform an on site audit at the beginning of your policy year to
review payroll estimates and classifications . . . WHAT WE EXPECT FROM YOU [regarding
Premium Auditing]: Maintain appropriated records as required by policy terms to facilitate a
thorough audit.”).
18 Tr.at21.
auditor took written notes and recorded that Ms. Bleacher told him that Wilkinson
did “mostly roofing, with very little siding work,” that “[t]hey didn’t do any sheet
metal fabrication,” and that “[a]ny carpentry work was for wood blocking.”19 When
the LM auditor asked why there was only one roofer on the payroll, Ms. Bleacher
had him speak with her father, Wilkinson’s owner, Barry Bleacher.
Mr. Bleacher told the LM auditor that Wilkinson did have a sheet metal shop,
and the employees who work in the sheet metal shop do not go to the job site.20 He
also said that Wilkinson installs siding and singles, but “they do very little roofing
work.” 21 Because he had now received two conflicting descriptions from the
Bleachers, the LM auditor asked for Wilkinson’s job contracts and invoices to verify
what kind of work Wilkinson actually engaged in.22 The Bleachers said they could
supply that information, and the LM auditor left.
A few months later, the LM auditor met with Ms. Bleacher and Mr. Sciortino,
an insurance agent. They informed the auditor that the invoices and job contracts
were not ready. Ms. Bleacher and Mr. Sciortino informed the auditor that the
19 Tr. at 23; Trial Ex. Binder at EX00617.
20 Tr. at 24.
21 Id
22 Tr. at 25.
majority of Wilkinson’s work was sheet metal, and that the sheet metal classification
should be added to their policy.
In all, the initial premium estimate was $29,912.
C. WILKINSON PRovIDEs LM WITH FAKE JoB INvoICEs
AND oTHER SUsPICIoUS DoCUMENTATIoN.
Shortly thereafter, Ms. Bleacher provided the LM auditor with Wilkinson’s
records. The records were meant to be a sampling of the work Wilkinson did.23
However, the records did not look legitimate to the LM auditor. He noticed that
there were discrepancies between what the contract called for, and what was actually
billed for.24 For example, one contract said it was a “contract for roofing,” but only
billed for “gutters and downspouts.”25 If Wilkinson only installed gutters and
downspouts on a job, it would be a cheaper classification than roofing - something
the LM auditor had informed Ms. Bleacher of during their prior contact.
Additionally, all of the projects appeared to have the same project number.26
Ms. Bleacher provided the LM auditor with a second packet on April 27,
2012.27 In it, there were a number of contracts for some of the same projects
23 Tr. at 27.
24 Tr. at 28.
25 Tr. at 28-29; Trial Ex. Binder at 00115, 00120~00122.
26 Tr. at 32.
27 Tr. at 33.
previously provided to LM. But these documents contained different substantive
information. For instance, for one job, the original document that Wilkinson
produced to LM stated it was for gutters and downspouts, but the April 2012
document for the same contract showed it was for roofing work.28 LM received
several more conflicting documents during pre-trial discovery.29 This even included
job contracts for jobs that never existed.30
Further, the original payroll reports Wilkinson provided listed only one
roofer.31 Those same reports listed a large number of employees who performed
“siding work.”32 Wilkinson never provided documents that LM requested for the
policy period that would properly break down what each employee did on each job
site.33
As such, every employee who worked outside of the office in any capacity
was classified as roofing, the highest available rating for each job.34 LM informed
28 Tr. at 35-38.
29 Tr. at 37-4(), 49-52; TI``ial EX. Binder at EXO()lZS, EX00231.
30 Tr. at 43-49.
31 Trial Ex. Binder at EX00171.
32 Id. Tr. at 42.
33 Tr. at 53.
34 Tr. at 53-54.
Wilkinson that LM would do this unless Wilkinson provided LM with the proper
documentation Wilkinson failed to do so.
D. LM RECLASSIFIES ALL EXTERNAL WILKINSON EMPLOYEES
As RooFERS.
