STATE OF MICHIGAN
COURT OF APPEALS
JOHN L. CHASE,
November 14, 2006
TERRA NOVA INDUSTRIES, M.D. PLUMBING
& HEATING CO., AMERISURE INSURANCE
CO., W. E. O'NEIL CONSTRUCTION CO. INC.,
STATE FARM FIRE & CASUALTY
INSURANCE CO., ARGONAUT MIDWEST
INSURANCE CO., TAUBMAN COMPANY,
L.P., and TRANSCONTINENTAL INSURANCE,
LC No. 04-000218
Official Reported Version
ST. PAUL GUARDIAN INSURANCE CO. and
SORDONI SKANSKA CONSTRUCTION CO.,
a/k/a SARDONI SKANSKA CONSTRUCTION
Before: Whitbeck, C.J., and Sawyer and Jansen, JJ.
Defendants-appellants Sordoni Skanska Construction Company and St. Paul Guardian
Insurance Company appeal by leave granted the order of the Workers' Compensation Appellate
Commission (WCAC), which affirmed a magistrate's decision that appellants were the parties
responsible for the payment of benefits to plaintiff for a work-related foot injury. We vacate the
order of the WCAC and remand for further proceedings.
This case arises out of the construction of Great Lakes Crossing Mall in Auburn Hills,
Michigan. Appellant Sordoni Skanska Construction Company (Sordoni) was retained to be the
general contractor on the Great Lakes Crossing Mall project. Because of the magnitude of the
construction project, Sordoni was able to obtain an "owner controlled insurance policy," or
"wrap-up" policy, pursuant to MCL 418.621(3), which provides in part:
Under procedures and conditions specifically determined by the director, a
separate insurance policy may be issued to cover employers performing work at a
specified construction site if the director finds that the liability under this act of
each employer to all his or her employees would at all times be fully secured and
the cost of construction at the site, not including the cost of land acquisition, will
exceed $65,000,000.00, and the contemplated completion period for the
construction will be 5 years or less.
Appellant St. Paul Guardian Insurance Company (St. Paul) issued the wrap-up policy. The issue
presented in this case is whether appellants are liable for plaintiff 's benefits under that policy.
After the policy was issued, certain property at the mall site was sold to Bass Pro Outdoor
World, L.P. Plaintiff 's employer, defendant M.D. Plumbing & Heating Company, was a
subcontractor for defendant W.E. O'Neil Construction Company, which was the general
contractor retained by Bass Pro Outdoor to construct the Bass Pro Outdoor store on the mall site.
On August 20, 1998, plaintiff injured his foot while working at the site.
Plaintiff filed an application for workers' compensation benefits. Appellants were not
parties to the initial proceedings. Following a hearing, a magistrate granted plaintiff an open
award of benefits. One issue presented during the initial proceedings was whether plaintiff 's
employer was insured by State Farm Fire & Casualty Insurance Company (State Farm).
However, the magistrate concluded that it lacked jurisdiction to consider the issue of State
Farm's liability. As a result, the magistrate found that plaintiff 's employer was uninsured, and
that liability for the benefits was to be placed on the general contractor at the Bass Pro Outdoor
site, W.E. O'Neil Construction Company, and its insurer, Argonaut Midwest Insurance
On appeal to the WCAC, plaintiff 's employer and W.E. O'Neil Construction Company
argued that there was evidence that State Farm insured plaintiff 's employer. The WCAC found
that the magistrate did indeed have jurisdiction to determine whether State Farm was liable in
this matter, and remanded the case to the magistrate to address the issue. The WCAC retained
On remand, the magistrate concluded that State Farm was estopped from denying
coverage. The magistrate also acknowledged that, after the WCAC's remand order, the parties
had filed additional applications, which named St. Paul as a carrier under the wrap-up policy.
However, the magistrate was unable to resolve the issues pertaining to liability under the wrapup policy before the expiration of his term, and declared a mistrial on those issues. As a result,
the matter was reassigned to another magistrate, who conducted several hearings. At the
conclusion of those hearings, the magistrate decided that St. Paul was liable under the terms of
the wrap-up policy. According to the magistrate, appellants could have exempted the Bass Pro
Outdoor property from the construction project, but failed to do so.
