|Michael F. Easley, Governor
Buck Lattimore, Chairman
Stephen T. Gheen
|Bernadine S. Ballance,
Thomas J. Bolch, Commissioner
Laura K. Mavretic, Commissioner
Christopher Scott, Commissioner
Dianne C. Sellers, Commissioner
Pamela T. Young, Commissioner
TO: All Interested Parties
FROM: Stephen T. Gheen, Chief Deputy Commissioner
DATE: June 5, 2003
RE: P.H. Glatfelter/RFS Ecusta Workers’ Compensation Claims in North Carolina (Update)
Deputy Commissioner George Hall
of the Industrial Commission has issued an Opinion and Award in the case of:
I.C. NO. 944502, JAMES GOODSON, Employee, Plaintiff, and N.C. DEPARTMENT OF INSURANCE, ex rel. JAMES LONG, Commissioner, Intervenor v. RFS ECUSTA, Assuming Employer, and P.H. GLATFELTER CO., Original Self-Insured Employer, and N.C. SELF-INSURANCE GUARANTY ASSOCIATION, Defendants. OPINION AND AWARD by GEORGE R. HALL, III, Deputy Commissioner, N.C. Industrial Commission. Filed 5 June 2003.
A copy of Deputy Commissioner
Hall’s Opinion and Award may be viewed and copied at the bottom of this page.
Pursuant to North Carolina law,
any party in the above captioned case will have fifteen days in which to appeal
Deputy Commissioner Hall’s Opinion and Award to the Full Commission. If an
appeal is filed by any party, notice of the appeal will be posted on the
Industrial Commission’s website.
Several hundreds of other P. H.
Glatfelter/RFS Ecusta employees have claims pending before the Industrial
Commission that appear to involve issues similar to those in the case filed
today. These cases will be scheduled for hearing in Asheville, North Carolina in
the near future. The parties in each case will be notified approximately four
weeks in advance of the dates for hearings. Additional information will be
posted on the Industrial Commission’s website as it becomes available.
Questions or concerns regarding Glatfelter/Ecusta claims should be
directed to: Stephen T. Gheen, Chief Deputy Commissioner, 919-807-2540 or email@example.com.
Due to the volume of inquiries, email communication is requested if possible,
though not required.
944502, JAMES GOODSON, Employee, Plaintiff, and N.C. DEPARTMENT OF INSURANCE, ex
rel. JAMES LONG, Commissioner, Intervenor v. RFS ECUSTA, Assuming Employer, and
P.H. GLATFELTER CO., Original Self-Insured Employer, and N.C. SELF-INSURANCE
GUARANTY ASSOCIATION, Defendants. OPINION AND AWARD by GEORGE R. HALL, III, Deputy
Commissioner, N.C. Industrial Commission. Filed
5 June 2003.
was heard before the undersigned in Raleigh, North Carolina on December 19,
2002. At the call of the case for
hearing, the parties submitted an executed Pre-Trial Agreement, which is
incorporated herein by reference as though fully set out herein, wherein factual
stipulations and stipulated documents were submitted into the evidentiary
record. Additionally, at the
evidentiary hearing, Ron Ennis, Senior Financial Analyst with the North Carolina
Department of Insurance and Shirley Pennell, head of the Statistics Department
for the North Carolina Industrial Commission presented testimony and the parties
entered into evidence by stipulation, stipulated documents #15-20. Subsequent to the evidentiary hearing, the deposition
testimony of Don Bowman, Corporate Insurance and Credit Manager, was obtained on
March 4, 2003. By Order dated March
18, 2003, Stipulated Exhibits 21-24 were received into evidence. Upon receipt of
the parties’ contentions, the record in this matter was closed and is now
ready for decision.
P P E A R A N C E S
Neil S. Fuleihan, Attorney, Brevard, North Carolina; Neil S. Fuleihan and
Timothy Finger, appearing.
Attorney General’s Office, Attorneys, Raleigh, North Carolina;
Clementine Peterson, Assistant Attorney General, appearing for Department of
Young, Moore & Henderson, Attorneys, Raleigh, North Carolina; J. D.
Prather and Robert Paschal, appearing for P. H. Glatfelter Company.
