W.C. Nos. 4-371-783, 4-371-786Industrial Claim Appeals Office.
August 15, 2000
FINAL ORDER
Respondent Colorado Compensation Insurance Authority d/b/a Pinnacol Assurance (CCIA) seeks review of an order of Administrative Law Judge Martinez (ALJ) which ruled that CCIA provided insurance coverage to the employer, John Forier (Forier), on the date of the claimant’s injury. The CCIA contends the ALJ erred in holding the insurance policy was improperly canceled for failure to pay a premium. The CCIA further contends the ALJ erred in excluding evidence establishing that CCIA provided proper notice of the cancellation under § 8-45-113, C.R.S. 1999. Because we agree with the ALJ that the policy was improperly canceled under § 8-45-114, C.R.S. 1999, we affirm the ALJ’s order and do not reach the issue of whether there was sufficient evidence of notice.
Forier purchased a policy of workers’ compensation insurance from the CCIA. The policy was effective from May 8, 1997, to May 1, 1998, and endorsed employees in the “excavation” category. Forier explained that he was operating an excavating and hauling operation and needed coverage for a truck driver. The CCIA required Forier to pay the entire estimated premium $1070 at the inception of the policy because the CCIA previously canceled a Forier policy for nonpayment of premium.
After approximately 10 days, Forier ceased operating the hauling business and negotiated a lease/purchase agreement to operate a hotel. Forier requested the CCIA to endorse coverage for hotel workers, and the CCIA issued an endorsement on July 23, 1999. The CCIA then billed Forier $750 for additional premium, and required payment on or before September 3, 1997. Forier contacted the insurance agency which handled the initial policy application, and requested that the unused premium from the hauling business be applied to the hotel premium. However, this request was not honored and on September 16, 1997, CCIA issued a notice stating the policy would be canceled effective October 1, 1997, unless $750 was received by September 30, 1997. Forier, who was traveling outside of the country, did not pay the additional premium and, on October 2, 1997, the CCIA issued a notice stating the policy was canceled effective October 1, 1997.
The claimant, one of Forier’s hotel employees, suffered a compensable injury on October 22, 1997. The ALJ found the claimant has sustained temporary total disability and medical expenses as result of the injury. The CCIA was ordered to pay these benefits.
Concerning the issue of insurance coverage, the ALJ found the July 23, 1997, endorsement amending the coverage to include Forier’s “hotel operation” constituted a “modification of the [original] insurance policy.” Under these circumstances, the ALJ found the CCIA’s invoice for an additional $750 in premiums constituted a request for a “current adjustment,” not a request for an advanced premium. Applying § 8-45-114, the ALJ concluded the CCIA’s remedy was to seek an adjustment of the premium after completion of an audit at the end of the policy period. However, the ALJ found the CCIA had no authority to cancel the policy and, therefore, the policy remained in effect on the date of the claimant’s injury. The ALJ also found the CCIA failed to prove it gave notification of cancellation to the Division of Worker’s Compensation as required by § 8-45-113.
On review, the CCIA contends the ALJ erred as a matter of law in determining that § 8-45-114 prohibited cancellation of the policy. The CCIA argues the statute “does not appear to contemplate a situation such as the instant one, where the initial policy was written for an excavation classification and the addition of the hotel resulted in a different classification.” (CCIA Brief at 7). Consequently, the CCIA asserts that the plain terms of the insurance policy permit cancellation of the policy for nonpayment of premium, followed by a pro rata refund for any unused premium. We disagree.
Section 8-45-114, which bears the heading “Adjustment of premiums,” provides as follows:
In the event the amount of premium collected by the fund from any employer at the beginning of any policy period, as ascertained and calculated by using the estimated expenditure of wages for the period of time covered by such premium payments as a basis, shall differ from the earned premium based upon the actual wage expenditure for such policy period, an adjustment of the amount of such premium shall be made at the end of such policy period and the actual amount of such premium shall be determined in accordance with the amount of actual expenditure of wages for such period. In the event such actual wage expenditure for such period is less than the amount on which such estimated premium was collected, then such employer shall be entitled to have the amount of the difference in premium repaid or credited on succeeding premium payments. If the earned premium, where ascertained, exceeds in amount the premium so paid by such employer at the beginning of each such policy period, such employer, upon being advised of the true amount of such premium due, shall forthwith pay to said Colorado compensation insurance authority fund an amount equal to the difference between the amount actually found to be due and the amount so paid by the employer at the beginning of said policy period.
In construing the statute, we should seek to effect the legislative intent. The best indicator of legislative intent is the language of the statute itself. Therefore, we should give the words and phrases in the statute their plain and ordinary meanings unless the result is absurd. Snyder Oil Co. v. Embree, 862 P.2d 259 (Colo. 1993). To the extent there is any ambiguity, we should construe the statute in the context of the entire statutory scheme so as to give consistent, harmonious, and sensible effect to all its parts. Henderson v. RSI, Inc., 824 P.2d 91 (Colo.App. 1991). Where, as here, the statute bears a legislatively enacted heading, we may consider the heading as some evidence of the legislative intent. See 1990 Colo. Sess. Laws, ch. 62 at 538; U. M. v. District Court, 631 P.2d 165 (Colo. 1981).
