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Ajax Construction Co., Inc. v. Liberty Mutual Insurance Co.

Supreme Court of Rhode Island

February 28, 2017

Ajax Construction Company, Inc.
v.
Liberty Mutual Insurance Company et al.

         Workers' Compensation Court 04-7659 Acting Chief Judge Debra Olsson Associate Judge Janette Bertness Associate Judge George Salem, Jr.

          For Plaintiffs: Susan Pepin Fay, Esq. Ryan C. Hurley, Esq. James T. Hornstein, Esq.

          For Defendants: Jeffrey M. Liptrot, Esq. Daniel J. Archetto, Esq. Conrad M. Cutcliffe, Esq.

          Present: Suttell, C.J., Goldberg, Flaherty, Robinson, and Indeglia, JJ.

          OPINION

          Gilbert V. Indeglia Associate Justice

         Ajax Construction Company (Ajax) and Beacon Mutual Insurance Company (Beacon) are before this Court on consolidated writs of certiorari from a decree of the Appellate Division of the Workers' Compensation Court (the Appellate Division), in favor of Liberty Mutual Insurance Company (Liberty).[1] The Appellate Division vacated a prior decree of a judge of the Workers' Compensation Court and entered a new decree ordering Beacon to pay workers' compensation benefits to an injured Ajax employee and to reimburse Liberty for any benefits paid to Beacon by Liberty under the prior decree. For the reasons set forth in this opinion, we quash the Appellate Division's decree.

         I Facts and Travel

         The facts are largely undisputed. On October 26, 2004, an Ajax employee, Mark Furia, was injured while working as an iron worker on a job site in Milton, Massachusetts. Following his injury, Furia filed a petition against Ajax in the Rhode Island Workers' Compensation Court. Shortly thereafter, on November 18, 2004, Ajax petitioned the Rhode Island Workers' Compensation Court, pursuant to § 28-35-12 and G.L. 1956 § 28-30-13, to determine which insurer (Beacon or Liberty) was obligated to pay Furia's claim. On December 22, 2004, a judge of that court entered a pretrial order with respect to Furia's petition that held that Furia sustained a work-related injury that resulted in total incapacity. That same day, the judge also entered an interlocutory order on Ajax's petition that required Beacon to pay benefits to Furia, pursuant to G.L. 1956 § 28-35-12(b)(1). The interlocutory order also stated that, if Beacon was found liable after trial, it would be entitled to receive a credit for all payments that it made to Furia; and, if Liberty was found liable, it would be ordered to reimburse Beacon for all payments that Beacon made to him. The same judge who entered the abovementioned orders conducted the trial on Ajax's petition on July 11, 2005, September 8, 2005, and May 11, 2006.

         Donald Morel, Ajax's president, was the only witness to testify. He stated that Ajax was located in Harrisville, Rhode Island, but he added that it did business in Connecticut, Massachusetts, New Hampshire, New York, and Rhode Island. He testified that Ajax's insurance agent, Christopher & Regan Insurance Inc., handled all of Ajax's insurance. Morel stated that Ajax carried workers' compensation insurance in every state that it worked in, which included insurance with Liberty in Massachusetts and Beacon in Rhode Island. Morel discussed the calculation of each insurer's premium and explained that "[a]ny wages that were worked in Massachusetts on any Massachusetts job would be reported to Liberty like every other state. Whatever wages are worked on those jobs get reported to that insurance company, and our tax returns are used as back up for the wages." The Liberty policy's annual premium for workers' compensation coverage was $282, 707, and the Beacon policy's annual premium was approximately $69, 000.

         In his testimony, Morel discussed Furia, who had been employed with Ajax for between fifteen and twenty years. He stated that Furia was injured while working in Milton, Massachusetts.[2] Morel explained that the particular job site where Furia was working when he was injured was not his sole place of employment, as Ajax moved iron workers to other job sites periodically.

         Morel testified that, after Furia's injury, a Liberty representative called him and inquired as to where Furia had been hired and where he worked. Morel stated that he told the representative that he was unsure, but that Furia was likely hired at Ajax's Rhode Island office. He said that he was uncertain because, at the time of his hire, Ajax was not located at its present office and did much of its hiring at the job sites.