Appellants appealed to the WCAC. Appellants argued that they were not timely made
parties to the litigation, and therefore that plaintiff 's claims against them were barred by statute
and the doctrine of laches. Appellants further argued that the magistrate's decision was
erroneous because plaintiff 's employer had not been working under the auspices of Sordoni, but
instead on the entirely separate Bass Pro Outdoor project. Appellants contended that there was
no basis on which to impose liability on appellants for an injury that occurred to the employee of
a subcontractor who had no contractual relationship with appellants.
The WCAC found appellants' claims unconvincing. In regard to appellants' late
involvement in the proceedings, the WCAC found that the situation was created by appellants'
own failure to carve out the Bass Pro Outdoor project after the property for that store was sold.
The WCAC also found that appellants were not prejudiced by their absence from the initial
proceedings. With respect to appellants' argument that plaintiff 's employer was not covered
under the wrap-up policy, the WCAC concluded that because the area where plaintiff was
injured was part of the original site plan, and because there had been no effort to carve out that
area from the project, the parcel in question remained part of the area insured by St. Paul under
the wrap-up policy. This Court granted appellants' application for leave to appeal.
The WCAC must review the magistrate's decision under the "substantial evidence"
standard, while this Court reviews the WCAC's decision under the "any evidence" standard.
Mudel v Great Atlantic & Pacific Tea Co, 462 Mich 691, 709; 614 NW2d 607 (2000). Review
by this Court begins with the WCAC's decision, not that of the magistrate. Id. We review de
novo questions of law in workers' compensation cases. DiBenedetto v West Shore Hosp, 461
Mich 394, 401; 605 NW2d 300 (2000). A decision of the WCAC is subject to reversal if it is
based on erroneous legal reasoning or the wrong legal framework. Id. at 401-402.
Appellants first claim that the magistrate and WCAC should never have addressed the
issue of coverage under the wrap-up policy. According to appellants, because they were not
involved in these proceedings at the time the initial award of benefits was granted, consideration
of the issue was barred by MCL 418.852(1), as well as the doctrine of laches.1
MCL 418.852(1) states: "The liability of a carrier or fund regarding a claim under this
act shall be determined by the hearing referee or worker's compensation magistrate, as
applicable, at the time of the award of benefits." "The primary goal of statutory interpretation is
to ascertain and give effect to the Legislature's intent." Ross v Dep't of Treasury, 255 Mich App
51, 55; 662 NW2d 36 (2003). "The Legislature is presumed to intend the meaning it plainly
Laches is an equitable doctrine. While the WCAC has no equitable jurisdiction, it is well
established that the WCAC may apply equitable principles in appropriate instances to further the
purposes of the Worker's Disability Compensation Act. Lulgjuraj v Chrysler Corp, 185 Mich
App 539, 544-545; 463 NW2d 152 (1990).
Here, the plain language of the provision states that liability "shall" be determined "at the
time of the award of benefits." In this case, no such determination was made with respect to
appellants at the time of the initial award. Because "shall" connotes a mandatory requirement,2
the plain language of MCL 418.852(1), at least arguably, supports appellants' position.
However, we also find that reasonable minds could differ with respect to whether the statute
means that the liability of a carrier must be determined at the time of the award where, as here,
the carrier was not a party to the proceedings at the time of the award, and the carrier's potential
liability was allegedly not discovered by the parties seeking the carrier's involvement until after
benefits were awarded. As a result, construction of MCL 418.852(1) is warranted. Ross, supra.
Because we generally defer to the WCAC's interpretation and application of the Worker's
Disability Compensation Act,3 and because the WCAC in this case never addressed appellants'
argument regarding MCL 418.852(1), we find it prudent to remand this matter to the WCAC for
an initial construction and analysis.
As for appellants' argument regarding the doctrine of laches, we find no error.
Application of the doctrine requires the passage of time combined with a change in condition
that would make it inequitable to enforce a claim against the defendant. Gallagher v Keefe, 232
Mich App 363, 369; 591 NW2d 297 (1998). "The defendant must prove a lack of due diligence
on the part of the plaintiff resulting in some prejudice to defendant." Id.
In the instant case, there is no evidence that plaintiff lacked due diligence in asserting a
claim against appellants. Further, we are not convinced that appellants have established the
requisite prejudice. Appellants contend that they were prejudiced because they were unable to
defend against the merits of plaintiff 's claim for benefits. However, in this appeal, appellants
have offered no evidence or argument to even suggest that plaintiff was not in fact entitled to
benefits. The burden was on appellants to establish prejudice, and we find their bald assertion to
be insufficient in this regard.