Stuart Law Firm, Attorneys, Raleigh, North Carolina; Catherine Stuart and
Charles Kyles, appearing for NC Self Insurance Guaranty Association.
* * * * * * * * * *
The undersigned finds as fact and concludes as matters of law the
following, which were entered into by the parties as:
Plaintiff was employed by Defendant Glatfelter from November 13, 1989 to
August 9, 2001 and RFS Ecusta from August 9, 2001 forward.
2. From June 24, 1987 to
August 9, 2001, Defendant P.H. Glatfelter Company, (hereinafter
“Glatfelter”), a Pennsylvania corporation, operated a paper mill in
Transylvania County, North Carolina, known as the Ecusta Division, which had
three or more employees at all relevant times.
North Carolina Department of Insurance (hereinafter “NCDOI”) is the state
agency responsible for the licensing and regulation of the self-insured
employers pursuant to N.C. Gen. Stat. §97-165 et. seq.
Defendant North Carolina Self-Insurance Guaranty Association (hereinafter
“NCSIGA”) is a statutorily created, nonprofit, unincorporated legal entity
pursuant to N.C. Gen. Stat. §97-130 et. seq. (hereinafter “Guaranty
Act”) created to pay only “covered claims” against insolvent member
The aforementioned parties are subject to and bound by the applicable
provisions of the North Carolina Workers’ Compensation Act and the Guaranty
On May 23, 1999, Plaintiff sustained an injury by accident arising out of
and in the course of his employment, which was admitted as a compensable injury
by Defendant-Employer Glatfelter.
7. On May 23, 1999, an
Employee/Employer relationship existed between Plaintiff and Defendant-Employer
On May 23, 1999, Defendant-Employer Glatfelter was self-insured for its
workers’ compensation liability.
9. Pursuant to an Form
60 filed May 23, 2000, a Form 62 filed August 3, 2001, and a Form 62 filed July
29, 2002, Plaintiff Goodson was paid compensation for temporary total disability
at the rate of $440.11 per week.
Plaintiff’s most recent period of compensation for temporary total
disability paid pursuant to an award of the Commission was from May 28, 2002 to
September 30, 2002, at which time RFS Ecusta stopped payment without following
statutory procedures to terminate compensation.
11. The NCDOI, pursuant to Glatfelter’s application, afforded Glatfelter a license to self-insure as of January 7, 1992 and thus, Glatfelter was deemed a member self-insurer of the NCSIGA in accordance with N.C. Gen. Stat. §97-131.
a requirement to be a self-insured employer in North Carolina, Glatfelter posted
a statutory deposit in the form of a surety bond, number 04S100046333BCA-18,
which was in the amount of $1.6 million.
13. On or about June 18, 2001,
Glatfelter informed the NCDOI that it was “in the process of selling its
Ecusta Division, along with the workers’ compensation liabilities.”
August 9, 2001, Glatfelter executed an Amended and Restated Acquisition
Agreement (hereinafter the “Agreement”) for the sale of its Ecusta Division,
which in pertinent part purportedly transferred the Glatfelter self-insured
workers’ compensation liabilities of certain Glatfelter employees, including
the Plaintiff Goodson, from Glatfelter to the purchaser[s] of the Ecusta
15. On August 9, 2001, Glatfelter and RFS Ecusta, Inc. executed an Assumption Agreement, whereby RFS purported to assume the self-insured workers’ compensation liabilities of certain Glatfelter employees, including the Plaintiff Goodson.
16. On or about August 24, 2001, Ron
Ennis, Senior Financial Analyst with the NCDOI, confirmed receipt of a
certificate of deposit by RFS in the amount of $1.6 million to replace the
Travelers Surety Bond previously posted by Glatfelter and the NCDOI released the
Travelers Surety Bond.
17. Glatfelter requested the NCDOI terminate its license to self-insure and the NCDOI approved the request, terminating Glatfelter’s period of self-insurance effective August 24, 2001.
purchased workers’ compensation insurance for its employees for the period of
August 8, 2001 through September 23, 2003.
