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Liberty Mutual Insurance Co. v. Silva-Garcia

Superior Court of Delaware, Kent

August 22, 2013


Submitted: June 24, 2013

Upon Consideration of Appellant's Appeal of the Industrial Accident Board Decision.

ORDER Linda Wilson, Esq., Wilmington, Delaware for Appellant.

William X. Moore, Jr., Esq., and Edward H. Wilson, III, Esq., Wilmington, Delaware for Appellee, Jesus Silva-Garcia.

Anthony G. Flynn, Esq., Cassandra F. Roberts, Esq., and William E. Gamgort, Esq., Wilmington, Delaware for Appellee, City Window Cleaning of Delaware, Inc.

Robert B. Young J.


This is an appeal by Liberty Mutual Insurance Company ("Liberty Mutual") from a determination by the Industrial Accident Board ("IAB" or "Board") that City Window Cleaning of Delaware, Inc. ("City Window") was covered, at the time of an injury to a City Window employee, Jesus Silva-Garcia ("Claimant" or "Silva-Garcia").

Since the evidence, though complex, supports a factual finding that City Window had reviewed its workers' compensation policy with Liberty Mutual as of the time of Silva-Garcia's accident, the Board's determination that coverage existed and was applicable is proper. The same is, therefore, AFFIRMED.


City Window, owned by Howard Herbert Hirzel ("Hirzel"), is in the business of window cleaning as well as the cleaning and dusting of high fixtures. As a result of the perceived risks involved with performing such work, City Window has been unable to obtain workers' compensation insurance on the open market for some time. Instead, City Window secures workers' compensation insurance on the involuntary market, pursuant to the Delaware Insurance Plan ("DIP"). The DIP is administered by the Delaware Compensation Rating Bureau ("DCRB"). The DCRB promulgates a Handbook, setting forth policies and procedures. Liberty Mutual was assigned to provide workers' compensation insurance for City Window, doing so without issue for several years. City Window was assigned a policy by Liberty Mutual to begin on January 1, 2009 and ending on January 1, 2010. On October 5, 2009, Liberty Mutual mailed a renewal notice to City Window indicating that payment was due "on or before January 1, 2010" to renew the policy. The first renewal notice cited $14, 054 as the amount due. City Window received the notice, but did not tender payment at the time because it believed it was owed reductions based on a decline in business and credits it believed it was due. A review occurred, resulting in Liberty Mutual's sending a second renewal quote letter dated December 3, 2009. The second letter reduced the premium amount to $11, 869. City Window still did not mail payment, because it continued to believe that a credit of $1, 276.00 was owed to the company. Hirzel requested that the credit be applied to reduce the cost of the policy, but Liberty Mutual refused to do so.

Hirzel testified that City Window had been relatively inactive up until a job at the Harrington Casino came in early January. The invoice for the premium payment was entered into City Window's system for processing on January 7th, around the same time City Window secured the Casino job. The job was to begin on January 11th, and was estimated to last about five days. On the first day of the job, a worker bumped into a door causing damage, resulting in a liability claim. As a result of the incident, Hirzel claims he was reminded to check on the workers' compensation insurance. He sent an email and placed a call to his office manager first thing on the morning of January 12th. Hirzel wanted to make sure that the payment had been mailed; and, if not, to make sure that it was done immediately. The office manager, Pamela Heron, had been holding off on the payment as a result of the dispute regarding the $1, 276.00 credit. She also believed that they did not have the funds in the account necessary to pay the bill. When she was contacted on January 12, 2010 by Hirzel, he told her to issue the check, stamp it with his stamp, and make sure it was mailed that day. Heron testified that she placed the premium payment and coupon in an envelope, which she ran through the office's postage meter. Heron left the office sometime between 4:30 and 4:45 p.m. that day. When there is mail to be sent, Heron testified that her normal procedure is to meter it, and then take it with her when she leaves. At that point, she drives directly to a mailbox located on Market Street with a final pickup time at 5:15 p.m. On the date in question, January 12, 2010, Heron says she followed her normal procedure, taking the seven minute drive to the Market Street mailbox, before proceeding to her second job.

Liberty Mutual provides a Philadelphia post office box address for customer payments. That post office box is checked by a bonded courier multiple times a day. The courier takes the contents of the box to Citibank's New Castle processing center, which is responsible for processing payments made to Liberty Mutual. Upon arrival, payments are sorted, captured with imaging, date stamped with processing date, and then deposited into the bank. Liberty Mutual has provided Citibank with instructions for the processing of its payments. These instructions include a 2:00 p.m. cut-off time for the processing of payments. At that time, Citibank stops processing payments, gathering the data to be transmitted to Liberty Mutual for its accounts receivable system. In order to meet this timeline, Citibank must stop internal processes an hour or two prior to the 2:00 p.m. cut-off. That generally means that any payments picked up from the post office box after 1:00 p.m would be stamped with a processing date of the next business date.

As a result of this process, no one is precisely certain when City Window's payment actually got to the Philadelphia post office box. City Window's check was processed January 19, 2010. The bank actually had the check on January 18, but that was a holiday. According to the Citibank representative, if the check arrived for processing on Friday January 15, 2010, it arrived after the 2:00 p.m cut-off time. Liberty Mutual issued a policy with coverage effective on January 20, 2010, the day the funds left City Window's account.

