W.C. No. 4-309-177Industrial Claim Appeals Office.
September 8, 1999.
FINAL ORDER
Respondent American Compensation Insurance Company (insurer) seeks review of an order of Administrative Law Judge Friend (ALJ) insofar as it held that the respondent-employer (Del’s) was insured for workers’ compensation at the time of the claimant’s injury. The insurer contends the ALJ incorrectly concluded the policy was not canceled, and that the insurer was estopped from denying coverage. We affirm.
The central issue in this case is whether Del’s was insured for workers’ compensation on July 10, 1996, when the claimant sustained injuries in the scope of his employment. The ALJ found that in January 1996 the Benner Schmucker Insurance Agency (Agency) contacted Del’s through Del’s vice president, Kathy Ewing (Ewing). The Agency provided a quotation on workers’ compensation insurance to be provided by the insurer. The ALJ found the quotation called for payment of an annual “estimated premium” of $56,065, to be paid in a down payment plus nine monthly installments of $5,295.
The ALJ found Del’s paid the down payment to the Agency, and on February 1, 1996, the insurer mailed the first monthly installment invoice for $5,295. However, Del’s did not receive the invoice and did not pay the first installment by the due date of February 21, 1996.
Thereafter, the insurer continued to bill Del’s for monthly installments, and Del’s made monthly payments “a few days after the due dates listed on the invoices.” The insurer took the position that Del’s was one month behind in making installment payments commencing in March 1996. Nevertheless, the ALJ found the insurer failed to communicate its position to Del’s. This was true because the invoices were often mailed prior to the “invoice date” and failed to reflect payments made on the prior invoice. Thus, the invoices tended to overstate the amount which the insurer was actually claiming Del’s owed. (Tr. Oct. 2, 1997, p. 18; Finding of Fact 5).
On June 17, 1996, the insurer mailed Del’s a notice that the policy would be canceled effective June 27, 1996, for “non payment of premium.” The notice did not state how much premium the employer would need to pay to avoid cancellation, but did state the employer would have 10 days from the notice to pay “all outstanding invoices, including those that are billed to you subsequent to the cancellation notice.”
Del’s received the notice of cancellation on June 21, 1996. Ewing immediately called Paige Holsinger (Holsinger), an employee of the insurer, concerning the notice. Although the evidence was conflicting concerning this conversation, the ALJ credited Ewing’s testimony that Holsinger told Ewing it was necessary to make an installment payment to avoid cancellation, but did not tell Ewing that the insurer required two installments to bring the account current. Instead, it was Ewing’s understanding that payment of one installment would be sufficient to avoid cancellation, and the employer mailed one installment payment of $5,295 on June 22, 1996. (Ewing testimony, Tr. Sept. 9, 1997, pp. 131-133).
The ALJ further found that on July 1, 1996, Keri Olson (Olson), a representative of the Agency, contacted Holsinger to ascertain the status of the employer’s insurance. According to Olson, Holsinger advised that the insurer had received an installment payment and did not mention that the insurance policy had been canceled. In fact, Olson understood the insurance was still in effect, and she issued a certificate of insurance on behalf of Del’s on July 10, 1996.
The ALJ determined that because a valid insurance policy was issued to Del’s the insurer bore the burden of proof to establish that the policy had “lapsed.” However, the ALJ found the insurer “failed to meet its burden to prove that its purported cancellation of Del’s policy was valid.” The ALJ then enunciated three separate conclusions of law in support of his determination that Del’s was insured on July 10, 1996. The conclusions were designated as A, B, and C.
In Conclusion of Law A the ALJ found the employer was behind in making “estimated premium” payments on June 27, 1996, but was “paid in advance as to actual premium.” The ALJ interpreted §8-44-110, C.R.S. 1998, as requiring 30 days notice where cancellation of a policy is based on failure to pay an insurer’s “estimated premium” rather than an “actual premium.” Therefore, the ALJ concluded the attempted cancellation was ineffective.