After LM reclassified Wilkinson’s employees as roofers, the company’s
premium increased. 35 LM believed that all of Wilkinson’s employees were
Delaware employees, and therefore LM would be liable if they were injured.36
Originally, Wilkinson had listed employees who worked in Maryland, New Jersey,
and Pennsylvania. LM excluded those employees initially, but then added them back
in once it was unclear whether those Wilkinson listed as out-of-state employees
were, in fact, out-of-state.37 The only employees who were not classified as roofers
were purely clerical employees and outside salespeople.38
After this reclassification, the premium rose from the initial estimate (based
on false information) of $29,912 to $73,325. To date, Wilkinson has paid LM
$39,385, leaving a balance of §|``>33,940.39 LM terminated the policy for non-payment
on Apri121,2011.
35 Trial Ex. Binder at EX00085.
36 Tr. at 57.
37 Tr. at 58.
38 Tr. at 59-6().
39 Tr. at 68.
_]0_
E. LM FILES SUIT AGAINST WILKINsoN.
LM filed suit against Wilkinson in the Court of Common Pleas f``or the $33,940
balance due. At mediation for that suit, LM contended that it was owed an additional
$62,399. The suit was transferred here. lt is now alleged that Wilkinson owes LM
$96,399, the sum of the balance due on the final audit and the additional premiums
identified by LM through the Court of Common Pleas’ discovery process.40
During the Policy period, LM paid one claim for $1,649. The employee was
injured in Maryland but sought Delaware benefits, requiring LM to pay.
Wilkinson’s principal place of business is in Delaware, but on occasion its
employees leave the state for its projects. According to LM, this makes them all
Delaware employees. 41 Wilkinson disagrees that those employees should be
classified as Delaware employees for work they do in other states.42
F. LM’S CALCULATES ITS DAMAGES IN UNPAID PREMIUMS.
Because LM reclassified everyone except for four clerical employees and two
officers to Delaware, the premium jumped from the initial estimated $29,912 to
$73,325 in the final audit.43
40 Pl. Closing Arg. at 19 (LM “is owed additional consideration under the Contract in the
amount of no less than $96,339.00”).
41 Tr. at 81, 85-87; Trial Ex. Binder at EX00769 (Tab 42).
42 Tr. at 87.
43 Tr. at 91.
_11_
After discovery, LM reclassified several Delaware salespersons as roofers,
adding $14,905 in premiums owed for those reclassified roofers. LM also
reclassified Maryland salespersons as roofers, adding $9,161 to the total premiums
owed. Finally, LM added $38,333 in premiums owed on out-of-state roofing
employees in Maryland, Pennsylvania and New Jersey. These additions result in the
$62,399 figure LM argues that Wilkinson owes in addition to the outstanding
$33,940 balance still owed on the final audit.
LM contends that Wilkinson owes premium on the out-of-state roofing work
not covered by insurance in the state in which the work took place. Generally, if`` an
individual is employed by a Delaware company and lives in Delaware, but gets hurt
in another state, that employee can apply for benefits in the state where he or she
worked or Delaware.44 By industry custom, carriers “will exclude each other’s
[coverage] as long as they can verify that the coverage they are excluding is actually
being picked up by the other.”45 Here, LM initially thought that Wilkinson had other
states’ coverage, but during discovery, it realized that the state payroll breakdown
was not accurate _ and that LM had relied on those inaccuracies when it excluded
44 Tr. at 92.
45 Id
_12_
the Maryland, Pennsylvania, and New Jersey exposure.46 Additionally, none of the
other states’ breakdowns reflect roofing work, even though all were roofing jobs.
Thus, LM posits, all that LM excluded differed from what other carriers were
supposedly picking up. LM suggests, therefore, that there were large parts of the
payroll that no insurers were covering. So LM had to provide coverage because all
of the employees on out-of-state jobs would have to be classified as Delaware
employees That is, LM covered the risk for each employee on those out-of-state
jobs. LM argues it should not have been providing that coverage without charging
the premium to cover those employees
LM first acknowledges Wilkinson did have some form of coverage in
Maryland and Pennsylvania during the entire time that LM was insuring it, though
not for roofers. Also, Wilkinson had coverage in New Jersey for the month of``
March, 2011. But Wilkinson also completed a large job in that state and didn’t have
coverage at the time of its performance on that job.47 So LM says it was actually
covering benefits for New Jersey prior to March 2011.48
46 Tr. at 93.
47 The New Jersey policy covered the period from March 22, 2011 to April 21, 2011. Trial
Ex. Binder at EX00572. Wilkinson worked on roofing jobs in New Jersey prior to March. Ia'. at
EX00636.
