ZURICH AMERICAN INSURANCE COMPANY v. BROADWAY MOVING & STORAGE, INC.

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-0582-05T50582-05T5

ZURICH AMERICAN INSURANCE

COMPANY,

Plaintiff-Appellant,

v.

BROADWAY MOVING & STORAGE, INC.,

Defendant-Respondent.

__________________________________

 

Argued October 23, 2006 - Decided December 7, 2006

Before Judges Seltzer and C.L. Miniman.

On appeal from the Superior Court of New Jersey, Law Division, Mercer County, Docket No. L-248-03.

Jonathan M. Kuller argued the cause for appellant (Podvey, Meanor, Catenacci, Hildner, Cocoziello & Chattman, attorneys; Mr. Kuller and Evelyn R. Storch, on the brief).

Kevin M. Shanahan argued the cause for respondent.

PER CURIAM

Plaintiff Zurich American Insurance Company (Zurich) appeals from the dismissal of its claims for unpaid workers' compensation premiums allegedly due from its insured, Broadway Moving & Storage, Inc. (Broadway). The unpaid premiums were imposed by Zurich following an audit of Broadway's payroll, which resulted in a determination that Broadway's employee payroll was larger than that used to calculate premiums at the inception of the policy. We reverse.

The procedural history can be summarized briefly. On August 6, 2004, Zurich filed a motion for summary judgment in which Zurich proffered evidence that it was the workers' compensation insurer for Broadway, and that Broadway had not paid its premiums in full. That motion was denied on October 8, 2004, on the basis of material, disputed facts. On March 28, 2005, at the conclusion of discovery and before trial, Broadway brought a motion in limine seeking partial summary judgment that insurance premiums for employees of Broadway working interstate be excluded from the premium calculation. Broadway's motion was granted on May 13, 2005. Zurich's remaining claims were listed for trial on June 29, 2005, but were dismissed without prejudice at the request of Zurich. Zurich appealed the denial of its motion for summary judgment and the award of partial summary judgment to Broadway.

The facts, in a light most favorable to Zurich, are these. On May 26, 2000, the New Jersey Compensation Rating & Inspection Bureau designated Zurich as the workers' compensation carrier for Broadway. Zurich issued two policies to Broadway, one covering the period from May 11, 2000, to May 11, 2001, and the other covering the period from May 16, 2001, to May 11, 2002, the second being a renewal of the first.

Broadway performs commercial and residential moving and storage. It is located at 130 Durand Avenue and two other locations, all in Trenton, New Jersey. While making intrastate moves within New Jersey and within parts of Pennsylvania (local moves), Broadway operates under its own name; but while making interstate moves, Broadway operates under the name of Atlas Van Lines (Atlas). Broadway is a party to an "Atlas Van Lines, Inc. Agency Agreement" pursuant to which Broadway is an agent of Atlas "for the limited purpose of representing and acting on behalf of Atlas in connection with Atlas's business as an interstate common and contract motor carrier and property broker." Broadway was permitted to use the name "Atlas" only when conducting interstate business.

It was Atlas's policy that an agent was required to maintain statutory workers' compensation insurance for the agent's local and intrastate operations. While engaged in the service of Atlas, an agent was required to maintain workers' compensation and employer's liability insurance with an Atlas-approved insurer. Alternatively, the agent could obtain such coverage "through Atlas's master workers' compensation insurance plan."

Zurich's policies provided coverage pursuant to the New Jersey Workers' Compensation Act, N.J.S.A. 34:15-1 to -128. Other-states coverage under Part Three of the policy was not provided in either policy. However, Zurich was required by its policy to respond to any and all losses involving Broadway employees. Part Five of the policy governed the annual premium.

Premium for each work classification is determined by multiplying a rate times a premium basis. Remuneration is the most common premium basis. This premium basis includes payroll and all other remuneration paid or payable during the policy period for the services of:

1. All your officers and employees engaged in work covered by this policy; and

2. All other persons engaged in work that could make us liable under Part One (Workers Compensation Insurance) of this policy. If you do not have payroll records for those persons, the contract price for their services and materials may be used as the premium basis. This paragraph 2 will not apply if you give us proof that the employers of these persons lawfully secured their workers compensation obligations.

The premium was to be determined pursuant to Zurich's manuals of rules, classifications, rates, and rating plans. All information required to calculate premiums was subject to verification and change by annual audit.