19. On October 23, 2002, RFS, U.S., Inc. and RFS Ecusta, Inc. filed a Chapter 11 Petition in Bankruptcy in the United States Bankruptcy Court for the District of Delaware (Case No. 02-13110 and 02-13111).
20. Glatfelter is not now and has never been declared insolvent.
21. The NCDOI continues to hold the $1.6 million Certificate of Deposit to secure the workers’ compensation liabilities that arose during P. H. Glatfelter’s period of self-insurance.
22. Pursuant to the Pre-Trial Agreement, the following documents are entered into evidence by stipulation of the parties:
1. North Carolina Industrial Commission Form 60 dated May 23, 2000;
2. North Carolina Industrial Commission Form 62 dated July 29, 2002;
3. NCDOI Surety Bond No. 04S100046333BCA-18;
4. Bowman correspondence to NCDOI dated June 18, 2001;
5. Ennis correspondence to Bowman dated June 21, 2000;
6. Certain pertinent parts of the Amended and Restated Acquisition Agreement dated August 9, 2001: (a) Introduction, Page 1, (b) Article I, Definitions, (c) Article II, Section 2.1, (d) Article II, Section 2.3, (e) Article V, Section 5.5, (f) Schedule 2.3(a), (g) Schedule 2.3(b), (h) Schedule 3.9, and (i) Schedule 5.5(a);
7. Assumption Agreement dated August 9, 2001;
8. Ennis to Bowman email correspondence dated August 24, 2001;
9. Ennis correspondence to Bowman dated August 24, 2001;
10. Summaries of RFS Insurance Policies from August 8, 2001 through September 23, 2003;
11. Glatfelter’s self-insurance license;
12. Glatfelter’s Application for Certificate of Authority as a Foreign Corporation;
13. Glatfelter’s Form 11-WC, Agreement and Undertaking of Employer Granted the Privilege of Paying Compensation as a self-insurer;
14. North Carolina Industrial Commission Form 62 dated August 3, 2001.
Pursuant to the Pre-Trial Agreement, the contested issues are as follows:
Plaintiff Goodson, Plaintiff Intervenor NCDOI and Defendant NCSIGA agree that the issues for determination are:
1. Whether the August 9, 2001, Amended and Restated Acquisition Agreement operated to relieve Defendant-Employer Glatfelter, in whole or in part, of its obligations created by Article I of the North Carolina Workers’ Compensation Act.
2. Whether Defendant Glatfelter is liable to Plaintiff for payment of his workers’ compensation claim.
3. Whether Defendant Glatfelter is liable for the payment of workers’ compensation claims, which arose during the period of its self-insurance.
4. Whether SIGA is liable for the payment of Plaintiff’s workers’ compensation claim upon the default of RFS to pay the claim.
5. Does the default by RFS on the payment of workers’ compensation claims, which arose during Defendant-Employer Glatfelter’s period of self-insurance, impose any liability on NCSIGA?
6. Whether, upon the posting of substitute security with the NCDOI and upon the resolution of any bankruptcy issues with regard to RFS, the $1.6 million statutory deposit being held by NCDOI is available for payment of Defendant-Employer Glatfelter’s workers’ compensation claims, which arose during its period of self-insurance.
Defendant Glatfelter contends that the contested issues are those set out in Chief Deputy Commissioner Steve Gheen’s December 3, 2002 Order.
* * * * * * * * * *
all the competent evidence of record, the undersigned finds as fact and
concludes as a matter of law the following:
1. During the period of
June 24, 1987 to August 9, 2001, Defendant Glatfelter, a Pennsylvania
corporation, operated a paper mill in Transylvania County, North Carolina, known
as the Ecusta Division, which had three or more employees at all relevant times.
Plaintiff worked for Defendant Glatfelter from November 13, 1989 to
August 9, 2001.
2. The NCDOI is the
state agency responsible for the licensing and regulation of self-insured
employers pursuant to N.C. Gen. Stat. §97-165, et seq.
NCSIGA is a statutorily created, nonprofit, unincorporated legal entity
pursuant to N.C. Gen. Stat. §97-130, et seq., created to pay “covered
claims” against insolvent self-insurers.
