All
opinions are subject to modification and technical correction prior to official
publication in the North Carolina Reports and North Carolina Court of Appeals
Reports. In the event of discrepancies between the electronic version of an
opinion and the print version appearing in the North Carolina Reports and North
Carolina Court of Appeals Reports, the latest print version is to be considered
authoritative.
NO. COA06-1123
NORTH CAROLINA COURT OF APPEALS
Filed:
4 September 2007
NORTH CAROLINA
FARM BUREAU
MUTUAL INSURANCE COMPANY, INC.
Plaintiff,
v. Wake
County
No. 04 CVS 1749
T-N-T Carports, Inc., VENANCIO
TORRES and DEBORAH TORRES,
Defendants.
Appeal by defendants from judgment entered 16 February 2006
by Judge Robert H. Hobgood in Superior Court, Wake County. Heard in the Court of Appeals 21 March 2007.
Young
Moore and Henderson, P.A. by Walter E. Brock, Jr. for plaintiff-appellee.
Eric
P. Handler, P.C. by Eric P. Handler for defendant-appellants.
STROUD, Judge.
This is a breach of contract action involving an insurance
contract for workers’ compensation and employers’ liability insurance. Plaintiff North Carolina Farm Bureau Mutual
Insurance Company, Inc. insured defendant T-N-T Carports, Inc. (“T-N-T”)
pursuant to two workers’ compensation insurance policies. Plaintiff issued each policy with an initial
premium determined by the estimated annual payroll of covered T-N-T
employees. This initial premium was
subject to an audit from which a final premium would be calculated. Defendants Venancio and Deborah Torres
personally guaranteed “payment of all premiums.”
The dispositive issue before this Court is whether T-N-T
subcontractors and their helpers, who transport and assemble steel carports and
garages, are properly classified as “Labor Only” employees or “Mobile Equipment
with Operators” employees for the purpose of calculating T-N-T’s final workers’
compensation insurance policy premium.
We hold that the trial court did not err by concluding that the work of
T-N-T’s subcontractors is “Labor Only.”
Accordingly, we affirm the trial court order entered 16 February 2006 by
Judge Robert H. Hobgood in Superior Court, Wake County awarding plaintiff
$260,046.50 in additional premium payments under both policies.
I.
Background
Defendant T-N-T manufactures unassembled steel carports and
garages at its plant in Mount Airy, North Carolina. Between March 2001 and September 2002, defendant T-N-T sold
carports and garages to buyers in approximately twenty states. Defendant T-N-T contracted with uninsured
subcontractors to transport the unassembled steel materials from Mount Airy to
job sites and to assemble the carports and garages on arrival. Defendant T-N-T’s subcontractors and the
subcontractors’ helpers used heavy-duty pickup trucks to transport the
unassembled steel and used various hand tools to assemble the carports and
garages.
Plaintiff issued two workers’ compensation insurance
policies to defendant T-N-T. Policy One
was in effect from 16 March 2001 to 16 March 2002. Policy Two was in effect from 16 March 2002 to 6 September
2002. Plaintiff issued each policy with
an initial premium determined by the estimated annual payroll of covered T-N-T
employees. For each policy, this
initial premium was subject to audit from which an actual premium would be
calculated. The estimated annual
payroll of T-N-T subcontractors and their helpers was not included when
plaintiff calculated the initial premium for either policy. However, N.C. Gen. Stat. §97-19 requires
North Carolina employers to provide workers’ compensation benefits to the
employees of uninsured subcontractors.
N.C. Gen. Stat. §97-19 (
2005).
Because defendant T-N-T did not require, or provide proof
of, workers’ compensation insurance coverage from its subcontractors, plaintiff
included the annual payroll of defendant T-N-T’s subcontractors and their
helpers when calculating the final premiums for both policies. This inclusion caused the final premium to
exceed the estimated premium. Plaintiff
had calculated the initial estimated premium for Policy One to be $17,005.00,
but plaintiff’s complaint alleged that the audit revealed that the actual
premium for covered T-N-T employees, including T-N-T subcontractors and their
helpers, should have been $135,462.00.