The premium, including other charges, was $23,209 for the first year. There were three classes of workers: (1) "furniture moving and storage, drivers"; (2) "salespersons-outside"; and (3) "clerical office employees." The total annual remuneration for the first class was stated to be $125,000; for the second class, $30,000; and for the third class, $180,000. The rates per $100 of remuneration varied for each class.

For the second year, the premium was $24,280 as a result of changes to the total remuneration of the three classes of workers. The total remuneration stated for the first class was $123,250; for the second class, $29,580; and for the third class, $177,480. The remuneration rates for each class also changed.

However, as a result of an audit, an additional premium of $73,364 was imposed with respect to the renewal policy. This additional sum was charged because the total annual remuneration for class one was found to be $520,574; class two was found to be $61,793; and class three was found to be $142,034. Furthermore, additional premiums for the first year of the policy were assessed in the amount of $70,158.

After these additional premiums were assessed, Broadway fell behind in making payments and the second policy was eventually cancelled for nonpayment. As of May 23, 2002, Broadway had paid the base premiums for the first and second policies, but paid none of the additional premiums. The total amount claimed due at that time was $144,852. Zurich instituted this collection action on January 28, 2003.

In moving for summary judgment, Zurich contended that, because it "was the designated workers compensation carrier of record for Broadway, Zurich was responsible for workers compensation benefits attributable to losses incurred during the course of both intrastate and interstate moves performed by Broadway's employees." Broadway, on the other hand, contended that it was not obligated to pay the additional premiums because Zurich improperly included individuals working in interstate moving and storage while Broadway was acting as an Atlas agent, and because those employees were covered by other workers' compensation policies.

Presented with Broadway's contention, the judge denied summary judgment to Zurich on October 10, 2004, finding that there were two genuine issues of fact:

First[,] there is the issue of whether the individuals who Broadway describes as those performing interstate business are in fact employees of Broadway Moving. Broadway contends that these individuals were employees of Atlas Van Lines and has included as an exhibit at least one ledger sheet which evidences same.

Second[,] there is the question whether the work performed by those individuals who Broadway claims were conducting interstate business as distinct from intrastate business is work covered by the policies. This is certainly a question of fact and should the fact finder conclude that these individuals were employees of Atlas Van Lines, but engaged in work that would make Zurich liable under the terms of the policy, there is the question whether Atlas Van Lines lawfully secured its workers' compensation obligations.

If these individuals were employees of Atlas and performed work that could have made Zurich liable, but were covered by other policies[,] then the payroll and remuneration for these employees should have been excluded from the premium basis.

The calculation of the premium basis and the amount owed by Broadway to Zurich depends upon the determination of each of these questions of fact. For these reasons, the motion for summary judgment is denied.

Richard Crocker, the President of Broadway, testified at his deposition on November 19, 2004. He explained that when Broadway first became an Atlas agent in 1991, it surrendered its ICC number and began to use Atlas's ICC number for all interstate moves. Some interstate business is obtained by Broadway directly from its own contacts. Other interstate business is referred to Broadway by one of the other 450 Atlas agents or, sometimes, by Atlas directly. Broadway also has a special products division which works out of a distribution center Broadway operates for Atlas. Broadway also does local office moves under its own name, and performs household moves, which can be local or interstate. About half of Broadway's business is local and half is interstate as an Atlas agent.

Broadway has certain workers that it uses to do its work as an Atlas agent. Certain of these employees work exclusively as interstate movers, but other interstate movers may work on local moves as well. Other Broadway employees mostly work on local moves, but sometimes are involved in interstate business under the Atlas agency agreement. The assignment of workers to both types of moves is based on "availability and bodies and workload."

All of the workers are on Broadway's payroll and are issued Forms W-2 by Broadway. All of the interstate and local workers are hired and fired by Broadway without any input from Atlas. When performing interstate and local moves, Broadway directs the actual workers who perform the move. However, Atlas requires that the interstate drivers, not the helpers, be approved by and registered with Atlas. The drivers' logs are maintained by Atlas and they are required to abide by Atlas's rules of operation. If a driver accumulates too many safety violation points, Atlas can refuse to have the driver handle interstate moves under its ICC number. The bills of lading are issued by Atlas under its ICC number. For the most part, Atlas does not exercise any control over the helpers.

