W.C. No. 4-468-801Industrial Claim Appeals Office.
October 5, 2001
FINAL ORDER
Zurich US (Zurich) seeks review of an order of Administrative Law Judge Coughlin which held Zurich responsible for the workers’ compensation benefits awarded on account of the claimant’s injury. We affirm.
The ALJ found Team Builders was the claimant’s employer on July 14, 2000, when the claimant suffered a work-related back injury. The parties agreed that if Team Builders did not have insurance coverage on July 14, Markel Homes was the statutory employer and Mid-Century Insurance would be liable for the claimant’s injury.
Team Builders obtained a workers’ compensation insurance policy from Zurich on November 9, 1999. The policy required bi-monthly premium payments. It is undisputed Team Builders failed to make a premium payment due in April 2000. On April 22, 2000, Zurich send Team Builders a Notice of Cancellation or Non-renewal which stated the policy was being canceled August 7, 2000, because the insured “Does not meet underwriting requirements.” However, Zurich canceled the policy April 30, 2000, due to nonpayment of premiums.
The ALJ found Zurich failed to prove it sent Team Builders a notice which complied with the requirements of § 8-44-110 C.R.S. 2001, concerning the cancellation on April 30, 2000. Therefore, the ALJ determined the April 30 cancellation was ineffective and Team Builders workers’ compensation insurance coverage remained in effect on July 14 when the claimant was injured.
On appeal Zurich contends the ALJ erroneously found Zurich failed to sustain its burden to prove there was no workers’ compensation insurance coverage on the date of injury. Zurich contends that it sustained its burden of proof through the testimony of underwriter, James Lawrence, who stated he had personal knowledge Zurich canceled Team Builder’s policy for non-payment of premiums on April 30, 2000. (Tr. p. 53).
Section 8-44-110 C.R.S. 2001 provides that:
“Every insurance carrier authorized to transact business in this state, . . . . which insures employers against liability for compensation under the provisions of articles 40 to 47 of this title shall notify the division, any employer insured by the carrier or the authority, and any agent or representative of such employer, if applicable, by certified mail of any cancellation of such employer’s insurance coverage. Such notice shall be sent at least thirty days prior to the effective date of the cancellation of the insurance.”
The statute also provides that the required notice may be sent less than 30 days prior to the effective date of the cancellation where the cancellation is based nonpayment of premium.
Zurich does not dispute the requirements of § 8-44-110. Furthermore, Zurich concedes it bore the burden to prove there was no insurance coverage. However, Zurich argues that once it established a prima facie case that insurance coverage was canceled, any procedural deficiency was immaterial. Further, Zurich contends that the opposing parties bore the burden to prove a violation of the statutory procedure for canceling the policy. We reject these arguments.
We have previously held that the purpose of § 8-44-110 is to afford the insured advance notice of an impending cancellation of insurance so that the insured has an opportunity to avoid non-insured status. Rodriguez v. Appliance Parts Co. Inc., W.C. No. 3-9983-582
(March 9, 1992). Furthermore, we concluded that § 8-44-110 requires that notice be given to the employer of any cancellation of its “insurance coverage.” Consequently, in Rodriguez v. Appliance Parts Co. Inc., supra, we concluded the statute applied to the cancellation of insurance established by virtue of a binder. Furthermore, we have held that because the provisions of § 8-44-110 are mandatory, the insurer’s failure to comply with the statute render the insurance cancellation ineffective. See Victory v. Del’s Masonry Inc.,
W.C. No. 4-309-177
(September 8, 1999); Rodriguez v. Appliance Parts Co. Inc., supra; cf. Hillebrand Construction Co. v. Worf, 780 P.2d 24 (Colo.App. 1989) (use of the term “shall” indicates mandatory action).
Zurich’s arguments do not persuade us to depart from our prior conclusions. Under Zurich’s construction the purpose of § 8-44-110
would be eviscerated if the insurer could establish an effective cancellation of insurance without complying with § 8-44-110. We do not believe the General Assembly intended this result. Consequently, we reject Zurich’s contention that the insurer’s failure to comply with § 8-44-110 is immaterial to whether the employer’s insurance has been effectively canceled.
Here, Zurich presented no evidence it sent a notice of cancellation which complied with § 8-44-110 that it intended to cancel Team Builders’ insurance coverage effective April 30, 2000 for nonpayment of premiums. (See Tr. p. 55). Under these circumstances, the ALJ correctly determined that Zurich failed to sustain its burden to prove it was not liable for the claimant’s injuries.
Moreover, even if the claimant or Team Builders bore the burden to prove Zurich failed to comply with § 8-44-110, the ALJ’s findings compel the conclusion they sustained their burden of proof. Therefore, the ALJ did not err in holding Zurich liable for the claimant’s injury.
For its part, Markel Homes and its insurer, Mid Century Insurance contend Zurich’s petition to review is frivolous and therefore, they request costs and attorney fees as provided by § 8-43-301(14), C.R.S. 2001.
Section 8-43-301(14) provides the signature of an attorney on a petition to review or brief constitutes a certification by the attorney that the petition to review or brief is “well grounded in fact and is warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law, and is not interposed for any improper purpose” such as harassment, delay, or unnecessarily increasing the cost of litigation.
So far as we know, no published appellate decision has addressed Zurich’s argument. It is true that we have held the insurer’s failure to comply with § 8-44-110 renders the insurer’s cancellation of insurance coverage ineffective. However, we cannot say that this conclusion will ultimately be adopted by the courts. Moreover, the fact that we disagree with Zurich’s argument does not render it frivolous See Weissman v. Crawford Rehabilitation Services, Inc., 914 P.2d 380
(Colo.App. 1995); Brandon v. Sterling Colorado Beef Co., 827 P.2d 559
(Colo.App. 1991) (resort to judicial review is not considered frivolous or in bad faith as long as there is a reasonable basis for party to challenge the ALJ’s order). Thus, we decline to impose attorney fees against Zurich.
IT IS THEREFORE ORDERED that the ALJ’s order dated May 2, 2001, is affirmed.
IT IS FURTHER ORDERED that the request for costs and attorney fees against Zurich is denied.
INDUSTRIAL CLAIM APPEALS PANEL
____________________________________ Kathy E. Dean
____________________________________ Robert M. Socolofsky
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. 2001. 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 October 5, 2001 to the following parties:
Glen Davidovich, 13679 Raleigh St., Broomfield, CO 80020
Michelle Murray, Team Builders, 1341 Red Mountain Court, Longmont, CO 80501
Markel Homes, 5723 Arapahoe Ave., #2A, Boulder, CO 80301
Zurich/Maryland Insurance Company, Gayle Trottnow, Zurich North America, P. O. Box 370308, Denver, CO 80237
Jackie Slade, Mid-Century Insurance, P. O. Box 378230, Denver, CO 80237
John A. Steninger, Esq., 4500 Cherry Creek Drive South, #930, Denver, CO 80246 (For Claimant)
Raymond A. Melton, Esq., 1801 Broadway, #1500, Denver, CO 80202 (For Respondent Zurich/Maryland Insurance Company)
Michael A. Perales, Esq. and Sarah K. Downey, Esq., 999 18th St., #3100, Denver, CO 80202 (For Respondents Markel Homes and Mid-Century Insurance)
Stacy Tarler, Esq., 1720 S. Bellaire St., #310, Denver, CO 80222 (For Respondent Team Builders)
BY: A. Pendroy