Initially, we note the provisions of § 8-45-114 are incorporated in the insurance policy by operation of law. Section 8-44-102, C.R.S. 1999 provides that workers’ compensation insurance contracts “shall be made subject to all the provisions” of articles 40 to 47 of the Act.
Turning to § 8-45-114, nothing in the language of this statute explicitly states that an “adjustment of premiums” attributable to endorsement of a new classification of workers entitles the insurance carrier to demand immediate payment of additional premiums on pain of cancellation. Rather, the statute focuses on the “estimated expenditure of wages” for the “policy period.” Further, “earned premium” is determined at the conclusion of the policy period based on actual expenditure for wages during the policy period. Indeed, the statute clearly contemplates that predictions concerning the employer’s expenditure for wages during a “policy period” may be inaccurate, and either the employer or the insurer may be entitled to an adjustment of earned premium when the policy period ends. Similarly, the employer may encounter an unforseen need to add new classifications of workers during a policy period. We see no reason in the statutory language to hold that every variation in premium attributable to a change in classification of workers should be treated differently than a variation in premium attributable to an increase or decrease in wages paid for a particular class of workers.
Indeed, the General Assembly is fully aware of difficulties created by “misclassification” of workers, and it has created a remedy where a misclassification “was caused by the failure of the insurer to provide accurate or complete data.” In such circumstances, the insurance carrier may obtain repayment “during the term of the contract for such insurance plus an additional reasonable time not to exceed 12 months.” Section 8-44-108(1), C.R.S. 1999. However, no such remedy exists where the insured requests coverage for an additional classification of workers, provides accurate data, and the insurer agrees to an endorsement covering the new classification. If the General Assembly had intended to require immediate payment of premium based on the new classification, we believe § 8-45-114 would explicitly provide such a remedy. This is particularly true because § 8-45-114, by its heading, purports to address circumstances where an “adjustment” of premium is required.
Finally, we note our interpretation of the statute is consistent with the policy itself. Part Five (E) of the policy, pertaining to premium, states that the premium mentioned on the information page of the policy is an “estimate,” and that the final premium “will be determined after each policy period using the actual, not the estimate premium basis and the prope classifications and rates that lawfully applied to the business and work covered by this policy.” (Emphasis added). Part 5 (E) specifically addresses collection of premiums in the event of “improper classification,” and this language appears to track §8-44-108. Thus, the policy suggests that the parties agreed to adjust the premium, at the conclusion of the policy, based on changes in classification of employees, not just variances in payroll. Where, as here, the terms of the policy are consistent with the provisions of the statute, we should not interfere with the parties intent as expressed in the clear language of the policy. See State Farm Mutual Automobile Insurance Co. v. Stein, 940 P.2d 384 (Colo. 1997) (insurance policies are subject to rules governing the construction of contracts and should be applied so as to promote the intent of the parties).
We have considered the provisions of the policy cited by the CCIA in its brief. Those provisions concern the calculation of final premium if the policy is canceled. The provisions do not address the circumstances under which cancellation is appropriate, and we do not find them instructive on this issue. In any event, the policy provisions may not be construed so as to conflict with the provisions of § 8-43-114.
It follows we agree with the ALJ that the CCIA improperly canceled the policy by failing to adhere to the provisions for “adjustment of premiums” set forth in § 8-4-114, and the policy itself. Therefore, the ALJ correctly ruled that the policy remained in force at the time of the claimant’s injury, and the ALJ properly ordered the CCIA to pay the claimant’s benefits. In light of this determination, we need not consider the CCIA’s argument that the ALJ erred in ruling the CCIA failed to give proper notice of cancellation under § 8-45-113.
IT IS THEREFORE ORDERED the ALJ’s order dated February 9, 2000, is affirmed.
INDUSTRIAL CLAIM APPEALS PANEL
____________________________________ David Cain
____________________________________ Kathy E. Dean
NOTICE
This Order is final unless an action to modify or vacate this Order is commenced in the Colorado Court of Appeals, 2 East 14th Avenue, Denver, CO 80203, by filing a petition for review with the Court, within twenty (20) days after the date this Order is mailed, pursuant to § 8-43-301(10) and § 8-43-307, C.R.S. 1999. The appealing party must serve a copy of the petition upon all other parties, including the Industrial Claim Appeals Office, which may be served by mail at 1515 Arapahoe, Tower 3, Suite 350, Denver, CO 80202.
Copies of this decision were mailed August 15, 2000 to the following parties:
Dolores A. Bronn, P. O. Box 3578, Eagle, CO 81631
John Forier, P. O. Box 11, Wolcott, CO 81655-0011
Laurie A. Schoder, Esq., Colorado Compensation Insurance Authority dba Pinnacol Assurance — Interagency Mail
Jeffrey S. Auxier, Esq., P. O. Box 1869, Edwards, CO 81632
Gary J. Benson, Esq., 3900 E. Mexico Ave., #1300, Denver, CO 80210 (For Respondent John Forier)
Raymond F. Callahan, Esq., 1660 S. Albion St., #425, Denver, CO 80222-4043 (For Respondent Colorado Compensation Insurance Authority dba Pinnacol Assurance)
BY: le