All of the trucks for interstate and local moves are owned by Broadway. At least the interstate trucks, and possibly all of the trucks, are labeled "Broadway" and "Atlas Van Lines" with Atlas's ICC number. They are also branded as Atlas trucks through paint specifications. Broadway is required to submit its truck inspection reports, maintenance reports, and initial qualification reports to Atlas. The workers all wear uniforms supplied by Broadway, but at least some, if not all, are branded as Atlas uniforms, i.e., blue pants and shirts with "Atlas Van Lines" and the employee's name embroidered on the shirt.

At his deposition, Mr. Crocker testified that Broadway was not disputing the audit relating to household moves, both local and interstate. Its dispute with the audit was confined to the special products division work, which he testified was "cut and dry, a complete separation from the other work." Special products moves are only part of the work done under the Atlas agency agreement.

In seeking partial summary judgment, Broadway relied on a March 24, 2005, affidavit of Craig R. Parres, the Vice President of Arthur J. Gallagher & Co. of St. Louis, Missouri, which was the insurance brokerage firm placing commercial insurance for Atlas. He stated that at all relevant times "the Atlas Van Lines program provided workers' compensation coverage for putative joint employees and/or statutory employees of certain Atlas Van Lines agents, including Broadway Moving & Storage, Inc." Parres also attached a claim report that indicated two Broadway employees had filed claims against a policy issued by Legion Insurance Company (Legion) and that one of them received benefits.

Attached to Parres's affidavit are two certificates of insurance for coverage afforded by Legion to "Atlas Van Lines, Inc., et al., Broadway Moving & Storage, Inc., P.O. Box 509, Evansville, IN," both for the period October 1, 1999, to October 1, 2000. One of these two certificates has no name included in the certificate holder box. A third certificate lists the insured as "Broadway Moving & Storage, Inc., P.O. Box 509, Evansville, IN," for the period October 1, 2000, to October 1, 2001. The certificate holder box indicates "EVIDENCE ONLY." The fourth certificate indicates that the insured was "Broadway Moving & Storage, Inc., 130 Durand Avenue, Trenton, NJ" for the period October 1, 2001, to June 15, 2002. "EVIDENCE ONLY" appears in this certificate holder box as well.

Also attached to the Parres affidavit was an "Information Page" for the Legion policy in effect between October 1, 2001, and October 1, 2002. It indicates that "the policy applies to the Workers Compensation Law of the states listed" in "GU207D," which was not attached. Finally, there were three Legion "Extension Schedules," one for each year of the period October 1, 1999, to October 1, 2002. For the first and second years, the deductible was $250,000, and for the third year it was $500,000.

In ruling on Broadway's partial summary judgment motion on May 13, 2005, the judge was persuaded that Broadway "has proved the existence of a policy with Legion Insurance that ran simultaneous to the Zurich American policy" and granted Broadway's motion for partial summary judgment because he found that there were two distinct classes of employees - intrastate insured by Zurich and interstate insured by Legion.

Rule 4:46-2(c) provides that a moving party may be entitled to summary judgment only if there is no genuine issue as to any material fact in the record. In deciding a summary judgment motion, the trial court must apply the standard articulated by our Supreme Court in Brill, supra, 142 N.J. at 540:

[A] determination whether there exists a "genuine issue" of material fact that precludes summary judgment requires the motion judge to consider whether the competent evidential materials presented, when viewed in the light most favorable to the non-moving party, are sufficient to permit a rational factfinder to resolve the alleged disputed issue in favor of the non-moving party.

The court must assume that the nonmoving party's version of the facts is true and give that party the benefit of all favorable inferences. Id. at 536. We apply the same standards on appeal. Prudential Prop. & Cas. Ins. Co. v. Boylan, 307 N.J. Super. 162, 167 (App. Div.), certif. denied, 154 N.J. 608 (1998); Antheunisse v. Tiffany & Co., Inc., 229 N.J. Super. 399, 402 (App. Div. 1988), certif. denied, 115 N.J. 59 (1989).

An employer in New Jersey is required to provide for payment of workers' compensation benefits to its employees. N.J.S.A. 34:15-72. The employer may self-insure upon proof to the Commissioner of Insurance of the employer's financial ability. N.J.S.A. 34:15-77. Otherwise, the employer must secure insurance with "any stock company or mutual association authorized to engage in workmen's compensation or employer's liability insurance in this State." N.J.S.A. 34:15-78.