Plaintiff also calculated the estimated premium for Policy Two to be
$11,912.50, but plaintiff’s complaint alleged that the audit revealed that the
actual premium for covered T-N-T employees should have been $66,138.00. Based on these audits, plaintiff sought
additional premiums in the amount of $172,682.50 plus interest.
Defendants do not dispute that the payroll of T-N-T
subcontractors and their helpers must be included when calculating the policy
premiums. Defendants dispute
plaintiff’s classification of these employees as “Labor Only” employees for
purposes of determining the amount of additional premiums due. Defendants argue that T-N-T subcontractors
and their helpers should be classified as “Mobile Equipment with Operators”
employees. Defendants refused to pay
the additional premiums demanded by plaintiff as a result of the policy audits.
On 9 February 2004, plaintiff filed suit in Superior Court,
Wake County alleging breach of contract.
In a consent pretrial order, plaintiff and defendants stipulated that
10. T-N-T
contends, and the Court held in its order granting partial summary judgment
entered herein on August 3, 2005,[Note 1] that the Uninsured
Subcontractor payments are adjusted under Subcontractor Table 2 of the Basic
Manual according to the category for ‘Mobile Equipment with Operators (such as
but not limited to earth movers, graders, bulldozers or log skitters)’,[sic]
which applies not less than 33 1/3% of the subcontractor payments to the
applicable rate per $100.00. Should
that category be deemed to apply, Farm Bureau would in fact apply precisely 33
1/3% of the subcontractor payments to the rate to calculate the final premium.
11. Farm
Bureau contends that the Uninsured Subcontractor payments are adjusted under
Subcontractor Table 2 of the Basic Manual according to the category for “Labor
only,” which applies not less than 90% of the subcontractor payments to the
applicable rate per $100.00. Should
that category be deemed to apply, Farm Bureau would in fact apply precisely 90%
to the subcontractor payments to the rate to calculate the final premium.
This
matter was heard by bench trial before Superior Court Judge Robert H. Hobgood
on 9 January 2006.
Plaintiff tendered Sue Taylor (“Taylor”), director of the
North Carolina Rate Bureau Workers’ Compensation Department (“Rate Bureau”), as
an expert witness at trial. Taylor
explained how the Rate Bureau classifies employees and how the Rate Bureau
would apply the Basic Manual for Workers Compensation and Employers Liability
Insurance (“Basic Manual”) to the disputed policies.
The Basic Manual contains insurance rates and classification
plans adopted by the North Carolina Rate Bureau and approved by the
Commissioner of Insurance. N.C. Gen.
Stat. §58-36-100(k) and (o) (2005).
N.C. Gen. Stat. §58-36-100(k) and (o) provide that all workers’
compensation insurance carriers must comply with the Basic Manual. Id.
The Basic Manual states that “[f]or each subcontractor not providing . .
. evidence of workers compensation insurance, additional premium must be
charged on the contractor’s policy for the uninsured subcontractor’s employees
according to Subcontractor Table 1 and 2” contained therein. Basic Manual for Workers Compensation and
Employers Liability Insurance, Rule 2(H)(2) (2001).
Subcontractor Table 1 notes that
[i]f the
contractor has not furnished evidence of workers compensation insurance and . .
. [d]oes not furnish complete payroll records, but documentation of a specific
job discloses that a definite amount of the subcontract price represents
payroll, . . . [t]hen to calculate the additional premium . . . [u]se the payroll amount indicated by
the documentation as the payroll, subject to the minimums in Subcontractor
Table 2.
Basic
Manual, Subcontractor Table 1.
Subcontractor Table 2 provides that “[i]f the job involves . . . [l]abor
only, . . . [t]hen the minimum to calculate [the] additional premium is . .
. [n]ot less than 90% of the subcontract price.” Basic Manual, Subcontractor Table 2 (emphasis added). Subcontractor Table 2 further provides that
“[i]f the job involves . . . [m]obile equipment with operators (such as
but not limited to earth movers, graders, bulldozers, or log skidders) . . .
[t]hen the minimum to calculate [the] additional premium is . . . [n]ot less
than 33 1/3% of the subcontract price.”