In Conclusion of Law B the ALJ determined the employer had a “reasonable expectation” of coverage on July 10, 1996, and the insurer is estopped from denying coverage. In support of this determination the ALJ found that the insurer’s “invoices were confusing” and failed to advise the employer that it was “two installments in arrears.” The ALJ also found the notice of cancellation was indefinite concerning the amount of premium required to bring the account current, and that Holsinger “did not accurately represent Del’s account status to Ewing when they communicated.” The ALJ concluded by stating that “Del’s was reasonable in its reliance on [the insurer] and its Agent, and as a result, did not procure replacement coverage prior to claimant’s injury.”
In Conclusion of Law C the ALJ determined the Agency was an agent for the insurer as a matter of fact and law. Consequently, the ALJ stated the employer’s “reasonable expectation was further reinforced” when the Agency issued the certificate of insurance on July 10, 1996. The ALJ determined the Agency undertook a duty to the employer to insure that coverage remained in place, and failed to do so while acting as the insurer’s agent. In light of these determinations the ALJ ordered the insurer to pay benefits to the claimant.
I.
On review, the insurer argues the ALJ misinterpreted §8-44-110 by distinguishing between “estimated premium” and “actual premium.” The insurer also disputes the ALJ’s application of the doctrines of “reasonable expectation” and estoppel, and the ALJ’s finding that the Agency was acting as an agent of the insurer rather the claimant. We conclude the ALJ’s findings and conclusions concerning estoppel are dispositive, and therefore, we need not address the substance of the insurer’s other arguments.
There are four basic elements to a claim of estoppel, all of which must be established by the party claiming the estoppel: (1) The party to be estopped must know the relevant facts; (2) The party to be estopped must also intend that its conduct be acted on or must so act that the party asserting the estoppel has a right to believe the other party’s conduct is so intended; (3) The party asserting the estoppel must be ignorant of the true facts; (4) The party asserting the estoppel must detrimentally rely on the other party’s conduct. Johnson v. Industrial Commission, 761 P.2d 1140
(Colo. 1988).
The rule of “reasonable expectation” is a derivative of the doctrine of estoppel, and is applicable in disputes concerning the existence of insurance coverage. In the context of cancellation of an insurance policy the doctrine requires the insurer to use clear and unequivocal language evidencing its intent to deny coverage, and also requires the insurer to draw the attention of the insured to such limiting conditions. Where the insurer fails to make the requisite disclosures coverage will be deemed to be that which would be expected by the ordinary layperson. Peters v. Boulder Insurance Agency, Inc., 829 P.2d 429 (Colo.App. 1991) Leland v. Travelers Indemnity Co., 712 P.2d 1060 (Colo.App. 1985).
The existence of an estoppel is generally a question of fact for determination by the ALJ. Johnson v. Industrial Commission, supra. Consequently, we must uphold the ALJ’s order if supported by substantial evidence in the record. Section 8-43-301 (8), C.R.S. 1999. Substantial evidence is evidence which would support a finding that a fact exists without regard to contradictory testimony and inferences. Monfort Inc. v. Rangel, 867 P.2d 122
(Colo.App. 1993). Further, the ALJ is not held to a standard of absolute clarity when expressing findings of fact and conclusions of law. Rather, it is sufficient for the ALJ to make findings concerning the evidence which he determines to be dispositive of the issues involved. Riddle v. Ampex Corp. 839 P.2d 489
(Colo.App. 1992). Even erroneous findings and conclusions do not warrant setting aside an order if they do not affect a substantial right of the parties. See § 8-43-310, C.R.S. 1999.
The insurer’s argument notwithstanding, there is substantial evidence to support the ALJ’s application of estoppel and the rule of reasonable expectation. In Conclusion of Law B the ALJ determined that Holsinger knew the insurer required payment of two installments to avoid cancellation of the policy, but led Ewing to believe that payment of one installment would be sufficient. This finding, which is fully supported by Ewing’s testimony, permits an inference the insurer was aware of the true facts and the employer was not. Further, Ewing justifiably relied on Holsinger’s misrepresentation because Holsinger was an employee of the insurer, the insurer’s invoices were unclear, and the notice of cancellation did not explicitly state the number of installments or amount of money necessary to avoid cancellation of the policy. Finally, the element of detrimental reliance was proven because the ALJ credited Ewing’s testimony that the employer would have made an additional payment and kept the policy in force had it been aware of the true state of affairs.