3. The North Carolina
Industrial Commission, created by statute, is primarily an administrative agency
of the State, charged with the duty of administering the Workers’ Compensation
Act pursuant to N.C. Gen. Stat. §97-77, et seq.
4. On January 17, 1992,
Defendant Glatfelter was licensed to self-insure its workers’ compensation
liabilities. Defendant Glatfelter posted the requisite statutory bond in
the form of a commercial surety bond issued by Travelers Casualty and Surety
Company of America in the amount of $1.6 million. Defendant Glatfelter was a self-insured from January 17, 1992
through August 24, 2001 and a member of the NCSIGA, which subjected it to
assessments pursuant to N.C. Gen. Stat. §97-165, et seq.
5. On May 23, 1999,
Plaintiff sustained an injury by accident arising out of and in the course of
his employment, which was admitted as a compensable injury by Defendant
Glatfelter on a Form 60 filed May 23, 2000.
Pursuant to the Form 60, a Form 62 filed August 3, 2001, and a Form 62
filed July 29, 2002, Plaintiff was paid temporary total disability compensation
at the rate of
A June 18, 2001 letter from Donald Bowman (hereinafter the “Bowman”),
Corporate Insurance and Credit Manager for Glatfelter, to the Ronald Ennis
(hereinafter the “Ennis”), Senior Financial Analyst with the NCDOI, stated
that, “The P.H. Glatfelter Company is in the process of selling its Ecusta
Division along with the Workers’ Compensation liabilities.
After the sale we will no longer want or need to be Self-Insured in the
State of North Carolina for Workers’ Compensation and therefore would like to
cancel the Surety Bond we now have.” [Emphasis
added] The letter also said,
“In addition, I would appreciate if you would let me know exactly what, if
anything else is needed from us to withdraw from being Self-Insured.”
A June 21, 2000 [sic] letter from Ennis to Bowman, regarding
Glatfelter’s termination of their self-insured status, said “According to
your letter the North Carolina division of the Company is being acquired by a
third party that is assuming all past workers’ compensation liabilities
accrued during the Company’s operation of the division.”
The letter went on to say, “The surety bond that you have in place
may be cancelled by giving the Commissioner 60 days written notice.
The Surety will remain liable for all obligations and liabilities of the
Principal that arose under Chapter 97 of the North Carolina General Statutes.
If the acquiring company provides a replacement bond, then the
Department will release the Surety Company of any past, present or future
liabilities.” [Emphasis added]
RFS Ecusta posted a $1,600,000 bond with the NCDOI.
9. An August 24, 2001
email message from Ennis to Bowman states, “The NC Department of Insurance
received confirmation that RFS Ecusta made a deposit in the amount of $1,600,000
to the Department’s correspondent bank to secure the assumption of the
liabilities of PH Glatfelter worker’s [sic] compensation reserve loss
claims. In connection therewith, liability
is discharged for all past, present, existing and potential liability for the
Travelers Casualty and Surety Company of America, under surety bond
04S100046333BCA-18 effective August 24, 2001, with PH Glatfelter Company as
Principal. I will provide to you
the original bond and corresponding endorsements in a mailing next week.
This also is notification that PH Glatfelter has voluntary [sic]
terminated their status as a Self-Insured Employer in the state of North Carolina effective August 24, 2001.
If you have any questions call me at 919.733.5633 ext. 250.”
10. Glatfelter’s bond was released
by the NCDOI and returned to Glatfelter with the August 24, 2001 letter from
11. The NCDOI never asked Glatfelter
to deposit a special release bond.
12. Bowman believed that Glatfelter was released from all of its workers’ compensation liabilities when the NCDOI accepted the 1.6 million dollar CD from RFS Ecusta as a substitution for Glatfelter’s bond. However, when asked if he was ever directly informed that Glatfelter’s obligations under as an employer in North Carolina were fully discharged under the North Carolina Workers’ Compensation Act, Bowman testified, “I don’t recall getting anything saying that we were discharged . . . .”
13. The NCDOI he did not have the
authority to release Glatfelter from liability for its self-insured workers’
compensation claims existing as of August 24, 2001.