Next, appellants contend that neither the controlling statute, MCL 418.621(3), nor the
wrap-up policy itself, provides coverage for plaintiff 's injury. In addressing appellants'
contention in this regard below, the WCAC ruled that because plaintiff was injured in an area
that was part of the original site plan, and because no subsequent effort had been made to carve
out that area from the project, the area was insured by the wrap-up policy. In our opinion, the
WCAC's focus was misdirected.
Pursuant to MCL 418.621(3), appellant St. Paul was only allowed to issue coverage as
authorized by the director. In this case, the authorization order, which was signed by a deputy
director, authorized appellant St. Paul to issue a policy "to cover employers performing work at
the construction site specified below under the conditions and procedures specified herein, on or
after June 24, 1997 in connection with (i) those certain construction jobs set forth in Exhibit B
attached hereto." Under the plain language of the authorization order, St. Paul was required to
See Kowalski v Fiutowski, 247 Mich App 156, 160-161; 635 NW2d 502 (2001).
Cain v Waste Mgt, Inc, 259 Mich App 350, 366; 674 NW2d 383 (2003).
cover employers working at the site "in connection with . . . certain construction jobs set forth in
Exhibit B." Had the deputy director intended to require St. Paul to cover work on all jobs,
performed by all employers at the site, he could easily have done so. However, the authorization
order clearly states that only certain jobs at the site were to be covered by St. Paul.
Consequently, focusing only on the site of the injury, as the WCAC did, was improper. Simply
put, we do not read MCL 418.621(3) or the deputy director's authorization order as requiring St.
Paul to cover all the work of all employees on all jobs performed at the site, but only "certain
construction jobs" at the site. The WCAC erred in concluding otherwise.
Logically, then, the question becomes whether plaintiff 's job was one of those "certain
construction jobs set forth in Exhibit B." However, the problem with answering that question is
that Exhibit B to the authorization order was simply an overhead map of the entire mall site. In
other words, there were no "certain construction jobs set forth in Exhibit B." Taken literally,
because only those jobs set forth in Exhibit B were to be covered, and because there were no jobs
set forth in Exhibit B, no jobs at the site were covered by St. Paul's policy. However, the deputy
director clearly intended to authorize some coverage, and such a literal interpretation would be
unreasonable. On the other hand, the shortcomings of Exhibit B to the authorization order do not
necessarily justify the WCAC's interpretation that all jobs at the entire site were to be covered
under the policy. Because the legal effect of any incongruity between the authorization order
and Exhibit B was not specifically raised before or addressed by the WCAC, this Court lacks the
authority to address the issue. Calovecchi v Michigan, 461 Mich 616, 626; 611 NW2d 300
(2000). As a result, on remand, the WCAC shall also consider and resolve the apparent
incongruity between the authorization order and Exhibit B thereto.
Moreover, regardless of any ambiguity created by Exhibit B, the WCAC's analysis was
incomplete. Paragraph 6(A) of the deputy director's authorization order stated that St. Paul's
policy was to cover all employers working at the designated site, "except where an agreement
specified in paragraph 5 above has not been executed." In turn, paragraph 5 of the authorization
Every general insurer whose insured employer is to become engaged upon
work on the site designated above or the employer to the extent that the employer
is self-insuring the obligations under the Act shall enter into an agreement with
the specific risk insurer in the form attached hereto as Exhibit A, incorporated
herein by reference, and made a part hereof, as a condition precedent to such
insured employer or self-insuring employer engaging its employees in work on
such site. This requirement shall not extend to vendors, truckers, suppliers,
material dealers, and others whose function is solely to supply or transport debris
material, equipment, or parts to or from the construction site.
Therefore, appellant St. Paul was required to cover all employers working at the site, except
those employers that had not executed an Exhibit A agreement. In this case, it appears that
neither plaintiff 's employer nor the contractor who hired plaintiff 's employer executed an
Exhibit A agreement with St. Paul. Without an explanation from the WCAC regarding why such
an agreement was not required in this case, the WCAC's decision was incomplete. On remand,
the WCAC shall determine whether the requisite Exhibit A agreements were executed, and, if
that query is answered in the negative, the WCAC shall determine whether that failure precludes
The WCAC order is vacated, and this case is remanded to the WCAC for further
proceedings consistent with this opinion. We do not retain jurisdiction.
/s/ William C. Whitbeck
/s/ David H. Sawyer
/s/ Kathleen Jansen