48 Tr. at 101.
_13_
According to LM, there is reason to believe that the coverage for Wilkinson
employees doing out-of-state jobs was not picked up by the other states because LM
was unable to verify any other coverage. LM says it would, under its customary (but
voluntary) practice, have stopped charging or removed those charges once it could
verify any out-of-state coverage. But LM never could, because Wilkinson never
provided it with proper recor,ds.49 LM alleges it “[has]n’t been provided with
accurate records that have an accurate breakdown with the state, which is why [LM]
included everyone under the Delaware class code, since they were all Delaware
employees and those wages had not been picked up by the other states. Until a time
when [LM has] accurate records so that [it] can properly break down payroll by state
and by classification . . . which [LM] still [does]n’t have . . . the records [will] appear
as all roofing.”50
To the best of Wilkinson’s understanding, it was legally required to have
workers’ compensation insurance in any state where it worked.51 Failure to do so
might provide an employer an undue competitive advantage based on different
49 Tr. at 102.
50 Tr. ar 151.
51 Tr. at 163.
_14_
states’ insurance rates; that could then translate to a foreign contractor’s bidding
advantage on a job.52
Wilkinson claims it would sometimes hire workers from other states when it
performed work in other states.53 lf so, it might need Delaware coverage for those
particular workers But Wilkinson still provides no records supporting that
assertion.
Wilkinson says it had a Maryland workers’ compensation policy with lWlF
with a policy period from August l, 2010, to August 1, 2011.54 lt says it had a
workers’ compensation policy in Pennsylvania with a policy period from August 4,
2010, to April 21, 2011.55 lt also says it had a workers’ compensation policy in New
Jersey with a policy period from March 22, 2011, to April 21, 2011.56 All three of
these policies were cancelled on or around the same time as the LM policy in April
2011 because Wilkinson obtained one policy that covered all of the states.57
52 Tr. at 164.
53 Tr. at 165.
54 Tr. at 166-67; Trial Ex. Binder at EX00567.
55 Tr. at 168; Trial Ex. Binder at EX00564.
55 Tr. at 169; Trial Ex. Binder at EX00572.
57 Tr. at 170.
_15_
III. DISCUSSION
A. THE LEGAL STANDARDS APPLIED To ARRIVE AT A VERDICT.
Here, LM brought suit against Wilkinson for breach of contract, alleging that
Wilkinson breached its obligations to pay the required premium for workers’
compensation insurance because it failed to maintain accurate payroll breakdowns,
which would have allowed LM to definitively calculate the premium due. Under
Delaware law, a party claiming breach of contract must prove three elements: (1) the
existence of a contractual obligation, express or implied; (2) a breach of that
obligation; and (3) resulting damages to the complaining party.58 Delaware follows
the “‘objective’ theory of contracts, i.e. contract construction should be that which
would be understood by an objective, reasonable third party.”59 “When interpreting
a contract, ‘[c]lear and unambiguous language . . . should be given its ordinary and
usual meaning. ”’60
58 Laugelle v. Bell Helicopter Textron, Inc., 2014 WL 2699880, at *13 (Del. Super. Ct. June
11, 2014) (citing VLIW Tech., LLC v. Hewlett-Packard Co., 840 A.2d 606, 612 (Del. 2003); H-M
Wexfora' LLC v. Encorp, Inc., 832 A.2d 129, 140 (Del. Ch. 2003); Spam``sh Tiles, Lta'. v. Hensey,
2005 WL 3981740, at *3 (Del. Super. Ct. March 30, 2005)).
59 Osbom ex rel. Osborn v. Kemp, 991 A.2d 1153, 1159 (Del. 2010) (internal citation
omitted).
60 Laugelle, 2014 WL 2699880, at *11 (quoting Rhone-Poulenc Basic Chems. Co. v. Am.
Motorists Ins. Co., 616 A.2d 1192, 1195 (Del. 1992) (intemal citation omitted)).