Such an authorized insurer is required to insure all of the employer's employees except as otherwise permitted by statute:

No policy of insurance against liability arising under this chapter shall contain any limitation of the liability of the insurer to an amount less than that payable by the assured on account of his entire liability under this chapter, and no provision of such policy shall be construed to restrict the liability of the insurer to any stated . . . employment carried on by an assured unless the . . . employment excluded by such restriction shall be concurrently separately insured or exempted as provided for in [N.J.S.A. 34:15-70 to -95.5].

[N.J.S.A. 34:15-87.]

See also Lohmeyer v. Frontier Ins. Co., 294 N.J. Super. 547, 555 (App. Div. 1996) (holding that "the exemption in Section 87 is satisfied only if there is concurrent separate insurance"), certif. denied, 148 N.J. 461 (1997). Thus, Zurich was required to insure the interstate employment of all Broadway employees unless some of the interstate employment was "concurrently separately insured."

Broadway urged, and the trial court found, that the certificates of insurance were adequate proof of a concurrent separate insurance policy, relying on Borough of Sayreville v. Bellefonte Ins. Co., 320 N.J. Super. 598 (App. Div. 1998). The issue in Sayreville was "the quantum of the insured's burden of proof to establish the existence and contents of lost or missing liability insurance policies" in an action against the carriers that issued the policies. Id. at 599. In reversing the grant of summary judgment to the insurance carriers, we held that the burden of proof was by a preponderance of the evidence rather than by clear and convincing evidence. Id. at 604. We also held that where the insured had parol contemporaneous evidence that the missing policies in fact existed, the insured could rely upon the terms contained in subsequently issued policies to prove the terms of the missing policies in the absence of any proof that the carrier was using a different form of policy. Id. at 605. This case provides no comfort to Broadway.

Preliminarily, there is no record evidence that the Legion policies are lost or missing, which must be shown to trigger the rule in Sayreville. Even if they were lost or missing, the certificates of insurance by themselves, at best, are only proof of the existence of the policies. They do not, and cannot, prove the terms of the alleged concurrent separate workers' compensation insurance policies issued by Legion. Further, proof of those terms is essential to determining whether Broadway is entitled to exclude any of its employees from the statutory obligation of Zurich to insure all of Broadway's employees.

For example, Parres certified that Legion supplied compensation insurance for "putative joint employees and/or statutory employees of certain Atlas Van Lines agents." We do not know if those terms appear in the Legion policy, and if they do, we certainly do not know how they are defined by the policy. Without that definition, we do not know which, if any, of Broadway's employees have the benefit of such insurance. We do not even know if the phrase is intended to refer to anyone on Broadway's payroll because the phrase could be construed to refer only to employees on Atlas's payroll who are considered by their work to be putative joint or statutory employees of Broadway.

Furthermore, a separate concurrent policy of insurance may not contain any "limitation of the liability of the insurer to an amount less than that payable by the assured on account of his entire liability" under the New Jersey Workers' Compensation Act. N.J.S.A. 34:15-87. The certificates of insurance do not prove that the Legion policies conformed to these requirements. The Extension Schedules with deductibles ranging from $250,000 to $500,000 certainly suggest that the policies do not conform, and leave Zurich exposed at least for the deductible, even if it was not exposed for the entirety of the claim, although it might have been.

We would be remiss not to comment upon the judge's finding that there are two distinct classes of employees at Broadway. This clearly is not supported by the testimony of Mr. Crocker. In reviewing exhibits D-3 and D-4, Mr. Crocker testified that seven or eight workers performed both interstate and local moves, and the balance were either local or interstate. Thus, the line drawn between local and interstate movers was not crisp. In fact, Mr. Crocker limited his dispute of the audit to the employees working in the special products division and elected not to contest premiums assessed by Zurich respecting employees working both locally and interstate.

Because the trial court failed to view the evidence in a light most favorable to Zurich and did not draw all reasonable inferences in its favor, the grant of summary judgment to Broadway is reversed and the matter is remanded for trial on all issues.

 
Reversed and remanded for proceedings consistent with this opinion.

See Brill v. Guardian Life Ins. Co., 142 N.J. 520, 540 (1995).

The record is not clear in this respect.

It is also not clear from the record whether the local movers wear these uniforms.

The identity of drivers and helpers performing special products moves and their collective annual remuneration cannot be determined from the record on appeal.

The certificates of insurance may not even be admissible evidence. Two of them appear to have been created for litigation because they say "EVIDENCE ONLY" where the name of the certificate holder belongs.

(continued)

(continued)

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A-0582-05T5

December 7, 2006