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Trujillo v. Atlantic Building Associates

Superior Court of Delaware

June 7, 2017

JULIO GARCIA TRUJILLO, an individual, Employee-Below, Appellant,
v.
ATLANTIC BUILDING ASSOCIATES, a foreign corporation, and GASTON SANTOS BAUTISTA, d/b/a SANTOS CONSTRUCTION, LLC, a domestic corporation, Employers-Below, Appellees.

          Date Submitted: March 10, 2017

         On Appeal from the Industrial Accident Board: REVERSED and REMANDED.

          Tara E. Bustard, Esquire, Arthur M. Krawitz, Esquire, Doroshow, Pasquale Krawitz & Bhaya, Wilmington, DE. Attorneys for Employee-Below, Appellant Julio Garcia Trujillo.

          Andrew J. Carmine, Esquire, Elzufon Austin & Mondell, Wilmington, DE. Attorney for Employer-Below, Appellee Atlantic Building Associates.

          OPINION

          Jan R. Jurden, President Judge

         I. INTRODUCTION

         This is an appeal from an April 13, 2016 Decision of the Industrial Accident Board (the "Board").[1] Employee-Below, Appellant Julio Garcia Trujillo was injured on April 9, 2014, while performing construction work for Gaston Santos Bautista d/b/a Santos Construction ("Santos").[2] Trujillo brought Petitions to Determine Compensation Due against Santos, WVM Construction ("WVM") (the subcontractor that hired Santos), [3] and Employer-Below, Appellee Atlantic Building Associates ("Atlantic") (the contractor who hired WVM).[4] After Trujillo filed his Petitions to Determine Compensation Due, the Office of Workers' Compensation determined that neither Santos nor WVM was insured for Delaware workers' compensation claims as of the date of Trujillo's injury.[5]

         Trujillo seeks compensation from Atlantic pursuant to 19 Del. C. § 2311(a)(5) on the basis that Atlantic failed to obtain "a certification of insurance in force under [Chapter 23 of Title 19]" of the Delaware Code from its subcontractor WVM. Relying on Cordero v. Gulfstream Development Corp., [6] Atlantic argues that it is not liable for Trujillo's workers' compensation claim because it obtained a certificate of insurance ("COI") from WVM that was "valid on its face at the time it [was] furnished, " regardless of the fact WVM's workers' compensation insurance policy applied only to workers and work accidents in the State of New Jersey.[7]

         The Board found that the Atlantic is not liable for Trujillo's workers' compensation claim because the COI obtained by Atlantic was valid on its face, despite the fact that the COI did not evidence that WVM's insurance applied to its employees working in Delaware.[8] For the reasons explained below, the Court finds that the Board applied an incorrect legal standard to the case.

         II. BACKGROUND

         A. Factual Background

         Trujillo testified before the Board that Santos hired him to perform construction work and that he was working for Santos on April 9, 2014, when he was injured.[9] The parties jointly stipulated that the construction site was in Millville, Delaware, and that while working on the second floor of a house, Trujillo stepped on a piece of plywood that collapsed beneath him.[10] Trujillo fell from the second floor to the ground floor.[11] An ambulance transported Trujillo to the emergency room where he was diagnosed with an L2 compression fracture.[12]

         Linda Garufi, a representative of Atlantic, also testified before the Board.[13] Atlantic is a Maryland corporation that performs commercial and residential construction work, including work in Delaware.[14] Garufi testified that Atlantic subcontracted WVM to perform framing work at the Millville construction site.[15] AVS Insurance Agency, WVM's insurance broker, provided Atlantic with a COI indicating that WVM had workers' compensation insurance.[16] The COI showed a policy number, the amount of insurance coverage, and effective dates of November 25, 2013, through November 25, 2014.[17] The COI indicates that the policy limits are "per statute, " but it does not state which statute. Garufi did not ask WVM, a New Jersey corporation, for anything in writing to verify that it had Delaware workers' compensation insurance.[18]

         Garufi admitted that the COI furnished to Atlantic does not indicate whether the policy covers workers' compensation claims for workers or work accidents in Delaware.[19] On this point, Garufi explained that no COI form she has seen indicates what states the coverage extends to.[20] Garufi did not attempt to verify whether WVM's workers' compensation insurance extended to Delaware through the Delaware Department of Labor's website.[21] However, Garufi did check the Division of Revenue's website to see whether WVM had a Delaware business license for 2014.[22] Garufi testified that she believed she had essentially verified that WVM had workers' compensation coverage in Delaware by checking WVM's Delaware business license because a non-resident subcontractor must provide proof of workers' compensation insurance as well as a bond in order to work within Delaware.[23]

         Garufi testified that she learned of Trujillo's injury when a medical bill was sent to Atlantic's office.[24] After receiving the medical bill, Garufi contacted WVM's insurance provider, Liberty Mutual, because she feared that the accident had not been reported.[25]

         Rebecca Colabaugh, an adjuster for Liberty Mutual, testified by deposition that WVM had a workers' compensation insurance policy applicable to the State of New Jersey that was effect in April 2014.[26] After speaking with Garufi regarding the accident, [27] Colabaugh conducted an internal investigation to determine whether the New Jersey policy would apply to Trujillo's Delaware accident.[28] Based on the results of her investigation, Colabaugh concluded that WVM's policy would not extend to Trujillo's injury, and Liberty Mutual denied coverage to WVM.[29]