_16_
LM must prove the existence of the three elements of its breach-of-contract
claim, and the amount of any damages therefrom, by a preponderance of the
evidence.61
B. WILKINSON BREACHED ITS CONTRACT WITH LM REGARDING PROPER
CLAssIFICATIoN oF WILKINsoN’s EMPLoYEEs AND OWES ADDITIoNAL
PREMIUM FoR ITS RooFERS.
Neither Wilkinson nor LM disputes there was a valid contract (the “Policy”)
for workers’ compensation insurance coverage. What is disputed is whether there
remains any unpaid premium due to LM.
The Policy states that Wilkinson was to expect that LM might perform an
audit at the beginning of`` the policy period and review the payroll estimates and
classifications.62 lt also states that LM expected Wilkinson to “maintain appropriate
records as required by [the Policy’s] terms to facilitate a thorough audit.”63 The
Policy goes on to explain how LM calculates premium. lt says that “[a]ll premium
for this policy will be determined by our manuals of . . . classifications,” and that
“classifications [are] assigned based on an estimate of the exposures [Wilkinson]
would have during the policy period.”64 lf Wilkinson did not properly estimate its
61 See DEL. P.J.l. CIV. § 19.20 (Breach of Contract); Id. at § 4.1 (Burden of Proof
- Preponderance of Evidence); Ia'. at § 22.24 (Measure of Damages - Breach of Contract) (2000).
62 Trial Ex. Binder at EX00025
63 Trial EX. Binder at EX00025.
54 Trial Ex. Binder at EX00042-EX00043.
_17_
exposure, LM would “assign proper classifications, rates, and premium basis by
endorsements to [the Policy].”65
The Rating Manual, which LM followed for this Policy, states that for
construction-related work, “[e]ach distinct type of construction or erection operation
at a job or location shall be assigned to the classification which specifically describes
such operation provided separate payroll records are maintained for each operation.
Estimated or percentage allocation of payroll is not permitted.”66 Further, “[a]ny
such operation for which separate payroll records are not maintained shall be
assigned to the highest bureau loss cost classification which applies to the job or
location where the operation is performed.”67 This requires Wilkinson to classify
each employee on a job site the highest risk classification applicable to his or her
role on the site.
Specifically, the Rating Manual defines the “roofing” classification as
applying to
[S]pecialist contractors performing any type of roofing,
roofing repair or reroofing job utilizing any type of roofing
material, including but not necessarily limited to hot tar,
shingles, slate, tile or rubber on any type of roof . . . . [This
classification is] [a]lso applicable to all personnel working
65 Trial Ex. Binder ar Ex00042_Ex00043.
66 Trial Ex. Binder at Ex00095.
67 lar
_13_
on a roofing job (e.g. ground personnel passing materials
to personnel on the roof and picking up debris and
personnel on the roof). Further applicable to the
waterproofing or insulation of roofs and the pressure
washing of roofs.68
This “roofing” classification also includes “[r]oof decking and related
carpentry work,” and “installation of sheet metal products (e.g. fascia, gutters,
downspouts) by a roofing contractor that is part of a roofing job.”69 Classifying an
employee under the “sheet metal” classification is only proper if that employee
works solely at a “separately staffed and local sheet metal fabrication shop.”70
At trial, Wilkinson was unable to identify any job function (other than those
few clerical or administrative positions at the company) that was unrelated to roofing
during the policy period.71 Yet, during the policy period, Wilkinson’s initial payroll
estimate was that there would only be one employee who was involved in roofing
work in any way. The Court finds by a preponderance of the evidence that
Wilkinson breached its obligations under the Policy.
The Rating Manual allows LM to classify all workers as the highest
classification for the type of work Wilkinson did if Wilkinson could not produce the
68 Trial Ex. Binder at EX00102.
69 101
70 Id
71 Tr. at 181.
_19_
separate individual payroll records that were required for construction jobs. That is
what LM did here.
LM, through an endorsement, reclassified all of Wilkinson’s Delaware
construction employees as “roofers.” Because roofing is riskier than sheet metal or
general carpentry, workers’ compensation insurance premiums for roofers are
higher. After the reclassification, the premium due to LM rose from the initial
estimate of $29,912 (based on one “roofer”) to $73,325. To date, Wilkinson has
paid LM 839,385; that leaves a balance of $33,940.72 The Court finds by a
preponderance of the evidence that this balance remains due to LM.