Basic Manual, Subcontractor Table 2 (emphasis added).
Based on the job description of T-N-T subcontractors and their helpers, Taylor testified that the uninsured subcontractors “should be labor only.” Taylor further testified that, because the erection and installation of carports and garages required only the use of hand tools and not “mobile equipment . . . such as earth movers, graders, bulldozers, or log skidders,” the majority of each subcontract price was attributable to labor. Taylor added that the mere use of motor vehicles to transport equipment and materials to job sites does not remove the subcontractors’ job from the “Labor Only” category.
Defendants called a T-N-T subcontractor and subcontractor’s
helper to testify at trial. These
witnesses explained that they used heavy-duty pickup trucks, such as Ford 250
or Chevrolet 3500 pickup trucks, to pull trailers carrying up to ten carports
at a time. The trailers are designed
specifically for hauling carports and garages.
Judge Hobgood entered judgment on 16 February 2006, finding
as follows:
19. A
typical job contracted by the uninsured contractors involved transporting steel
materials manufactured by T-N-T from Mount Airy, North Carolina, to a buyer’s
location and then erecting the carport or garage at that location. The transportation was done using trailers,
which held steel materials at least 21 feet long and carried materials for
multiple carports or garages at once, pulled by DOT-registered, heavy-duty
pick-up trucks . . . The erection of
the carports and garages was done using hand tools provided by the uninsured
subcontractors.
20. Samples
of the business auto insurance policy form and general liability insurance
policy form used by Farm Bureau each contain a definition of the term “mobile
equipment,” which definition expressly excludes “motor vehicles” and a
definition of the term “motor vehicle” which expressly excludes “mobile
equipment.”
21. The
workers compensation insurance policies issued to T-N-T by Farm Bureau contain
no terms defining “mobile equipment with operators” except the parenthetical
phrase “(including but not limited to earth movers, graders, bulldozers or log
skidders . . .).” Instead, the Basic Manual contains the rules for additional
premium calculation for uninsured subcontractors, including Subcontractor Table
2 containing the terms in dispute, and is part of the uniform classification
plan and rules that were filed by the North Carolina Rate Bureau with the North
Carolina Department of Insurance, approved by the Department of Insurance, and
required to be followed by all North Carolina workers compensation insurers.
Based
upon these findings, Judge Hobgood concluded:
5. The
installation of carports and garages by the uninsured subcontractors of T-N-T
is not a job that involves “Mobile Equipment with Operators.” Therefore, the job of uninsured
subcontractors, who are paid for the installation of carports and garages, most
appropriately falls into the category of “Labor only”. Under the category of “Labor only”, 90% of
the subcontractor payments are subject to application of the rate for the
additional premium due.
6. For the “Labor only” category, Farm Bureau applies precisely 90% of the subcontract payment to the applicable rate, no more. The parties stipulated that if the 90% rule applies then the additional premium due for the policy period March 16, 2001 to March 16, 2002, is $150,516.00. Therefore, that sum is the additional premium due for that policy period.
7. The
parties have stipulated that if the 90% rule applies, then the additional
premium due for the policy period March 16, 2002 to September 6, 2002, is
$109,530.50. Therefore, that sum is the
additional premium due for that policy period.
Accordingly, Judge Hobgood ordered defendants to pay
plaintiff $260,046.50 in additional premiums.
Defendants appeal, arguing that Judge Hobgood erred by concluding that
the work of T-N-T subcontractors and their employees was “Labor Only.”
II.
“Labor Only” vs. “Mobile Equipment with Operators”
Defendants argue that Judge Hobgood erred by concluding that
the work of T-N-T subcontractors and their employees was “Labor Only.” In support of their argument, defendants
assert that the trial court’s conclusion is illogical because the trial court’s
findings reveal that installation of carports and garages is only part of the
subcontractors’ job. We disagree.
“The standard of review on appeal from a judgment entered
after a non-jury trial is ‘whether there is competent evidence to support the
trial court’s findings of fact and whether the findings support the conclusions
of law and ensuing judgment.’” Friday
v. United Dominion Realty Tr., Inc., 155 N.C. App. 671, 674, 575 S.E.2d
532, 534 (2003) (internal citation omitted).
