An employer, Waco Contractors, Inc., applied for workers' compensation insurance with U.S. Fidelity and Guaranty, indicating the intent to exclude certain corporate officers from coverage. The insurance company initially calculated premiums based on this exclusion. However, a subsequent audit led to a back-assessment of premiums for the excluded officers. The court found that the insurance company’s notice of necessary statutory procedures was inadequate for the employer, despite the insurance company's awareness of the employer's intent and the statutory requirements at the time of policy issuance. The court ruled that the insurance company failed to provide timely notice regarding the steps the employer needed to take to formalize the exclusions as intended. As a result, the trial court's judgment was reversed and remanded. The case was presided over by Judge Swiney, with Judges Franks and Susano concurring. The appeal involved the failure of the insurance company to communicate effectively with the employer regarding the exclusion process, impacting the contractual agreement.
The policy in question does not exclude any corporate officers, and failure to submit an exclusion form may lead to the inclusion of officers' payroll in the final audit. The Plaintiff did not provide a copy of the relevant letter or necessary information for exclusion to the Defendant. In August 1995, the Defendant’s insurance was transferred to another agency, and the policy was renewed. An audit by Plaintiff's employee, Anna Lighthouser, revealed the Defendant's non-compliance with T.C.A. 50-6-104 regarding exclusion procedures for corporate officers. Consequently, the Plaintiff assessed additional premiums for the two officers dating back to August 1994 and sought $5,471.00 for unpaid premiums in Monroe County General Sessions Court, where they won. The Defendant appealed to Monroe County Circuit Court, which upheld the judgment for $5,455.00 based on trial evidence, including testimony and documentation. The appeal involves several issues: the effect of the Defendant’s exclusion election, the implications of T.C.A. 50-6-104 on premiums, the agency's role regarding notice as per T.C.A. 56-6-147 and T.C.A. 56-5-314, the calculation of premiums based on minimum wage for unpaid corporate officers, and the appropriateness of the Circuit Court’s judgment. The Defendant contends that the application and policy did not require further steps for exclusion, while the Plaintiff argues that strict written notice is mandated by T.C.A. 50-6-104.
Officers of a corporation can choose to exempt themselves from the Workers' Compensation Law, requiring written notice to be given to the employer and filed with the relevant division. This notice must be provided at least thirty days prior to any accident resulting in injury or death, or at the time of employment if the injury occurs within thirty days of employment. A corporate officer's election to exempt themselves does not affect the employer's employee count for coverage under the law. The statutes clarify that the exemption impacts the officer's entitlement to compensation for injuries under the Workers' Compensation Act versus pursuing tort claims. The legal interpretation of these statutes emphasizes that they govern employee rights in accident scenarios rather than insurance disputes between employers and insurers. Furthermore, while the statutes set procedures for exemptions, they are to be construed equitably, and any strict construction applies primarily to issues concerning common law rather than insurance premium disputes. The intention of the legislature is to be determined by the plain language of the statutes, which must be applied as written without extending their meaning.
The fundamental principle of statutory construction is to determine and effectuate legislative intent without improperly broadening or narrowing a statute's application. Tennessee's Workers' Compensation statute is deemed remedial and should be equitably interpreted to fulfill its objectives. The statute cited by the Plaintiff does not address insurance premiums but rather defines the rights and remedies available under the law for personal injury or death due to workplace accidents. Specifically, rights granted to employees under the Workers' Compensation Law exclude all other remedies available at common law for injuries or deaths incurred.
The Plaintiff argues that corporate officers' failure to adhere strictly to statutory exemption procedures should bind the employer in a dispute with the insurance carrier. However, the coverage for the accident itself is not contested. T.C.A. 50-6-104 does not necessitate strict compliance in the contract dispute between the corporate employer and the insurance company. T.C.A. 50-6-103(a) indicates that corporate officers are not required to accept compensation under the Workers' Compensation Act without regard to fault for injuries or deaths occurring during employment.
Although no case law directly applying T.C.A. 50-6-104 is cited, analogous cases indicate that similar procedural requirements under the Workers' Compensation Act are directory rather than mandatory. The central issue is whether the Plaintiff can invoke T.C.A. 50-6-104 procedures to later claim payment for services not requested in the insurance application. Although the Defendant was asked to elect coverage in the insurance application, the statutory procedures the Plaintiff relies upon are not referenced in the application or the resulting insurance policy. Additionally, there is no evidence of any notice to the Defendant regarding the implications of not completing the statutory procedures. The Plaintiff's only assertion of notice is based on a letter sent to the insurance agency, which does not suffice as notice to the Defendant.
Defendant objected to the admissibility of the NCCI manual at trial, claiming it lacked foundation for establishing the 'rules' for policies under the assigned risk pool, which the Trial Court overruled. The relevant section of the manual defines a 'Producer' as a licensed insurance agent acting on behalf of the insured, not the Plan Administrator or assigned carriers. Plaintiff contended that T.C.A. 56-5-314 designates the NCCI manual as the governing rules for such policies but provided no supporting authority beyond the statute itself. The Trial Court did not address Plaintiff's failure to notify Defendant adequately, despite a letter sent to the insurance agency. The analysis indicated that the letter, flawed in nature, did not fulfill statutory notice requirements to Defendant. T.C.A. 56-5-301 applies broadly to insurance written in the state, listing exceptions not applicable here. Defendant argued that the insurance agent was its representative, thus notice to the agent could not be imputed to them. T.C.A. 56-6-147 states that agents soliciting insurance are deemed to be agents of the insurer, protecting applicants relying on agents' representations. Plaintiff did not raise the issue of the agent's apparent authority. The dispute arose from the insurance application used to set premiums. The statute is meant to prevent insurers from denying accountability for agents' actions and is construed liberally for the insured's benefit. Ultimately, the court found Plaintiff’s argument that the NCCI manual supersedes the statute legally unfounded, and the attempt to use the manual to establish notice was unsuccessful.
The letter sent by the Plaintiff to the Monroe County insurance agency indicated that the Plaintiff was aware of a potential dispute shortly after the Defendant's application. However, the Plaintiff did not appropriately notify the Defendant about the exclusion of corporate officer employees from the workers' compensation policy. The September 13, 1994 letter confirmed the Plaintiff's knowledge of the Defendant's intent to exclude coverage but failed to inform the Defendant that additional actions were necessary to implement this intent. The language in the letter, including phrases like "please be advised" and "please note," highlighted the Plaintiff's awareness that the corporate officers were still covered under the policy and that the correct premiums were not being charged.
The mention of a third-party individual, Harshad Patel, in communications with the Plaintiff's agent was deemed inadequate for proper notice to the Defendant regarding the contract issue. The Defendant had clearly stated a desire not to cover corporate officers, but the Plaintiff did not provide timely notification that this was not achieved. The Trial Court incorrectly applied procedures from T.C.A. 50-6-104, which pertain to corporate officer employees’ rights under the workers' compensation act, to this contractual dispute. The Plaintiff had superior knowledge of the necessary steps to realize the Defendant's expressed intent but failed to notify the Defendant about the resulting policy discrepancies. The statutory provision under T.C.A. 56-6-147 designates the insurance agent as the representative of the insurance company for disputes arising from the insurance application, negating the Plaintiff's claims regarding the NCCI manual and notice issues.
The court's decision is limited to the contractual dispute between the insurance company and the employer regarding premium amounts and does not affect the rights of employees under workers' compensation laws. The judgment of the Trial Court has been reversed and the case remanded for further proceedings consistent with this opinion, with costs of the appeal assessed to U.S. Fidelity Guaranty.