C. WILKINSON OWEs ADDITIoNAL PREMIUM AFTER
PRoPER RECLASSIFICATION oF “SALESPERsoNs” As RooFERS.
LM says that it is owed $14,905 in premium for Delaware roofers
misclassified as salespersons by Wilkinson. LM says it is also owed an additional
$9,161 for Maryland roofers misclassified as salespersons by Wilkinson.
The Rating Manual defines “salespersons” as “employees exclusively
engaged in sales or collection work away from the employer’s premises or who are
engaged in such work for any portion of their time and devote the balance of their
time to clerical office duties.”73 A Job Sites Sheet, illustrating where employees
72 Tr. at 68.
73 Trial Ex. Binder at EX00091.
_2()_
spent their day, shows alleged Delaware salesperson74 Victor B. working at a roofing
job in Maryland.75 The Job Sites Sheet also shows alleged Maryland salesperson75
Joseph C. working at a roofing job site in Maryland.77
Mr. Bleacher testified that Wilkinson had only one roofer on the payroll in
2010.78 ln 201 1, Wilkinson classified that same roofer as a “salesperson.”79 ln 2010,
while applying for LM insurance coverage, Mr. Bleacher signed an application for
workers’ compensation estimating no payroll for salespersons80 Mr. Bleacher also
testified that Wilkinson’s salespersons “managed the project.”31 Yet, this does not
fall within the Rating Manual’s definition of salespersons: “employees exclusively
engaged in sales or collection work away from the employer’s premises.”32
74 Trial Ex. Binder at EX00318.
75 Trial Ex. Binder at EX00302.
75 Trial Ex. Binder at EX00330.
77 [a-
78 Tr. at 188.
79 Trlal EX. Binder at EXOOZOS.
80 Trial Ex. Binder at EX00592.
81 Tr. at 175.
82 Trial Ex. Binder at EX00091.
_21_
The Court finds by a preponderance of the evidence that Wilkinson’s
Delaware employees reported by Wilkinson as salespersons were properly re-
classified as roofers under the Rating Manual. And, as explained further below,
Wilkinson’s employees doing work in Maryland were covered by LM’s Delaware
Policy, no matter the existence of Wilkinson’s Maryland insurer. Therefore, LM is
entitled to: (1) the $14,905 in damages for the Delaware salespersons reclassified as
roofers; and (2) the $9,161 for the employees conducting Maryland work.
D. WILKINSON OWES PREMIIJM FoR ITS EMPLoYEES’
OIJT-oF-STATE WoRK.
LM’s auditor testified that as a “courtesy” to the insured, insurance companies
do not double-charge premiums for employees based in one state that work in other
state(s).83 Instead, those companies will cover a claim if it is brought, and then
subrogate from the company that receives a premium for that employee’s work. LM
says that with the inconsistencies, and sometimes fabrication, of the records it
received, it has no good-faith basis to believe that Wilkinson had adequate out-of-
state workers’ compensation insurance coverage for employees traveling to
Wilkinson’s out-of-state jobs
63 Tr. at 92.
_22_
Notwithstanding, the custom described governs neither LM’s actual coverage
obligation nor Wilkinson’s actual premium obligation. Delaware statutory law does
Nineteen Del. C. § 2303 provides that:
lf an employee, while working outside the territorial limits
of this State, suffers an injury . . . such employee shall be
entitled to the benefits provided by this chapter, provided
that at the time of such injury: (1) [t]he employee’s
employment is principally localized in this State; or
(2) [t]he employee is working under a contract of hire
made in this State in employment not principally localized
in any state; or (3) [t]he employee is working under a
contract of hire made in this State in employment
principally localized in another state whose workers’
compensation law is not applicable to the employee’s
employer; or (4) [t]he employee is working under a
contract of hire made in this State for employment outside
the United States and Canada.84
Further, the statute provides that “the payment or award of benefits under the
workers’ compensation law of another state . . . shall not be a bar to a claim for
benefits under this chapter.”35 Under Delaware law and the Policy, LM was at-risk