And while Ennis testified that he did not release Glatfelter from its
liabilities under the North Carolina Workers’ Compensation Act for existing
claims, a September 25, 2001 memorandum to Jo Ann Thorpe of the North Carolina
Industrial Commission reveals that he attempted to exercise authority he did not
have. Ennis’ memorandum reads,
“P.H. Glatfelter Company, Inc. recently sold their North Carolina affiliate to
RFS Ecusta, a non self-insured employer. Effective
August 24, 2001 RFS Escuta [sic] assumed P.H. Glatfelter’s
outstanding workers’ compensation claim liabilities in reference with the
sale. In connection therewith, P.H.
Glatfelter Company terminated their status as self-insured in North Carolina and
RFS Escuta [sic] is the sole entity responsible for P.H.
Glatfelter’s open claims.” [Emphasis
through its Senior Financial Analyst, Ennis, allowed a substitution of security
by allowing the release of Travelers Surety Bond, thereby, releasing Travelers
from the liability of its principal, Glatfelter, by means of substitution of RFS
Ecusta’s $1.6 million Certificate of Deposit.
Ennis did not require Glatfelter to post a special release bond issued by
a corporate surety upon Glatfelter’s cessation as a self-insured employer
under the Act on August 24, 2001.
15. Bowman’s belief that Glatfelter
had been released from its liability for payment of existing claims during the
period of self-insurance in favor of RFS Ecusta is not well founded.
The NCDOI, through its Senior Financial Analyst, Ennis, in an internal
memorandum with his supervisor and an external communication with Jo Ann Thorpe
of the Statistics Department of the Industrial Commission, reported that RFS had
assumed liability for Defendant Glatfelter’s self-insured workers’
compensation claims. It should be
noted that Ennis’ October 2, 2001 memorandum to Jo Ann Thorpe was written
after Glatfelter had executed the purchase agreement with RFS Ecusta and there
is no evidence that Bowman was aware of Ennis’ memorandum at the time.
Glatfelter did not rely on any representations of the Department of
Insurance or the North Carolina Industrial Commission prior to entering in the
acquisition agreement. Glatfelter
received a letter dated August 9, 2001 from the Law Offices of Ballard, Spahr,
Andrews & Ingersoll regarding the effect of the Amended and Restated
Acquisition Agreement. Glatfelter’s
own attorneys stated “The opinions expressed herein are limited to the federal
laws of the United States of America, the General Corporation Law of the State
of Delaware and the laws of the Commonwealth of Pennsylvania, and we express no
opinion concerning the laws of any other jurisdiction.”
Glatfelter, therefore, did not have a legal opinion as to the effect of
the Amended and Restated Acquisition Agreement in North Carolina.
16. RFS Ecusta, Defendant
Glatfelter’s purported successor in interest for its workers’ compensation
liabilities, never applied for, or submitted the requisite documentation
necessary to qualify as a licensed self-insured employer under the North
Carolina Workers’ Compensation Act. The
NCDOI did not require RFS Ecusta to become self-insured in order to post the
replacement bond. RFS Ecusta was
insured for the period 8/8/01 through 8/8/02 by PMA Insurance Company, from
8/8/02 through 9/23/02 and 9/23/02 through 9/23/03 by Travelers Insurance
17. Despite Ennis’ testimony that
he did not purport to release Glatfelter from liability for its existing
workers’ compensation claim liability when Glatfelter ceased its status as a
licensed self-insurer, Ennis’ action in permitting RFS Ecusta to post a bond
instead of requiring a special release bond and his memorandum to Jo Ann Thorpe
strongly suggest that Ennis may have believed at the time that RFS Ecusta would
assume Glatfelter’s existing workers’ compensation liabilities.
These facts support Bowman’s testimony that “it was my opinion that
we were relieved from the State with what Mr. Ennis sent” based on his
communications with Ennis that RFS Ecusta could and was lawfully assuming
Glatfelter’s existing liabilities. Therefore,
Glatfelter’s defense of this claim is not without reason.
In addition, it appears the legal issues in this case are of first
impression in North Carolina.