Similarly, the evidence supports application of the rule of reasonable expectation. The insurer’s notice of cancellation failed to notify the employer of the exact conduct necessary to avoid cancellation. Considering the indefinite nature of the notice, Ewing reasonably called Holsinger to obtain clarification. However, Holsinger did not specify the complete course of action which the insurer deemed necessary to avoid cancellation. Under such circumstances, the ALJ correctly concluded that the coverage in force is that which a reasonable layperson would expect. In this case, a reasonable layperson could expect continuing coverage on July 10, 1996, the day of the claimant’s injury.
We are unpersuaded the insurer’s failure to issue a notice of reinstatement mandates a conclusion that the employer did not have a reasonable expectation of coverage. Holsinger’s conduct forms the basis of the estoppel in this case, and that conduct occurred after issuance of the notice of cancellation. Because Holsinger advised Ewing that payment of one installment was sufficient to reinstate the policy, she necessarily estopped the insurer from relying on the technical reinstatement provision contained in the notice of cancellation.
Further, the question of whether the ALJ correctly found the Agency was an agent of the insurer is immaterial to our resolution of the issue. Conclusion of Law B and Finding of Fact 8 describe the actions of the insurer which form the basis of an estoppel commencing on or about June 21, 1996. Even if the Agency was acting as Del’s agent, the insurer took no action after June 21 and prior to July 10 to suggest that it intended to enforce the notice of cancellation. In fact, on July 1 Holsinger did not tell Olson the policy was canceled despite Olson’s inquiry concerning the status of the policy. Further, Conclusion of Law C, which discusses the agency theory in depth, constitutes a separate basis for the ALJ’s order. Regardless of whether Conclusion of Law C is correct, the ALJ’s order is independently supported by Conclusion of Law B.
II.
We have considered the insurer’s argument that the ALJ incorrectly applied the burden of proof. However, as we read the order, the ALJ’s statement that the insurer failed to meet its burden of proof pertains to the issue of whether the policy was canceled under § 8-44-110, and the order recognizes the estoppel theory as a separate, equitable basis for vitiating the cancellation.
Further, the ALJ did not find the insurer failed to present sufficient evidence to rebut the claim of estoppel. Instead, the ALJ resolved conflicts in the evidence and made explicit credibility determinations which were then incorporated into Conclusion of Law C. (See Finding of Fact 8). Thus, the issue of estoppel was not resolved based on the ALJ’s application of the burden of proof, but instead upon the ALJ’s positive findings of fact resolving a dispute about the parties’ conduct.
IT IS THEREFORE ORDERED that the ALJ’s order dated June 9, 1998, is affirmed.
INDUSTRIAL CLAIM APPEALS PANEL
___________________________________ David Cain
____________________________________ Kathy E. Dean
NOTICE
This Order is final unless an action to modify or vacate the Order is commenced in the Colorado Court of Appeals, 2 East 14th Avenue, Denver, Colorado 80203, by filing a petition to review with the court, with service of a copy of the petition upon the Industrial Claim Appeals Office and all other parties, within twenty (20) days after the date the Order was mailed, pursuant to §§ 8-43-301(10) and 307, C.R.S. 1999.
Copies of this decision were mailed September 8, 1999 to the following parties:
Martin A. Victory, 323 S.W. 42nd Ave., Apt. 33, Loveland, CO 80537
Del’s Masonry, Inc., P.O. Box 1551, Longmont, CO 80502-1551
RTW Colorado Inc., attn. Lynn Estes, P.O. Box 6541, Englewood, CO 80155-6541
Jack Taussig, Esq., 1919 14th St., Ste. 805, Boulder, CO 80302 (For Claimant)
James R. Clifton, Esq., Harvey D. Flewelling, Esq., 5353 W. Dartmouth Ave., Ste. 400, Denver, CO 80227 (For Employer)
Douglas A. Thomas, Esq., 600 17th St., Ste. 1600 North, Denver, CO 80202 (For Insurer)
BY: A. Pendroy