Claimant Jesus Silva-Garcia suffered an injury resulting in the partial amputation of his left leg. The injury, which occurred on January 15, 2010, as City Window was completing the job at the Casino, resulted from Silva-Garcia's being run over by the articulating lift as he was helping guide the operator out of the casino. When the accident occurred, the supervisor on the job immediately called Hirzel, who was at home in New Castle County at the time. The Claimant was taken by ambulance to Milford Hospital, where he was treated for nearly a month. Upon receiving the supervisor's call, Hirzel left home to drive to Milford Hospital to check on Claimant. During his drive from New Castle County, Hirzel contacted Heron, directing her to contact the company's insurance broker, Buzz Hennessey, to report the injury.

On February 12, 2010, Silva-Garcia was released from the hospital. According to Kilpatrick's notes, Liberty Mutual began investigating Claimant's injury immediately upon notice of the accident. In fact, an investigator from Liberty Mutual came to the Milford Hospital the day after the accident. That same investigator met with Hirzel on January 18, the first business day following the accident. At the time of his release from the hospital, Claimant's family contacted Hirzel to tell him that Silva-Garcia was out of the hospital, but had prescriptions to pick up that he could not afford. Hirzel called Hennessey to find out what was going on with the insurance claim. Hennessey gave Hirzel the phone number for Gail Kilpatrick, the Liberty Mutual claims adjuster in charge of City Window's claim. Hirzel was informed that Kilpatrick was out of the office, and would not return until the following Tuesday. As a result, Hirzel decided, until he could talk with the insurance adjuster, to pay for the prescriptions himself.

On January 20th, five days after the accident, City Window received a letter from Liberty Mutual. The letter stated that, as the renewal quote was paid late, the quote had been rescinded. It further provided that the renewal policy would have a lapse in coverage up front.

This letter was sent after the premium payment was processed by Liberty Mutual. It would also have come after Liberty Mutual's investigator had taken a statement from and met with Hirzel.

Silva-Garcia filed a Petition to Determine Compensation Due with the Industrial Accident Board on February 22, 2010. The Petition alleged that the January 15 injury he had suffered at the Casino was a compensable work-related injury. At the time of his filing, Liberty Mutual had not yet issued a formal decision regarding whether the injury and resulting claim made by City Window were insured.

The IAB scheduled a bond hearing for March 31, 2010. At that hearing the Board would determine whether City Window would be required to post a bond pursuant to 19 Del. C. §2372 to secure the payment of compensation to the Claimant. Initially, City Window was unable to demonstrate proof of insurance, because the payment had occurred shortly before the accident and a policy had not yet arrived. At the Bond Hearing, City Window was still unable to provide proof of insurance coverage because, Liberty Mutual was still investigating whether or not there was coverage in place at the time of the accident. At the time of the hearing, Liberty Mutual had still not issued a formal coverage decision. The IAB ordered that City Window post a bond of $250, 000. A hearing on Claimant's Petition was scheduled for June 9, 2010.

On April 15, 2010, Claimant filed a separate negligence action against City Window in the Superior Court for New Castle County. On April 27, Liberty Mutual issued its official letter denying that coverage was in place at the time of the accident. The letter stated that the payment was not received by Liberty Mutual until January 19, 2010. Accordingly, the insurance policy became effective on January 20, 2010. As part of the negligence action, Claimant noticed and took a 30(b)(6) deposition of Liberty Mutual's designee, Gail Kilpatrick. That deposition took place on August 13, 2010, with most of the questioning focused on Liberty's investigation of the accident and subsequent denial of coverage. Shortly after Kilpatrick's deposition, the case was stayed by stipulation, pending a determination by the IAB as to whether or not there was insurance coverage for the accident.

In September 2010, City Window requested that the IAB schedule a hearing to determine whether there was coverage in place at the time of the accident. The hearing was scheduled for October 15, 2010. After receiving notice of the hearing, Liberty Mutual informed the IAB that it would be presenting a Motion to Dismiss hearing on October 15, 2010, because it believed that the IAB lacked jurisdiction to determine whether coverage existed. In addition, Liberty Mutual filed a Complaint for Declaratory Judgment in the Superior Court for New Castle County, seeking a determination that there was no coverage in place on January 15, 2010.

When the parties appeared before the IAB for the scheduled hearing on October 15, the Board was informed of the pending Declaratory Action. The IAB decided to postpone the hearing, requesting that the parties submit memoranda of law addressing the issue of the IAB's jurisdiction to conduct such a hearing. The IAB ruled on November 23, 2010 that it had jurisdiction over the issue. As a result of that decision, City Window moved to dismiss the Declaratory Action. The New Castle County Court agreed, dismissing the Action on May 26, 2011. The Order stated that the IAB was "the most appropriate entity to resolve the dispute."

The Board scheduled the coverage hearing for August 17, 2011.[1] All the parties agreed that City Window did not pay its premium by the date required, and that as a result a lapse in coverage occurred. The dispute in this case ...

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