         B. The Board's April 13, 2016 Decision

         The Board began its analysis by noting that Atlantic was not Trujillo's employer.[30] While this fact would normally preclude Atlantic's liability for Trujillo's workers' compensation claims, 19 Del. C. § 2311(a)(5) requires contracting entities to obtain from their subcontractors "a notice of exemption of executive officers or limited liability company members and/or a certification of insurance in force under this chapter." If a contracting entity fails to obtain either a notice of exemption or a certificate of insurance, "the contracting entity. . . shall be deemed to insure any workers' compensation claims arising under this chapter." The Board recognized that, by enacting § 2311, "the 'General Assembly put the onus on the general contractors to make sure that their subcontractors had coverage for workers' compensation liability.'"[31] Despite this onus on general contractors, the general contractor will not necessarily be liable in every case where a subcontractor does not, in fact, have coverage for workers' compensation liability. On this point, the Board identified the Delaware Supreme Court's decision in Cordero as particularly relevant.[32]

         In Cordero, Rodriguez Contracting Company ("Rodriguez") provided Delaware Siding Company ("Delaware Siding") with a COI for workers' compensation insurance in connection with a subcontract for siding and roofing work, but then allowed the coverage to lapse.[33] At the time Rodriguez's employee was injured, Rodriguez did not have a workers' compensation insurance policy in effect, but Delaware Siding did not know or have reason to believe that Rodriguez did not have workers' compensation insurance coverage.[34] In support of its holding that both Delaware Siding and the general contractor, Gulfstream Development Corporation, had fulfilled their obligations under § 2311(a)(5), the Delaware Supreme Court explained that § 2311(a)(5) is a "safe harbor" from § 2311(a)(4)'s universal coverage mandate.[35] The Supreme Court held that once a contractor satisfies § 2311(a)(5), it will not be liable to insure workers' compensation claims from its subcontractor's employees, even if the subcontractor allows its coverage to lapse, except in cases "where the contractor knows or has reason to believe the certification is false."[36] For example, "where the contractor knows that its subcontractor has a history or practice of allowing its insurance coverage to lapse before the coverage period expires."[37]

         The Board found Cordero instructive and highlighted the following language: "A certification of insurance is 'in force' if it is valid on its face at the time it is furnished to the contractor."[38] In light of that language, the Board found the COI provided by AVS Insurance Agency to Atlantic valid on its face.[39] Further, the Board found that Atlantic acted in good faith and satisfied any due diligence requirement of the statute.[40] The Board supported this finding by noting that there were no "red flags" in the case that should have put Atlantic on notice that WVM did not have insurance coverage "in force."[41] Consequently, the Board found that Atlantic is not liable to insure Trujillo's injuries.[42]

         III. PARTIES' CONTENTIONS

         Trujillo contends that the plain language of 19 Del. C. § 2311(a)(5) requires the workers' compensation insurance referenced on a "certification of insurance in force under this chapter" to be Delaware workers' compensation insurance.[43] Because Atlantic never obtained a COI from WVM for workers' compensation insurance "in force" in Delaware, Trujillo concludes Atlantic must insure Trujillo's workers' compensation claims pursuant to § 2311(a)(5).[44]

         Atlantic contends that the Board did not err in determining that Atlantic complied with § 2311(a)(5).[45]

         IV. STANDARD OF REVIEW

         The Court reviews decisions of the Industrial Accident Board only to determine whether the decision is free from legal error and whether the Board's findings are supported by substantial evidence.[46] Substantial evidence is "such relevant evidence as a reasonable mind might accept as adequate to support a conclusion."[47] Legal errors are reviewed de novo.[48] Absent error of law, the Board's decision is reviewed for abuse of discretion.[49] An abuse of discretion occurs when the Board's decision "exceeded the bounds of reason in view of the circumstances, [or] so ignored recognized rules of law or practice so as to produce injustice."[50]

         V. DISCUSSION

         As noted by the Board, Cordero is not squarely on point with this case. Cordero involved a subcontractor allowing its workers' compensation insurance to lapse after furnishing the contractor with a COI that was valid on its face as to the effective dates of the policy. Stated differently, a fact evidenced on the face of the COI turned out to be false. It was in this context that the Supreme Court stated "[a] certification is 'in force' if it is valid on its face at the time it is furnished to the contractor."[51] Thus, when a contractor does not know or have reason to believe that a policy is not or will not be effective on the dates stated on a COI, the contractor fulfills its obligation to obtain a certification of insurance "in force" when the COI states effective dates for the workers' compensation insurance that cover the work period. As the Court explained, "[w]e can safely presume that the General Assembly intended that a certification 'in force' at the time it is furnished would remain 'in force' during its entire coverage period."[52] That said, § 2311(a)(5) requires not only a "certification of insurance in force" but a "certification of insurance in force under this chapter." The significance of the "under this chapter" language was not addressed in Cordero.

         Pursuant to 19 Del. C. § 2371, "[e]very employer to whom this chapter c-i applies shall insure the payment of compensation to [] employees ...."[53] An employer with its primary place of business in another state is required to "carry Delaware workers' compensation coverage in full for any employees doing substantial work in the State as if they were an employer in Delaware.[54] By statute "[substantial work shall include" "[a] construction or contracting business for which a Delaware employer would be required to be licensed under Chapter 25 of Title 30."[55] Chapter 25 of Title 30 requires "[a]ny person desiring to engage in business in this State as a contractor" to obtain a license from the Department of Revenue.[56] Thus, § 2371 requires all contractors performing construction work in Delaware to have "Delaware workers' compensation coverage in full" in connection with such work.

         Moreover, pursuant to § 2371(d), the insurance required of out-of-state employers for employees doing substantial work in the State "shall" consist of:

(1) An actual Delaware workers' compensation policy covering the activities of the employer for any employee engaged in the employer's business ...

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