* * * * * * * * * *
Based upon the foregoing stipulations and findings of fact, the
undersigned makes the following:
CONCLUSIONS OF LAW
1. The North Carolina Industrial Commission has subject matter jurisdiction over this action and personal jurisdiction over each of the parties. N.C. Gen. Stat. §§97-1; 97-91; North Carolina Ins. Guar. Ass’n v. International Paper Co., 152 N.C. App. 224, 569 S.E.2d 285 (2002). No other parties are necessary in this cause of action, in that RFS Ecusta was the only “Buyer” who purported to assume any liability for Glatfelter’s workers’ compensation obligations and they are subject to the protection of the United States Bankruptcy Court for the District of Delaware.
2. “No contract or agreement, written or implied, no rule, regulation, or other device shall in any manner operate to relieve an employer in whole or in part, of any obligation created by this Article, except as herein otherwise expressly provided.” N.C. Gen. Stat. §97-6. There was no valid transfer of Glatfelter’s workers’ compensation liabilities to RFS Ecusta. N.C. Gen. Stat. §97-6.
3. Plaintiff is entitled to have Glatfelter pay his workers’ compensation claim, which arose during its period of qualification as a self-insured employer. N.C. Gen. Stat. §§97-3; 97-9; and Roberts v. City Ice and Coal Company, 210 N.C. 17, 185 S.E. 438 (1936).
4. “If a self-insurer ceases to self-insure or desires to replace securities with an acceptable surety bond or bonds, the self-insurer shall notify the Commissioner, and may recover all or a portion of the securities deposited with the Commissioner upon posting instead an acceptable special release bond issued by a corporate surety in an amount equal to the total value of the securities. The special release bond shall cover all existing liabilities under the Act plus an amount to cover future loss development and shall remain in force until all obligations under the Act have been discharged fully.” N.C. Gen. Stat. §97-185(g). [Emphasis added] ‘ “Corporate surety” means an insurance company authorized by the Commissioner to write surety business in this State.’ N.C. Gen. Stat. §97-165(5).
5. “If a self-insurer ceases to self-insure, no deposits shall be released by the Commissioner until the self-insurer has discharged fully all of the self-insurer’s obligations under the Act.” N.C. Gen. Stat. §97-185(h). [Emphasis added] P.H. Glatfelter’s bond should not have been released without the posting of a “special release bond” as Glatfelter has not fully discharged all its obligations under the Act. The bond posted by RFS Ecusta does not qualify as a “special release bond,” as RFS Ecusta was not a “corporate surety” as defined in N.C. Gen. Stat. §97-165(5).
6. There is no mechanism in the statutory scheme that permits a self-insured employer to transfer its potential liabilities for workers’ compensation claims by private contractual agreements. While Glatfelter can cease to be self-insured, the self-insured must still fully discharge all of the self-insurer’s obligations under the Act. N.C. Gen. Stat. §97-185.
7. RFS Ecusta’s surety bond is not at issue at this time as Glatfelter has never been declared insolvent or in hazardous financial condition, nor has it fully discharged all of its obligations under the Act. N.C. Gen. Stat. §§97-143, 97-185. The NCSIGA’s potential liability is not at issue.
8. Glatfelter’s defense of this claim was not unreasonable. N.C. Gen. Stat. §97-88.1.
* * * * * * * * * *
Based upon the foregoing stipulations, findings of fact, and conclusions
of law, the undersigned enters the following:
W A R D
1. Defendant Glatfelter is hereby ORDERED to make payment of disability compensation and medical compensation to Plaintiff for payment of his admittedly compensable workers’ compensation claim and is hereby ORDERED to secure its obligations under the Act as required by N.C. Gen. Stat. §97-93.
2. The parties’ request for attorneys’ fees pursuant to N.C. Gen. Stat. §97-88.1 is hereby DENIED.
3. Glatfelter shall pay the costs.
It is further ORDERED that this case be REMOVED from the Raleigh hearing docket.
GEORGE R. HALL, III
Read Chairman Buck Lattimore's April 4, 2003 Memo.
Read Chief Deputy Commissioner Stephen T. Gheen's December 3, 2002 Order.
Read Chairman Lattimore's November 8, 2002 Memorandum.
ReadNCSIGA's October 28, 2002 Letter.