In a non-jury trial setting, “the court’s findings of fact have the
force and effect of a verdict by a jury and are conclusive on appeal if there
is evidence to support them, even though the evidence might sustain findings to
the contrary.” Williams v. Pilot
Life Ins. Co., 288 N.C. 338, 342, 218 S.E.2d 368, 371 (1975).
Here the trial court found that T-N-T subcontractors and
their helpers transport materials on trailers pulled by heavy-duty pickup
trucks. The trial court further found
that when referring to “Mobile Equipment with Operators,” both policies
expressly state that mobile equipment is equipment “such as but not limited to
earth movers, graders, bulldozers or log skidders.” These “mobile equipment” construction vehicles are inherently
different from the trailers and heavy-duty pickup trucks used by T-N-T
subcontractors and their helpers. Such
construction vehicles are designed principally for use off public roads,
generally travel on crawler threads, and are maintained to provide mobility to
permanently mounted construction equipment.
The heavy-duty pickup trucks and trailers used by T-N-T subcontractors
and their helpers are designed to travel on public roads and to transport the
unassembled steel materials.
We hold that the use of trailers and heavy-duty pickup
trucks to transport materials to job site locations does not transform
T-N-T
subcontractors from “Labor Only” employees to “Mobile Equipment with Operators”
employees for purposes of calculating defendant T-N-T’s final workers’
compensation insurance policy premiums.
This holding is consistent with the testimony of North Carolina Rate
Bureau, Workers Compensation Department Director Sue Taylor, as discussed
above.
For the reasons stated above, the trial court did not err by
concluding that the work of T-N-T subcontractors and their helpers is “Labor
Only.” This assignment of error is
overruled.
III.
“Vehicle Rule”
Alternatively, defendants argue that the trial court should
have calculated the additional premiums based on a “Vehicle Rule”
classification, by which 33 1/3% of the subcontract price is used to determine
additional premiums. However,
defendants failed to assign error to Judge Hobgood’s fourth conclusion of law
which was: “The parties stipulated that
either the Basic Manual category for ‘Mobile Equipment with Operators (such as
but not limited to earth movers, graders, bulldozers or log skidders’ or the
Basic Manual category for ‘Labor only’ applied to the T-N-T uninsured
installers.” “[S]tipulations are
judicial admissions and are therefore binding in every sense, preventing the
party who agreed to the stipulation from introducing evidence to dispute it . .
. .” Thomas v. Poole, 54 N.C.
App. 239, 241, 282 S.E.2d 515, 517 (1981), cert. denied, 304 N.C. 733,
287 S.E.2d 902 (1982) (internal citation omitted). Thus because defendants did not assign error to this conclusion,
that either the “Mobile Equipment with Operators” or the “Labor Only”
categories applied, defendants’ rights to review of the conclusion on appeal is
deemed waived. N.C.R. App. P., Rule
10(a) (2005).
IV.
Conclusion
We hold that the use of trailers and heavy-duty pickup
trucks to transport materials to job site locations does not transform T-N-T
subcontractors from “Labor Only” employees to “Mobile Equipment with Operators”
employees for purposes of calculating defendant T-N-T’s final workers’
compensation insurance policy premiums. Accordingly, we affirm the trial court
order entered 16 February 2006 by Judge Robert H. Hobgood in Superior Court,
Wake County awarding plaintiff $260,046.50 in additional premium payments under
both policies.
AFFIRMED.
Judges McCULLOUGH and CALABRIA concur.
1. A motion pursuant to N.C. Gen. Stat.
§1A-1, Rule 60 for relief from the 3 August 2005 order granting partial summary
judgment was heard prior to trial, and on 19 January 2006, the trial court
entered an order granting the Rule 60 motion and setting aside the 3 August
2005 order in its entirety. Neither
party has assigned error to the trial court’s ruling on the Rule 60
motion. Thus, stipulation number 10
stated only T-N-T’s contention, not a ruling of the court for purposes of the
trial.