         Morel was asked about his response to the Liberty representative who, during the phone call, inquired about the amount of work Ajax performed in Massachusetts and in Rhode Island. Morel testified that he may have told the representative that Ajax performed about 50 percent of its work in Massachusetts and 50 percent in Rhode Island, although he did not recall saying that to the representative. He stated that, at times, Ajax could have performed more work in Rhode Island; historically, however, 80 percent of Ajax's work had been in Massachusetts. Morel testified that for any given year, Ajax was unsure of where it would perform the majority of its work. In the year of Furia's injury, however, Ajax did more work in Massachusetts than Rhode Island. Morel also noted that, for employees who worked in Massachusetts, Ajax withheld Massachusetts income taxes and paid Massachusetts unemployment taxes. He said that his next contact with Liberty after the phone call was a letter from Liberty denying coverage for the claim. Morel stated that he did not personally discuss Furia's claim with a Beacon representative.

         The parties also introduced various documents into evidence, including the deposition transcripts of Furia and Jessica Reardon, a Liberty case manager. In Furia's March 3, 2005 deposition, he stated that he was hired at the Ajax headquarters in Rhode Island and had worked for Ajax as an ironworker for twelve to fifteen years. Furia stated that, since his hire, he had worked in Connecticut, Massachusetts, and Rhode Island. When asked what percentage of work he did in Massachusetts compared to Rhode Island, Furia responded "70/30." Furia was asked whether Massachusetts or Rhode Island taxes were deducted from his Ajax paychecks, to which he replied, "Both, I believe."

         Furia stated that, after his injury, his wife brought him to Kent Hospital, and he was later transferred to Rhode Island Hospital. He recalled a visit from a Liberty representative, Don Friar, while in the hospital. Friar told Furia that his claim was a "no-brainer" Rhode Island workers' compensation case because Furia lived in and was hired in Rhode Island. Furia stated that Friar, before leaving, handed him a business card for a Rhode Island workers' compensation attorney and told him to contact the attorney.

         In Reardon's deposition, she stated that she was, at that time, assigned to handle Furia's claim, but she noted that another adjuster, Ellen Cunningham, previously handled it. Reardon was unsure whether Liberty sent a representative to speak with Furia in the hospital. She was also asked about various case notes on Furia's claim file, including a note that said, "Claim is Rhode Island jurisdiction based on PWALSH." Reardon explained that "PWALSH" was an acronym for a test that Liberty used to determine a claim's jurisdiction; she said that it stood for "[p]aid, works, accident, lives, supervised, hired." Reardon testified that Cunningham performed the PWALSH test for Furia's claim and denied it on jurisdictional grounds.

         On May 11, 2006, the trial judge issued a bench decision. In it, he discussed G.L. 1956 § 28-36-5, which states, in pertinent part, "Every policy shall cover the entire liability of the employer under chapters 29 -- 38 of this title * * * ." He cited to an opinion of the Appellate Division of the Workers' Compensation Court, Flaxington v. Persona Management, W.C.C. No. 92-14565 (App. Div. 1995), for the proposition that an insurer violates § 28-36-5 if it insures an employer but excludes coverage of a particular class of employees. Thus, the trial judge rejected Beacon's argument that it had a right to limit the coverage it provided to various groups of employees by listing specific classes of covered employees in its policy. The trial judge stated that any attempts by Beacon to limit its coverage or exclude classes of employees from coverage were a nullity and, thus, did not exempt Beacon from liability.

         The trial judge stated that Ajax was liable to Furia under the Rhode Island Workers' Compensation Act (the act) because Furia was hired in Rhode Island. He determined that Beacon was primarily liable to Furia because he brought his claim in Rhode Island and Beacon issued a policy to Ajax pursuant to the act. The trial judge stated, "I do believe that Mr. Furia has a right to expect payments from a single entity, and in this case, I have designated Beacon Mutual as that entity." He also found that Ajax had dual or overlapping coverage regarding this claim because Furia had a right to compensation under the workers' compensation laws of both Rhode Island and Massachusetts. Given the overlapping coverage, he determined that Liberty was required, under the policy it issued to Ajax, to share in Beacon's responsibility to pay Furia. As such, the trial judge held that Liberty must reimburse Beacon for 50 percent of the benefits that Beacon paid to Furia.

         The trial judge stated that the act lacked a particular remedy that addressed the matter at hand. He noted, however, that workers' compensation law was "equitable in nature, " so he fashioned a remedy that was "equitable and in accordance with the existing law." As such, the trial judge ordered that: Beacon provide workers' compensation benefits to Furia, Beacon receive a credit for all sums paid to Furia after the interlocutory order entered, and Liberty indemnify Beacon for 50 percent of the workers' compensation benefits paid to Furia.[3]

         In May 2006, following the decree, Ajax, Beacon, and Liberty each appealed to the Appellate Division. On appeal, Ajax argued that the trial judge erred in assigning Liberty only 50 percent liability for the payment of Furia's benefits. It argued that Liberty should have been 100 percent liable for the payment of benefits because Ajax paid Liberty a premium exceeding $280, 000 to ...


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