34 DEL. CODE ANN. tit 19, § 2303(a) (2010).
33 Id. at § 2303(b).
_23_
for any potential benefits claimed by Wilkinson employees principally localized in
Delaware,86 regardless of the location of their worksite.87
Even if LM would normally bind itself to follow industry custom and
“courtesy,” that practice would not apply in this case. Why? Because Wilkinson
had no roofing coverage for its out-of-state worksites. Wilkinson has produced
evidence that it possessed some workers’ compensation insurance coverage in
Maryland, Pennsylvania, and New Jersey, Mr. Bleacher claimed that Wilkinson had
proper insurance in those states both during LM’s Policy period and in the years
prior. Wilkinson paid $17,457 for coverage in Maryland, but the record shows a $0
estimated annual premium for roofing.88 Wilkinson paid $14,845 for coverage in
Pennsylvania, but the record again shows a $0 estimated annual premium for
roofing.89 Finally, Wilkinson paid $9,151 for coverage in New Jersey, with $7,614
85 See id. at § 2303(d)(4) (“A person’s employment is principally localized in this or another
state when: . . . A person’s employer has a place of business in this or such other state and the
person regularly works at or from such place of business”).
37 “[The] premium basis includes payroll and all other remuneration paid or payable during
the policy period for the services of . . . all other persons engaged in work that could make us liable
under Part One (Workers Compensation lnsurance) of this policy.” Trial Ex. Binder at EX00043.
Part One of the Policy provides that “[LM is] directly and primarily liable to any person entitled
to the benefits payable by this insurance.” Id. at EX00039.
88 Trial Ex. Binder at EX00567.
39 Trial Ex. Binder at EX00564.
_24_
in estimated annual premium for roofing-but this New Jersey coverage was
obtained only after Wilkinson completed a large roofing job.90
Despite showing $0 in roofing coverage in Maryland, Wilkinson does adduce
evidence that it had coverage from lWlF in the case of employee Jose O.’s injury.
Mr. O. injured himself when he fell from a roof in Maryland on March 2, 2011;
Wilkinson was then under LM’s coverage.91 Wilkinson initially reported the claim
to LM, as it could. And LM paid benefits under the claim. That’s because Mr. O.
appeared by all accounts to be a Delaware employee working on a Maryland job.92
ln turn, by law he could have sought benefits in either state via either policy.
Wilkinson later reported the injury to its insurance carrier in Maryland, which also
paid out on the claim.93 LM maintained that Wilkinson’s submission of the Mr. O.
claim to LM was proper and so it did not attempt to subrogate that claim.94 While
this seems to contradict LM’s auditor’s testimony that industry practice is not to
have an insured double-covered (and, then double-charged), that is not dispositive
of the premium owed. The clear Policy language is
90 Trial Ex. Binder at EX00572; supra note 47.
91 Trial Ex. Binder at EX00566.
92 Id
93 Trial Ex. Binder at EX00487.
94 Trial Ex. Binder at EX00405-06.
_25_
After reviewing the evidence produced, the Court finds by a preponderance
of the evidence that Wilkinson breached its obligations under the Policy by failing
to provide coverage for its out-of-state employees As such, LM is entitled to the
additional premiums that Wilkinson owes LM for its coverage of Wilkinson’s out-
of-state employees during the policy period.
IV. CONCLUSION
This Court finds, by a preponderance of the evidence, that Wilkinson breached
its contract with LM. Wilkinson did not properly document what each of its
employees did at its construction sites. Wilkinson falsified records when questioned
about each employee’s role in each job. And it caused LM to charge too low a
premium for the risk that LM actually covered for jobs completed in Delaware
during the Policy period.
Thus, Wilkinson owes LM $33,940 -the balance due when LM reclassified
all of Wilkinson’s job site employees as “roofing.” Wilkinson additionally owes
premium for its Delaware and Maryland employees who were fraudulently classified
by Wilkinson as salespersons and are now properly reclassified by LM as roofers
Finally, Wilkinson failed to have proper out-of-state coverage and put LM at risk for
coverage of Wilkinson employees at its out-of-state sites
_26_
ln sum, Wilkinson owes an additional premium total of $96,339. And a
judgment in this amount shall be entered against Wilkinson and for LM.
M
Paul R. Wallace, Judge
IT IS SO ORDERED.
Original to Prothonotary
cc: All counsel via File and Serve
_27_