CINCINNATI INSURANCE COMPANY,
Plaintiff-Appellant,
v
.
Iredell County
No. 01 CVS 1423
BROWN AND WALKER COMPANY,
Defendant-Appellee,
Christopher J. Small for plaintiff-appellant.
Orbock Bowden Ruark & Dillard, PC, by Edwin W. Bowden, for
defendant-appellee.
McGEE, Judge.
Brown and Walker Company (defendant) is a heating and air
conditioning company that provides installation, service and repair
and is owned and operated by Tony Brown (Brown) with its sole
office in Iredell County, North Carolina. Defendant purchased a
workers' compensation insurance policy issued by Cincinnati
Insurance Company (plaintiff). Plaintiff initiated an audit of
defendant in January 1999 regarding the status of all alleged
subcontractors who had performed work for defendant from 30 January
1998 through 26 January 1999.
Based on that audit, plaintiff determined defendant had not
paid sufficient premiums for those subcontractors hired bydefendant during that time period, and plaintiff demanded defendant
pay an additional premium to cover individuals and businesses that
defendant had stated were subcontractors. Plaintiff issued a
premium adjustment invoice to defendant on 22 March 2000 for
$22,689.00. This amounted to an increase of $9,862.00 for the
policy term, 30 January 1998 through 26 January 1999, and an
increase of $12,827.00 for the policy term, 11 February 1999
through 9 July 1999.
Plaintiff contended that the twenty-two individuals and
businesses alleged to be subcontractors by defendant were actually
defendant's employees, for whom plaintiff was providing coverage
during the time periods subject to the audit.
(See footnote 1)
Plaintiff admits in
its brief that eight of the twenty-two listed in the audit were in
fact subcontractors, who required no coverage, and according to
plaintiff, they were excluded from the premium balance due at the
close of the audit. Plaintiff maintained that the remaining
individuals and businesses were subject to defendant's supervision
and were therefore defendant's employees.
Plaintiff filed an unverified complaint against defendant to
recover unpaid workers' compensation insurance premiums. Both
plaintiff and defendant filed motions for summary judgment stating
that there was no genuine issue of material fact in dispute. Thetrial court granted defendant's motion for summary judgment on 20
August 2002. Plaintiff appeals.
In its sole assignment of error, plaintiff argues the trial
court erred in granting summary judgment in favor of defendant.
Plaintiff contends that for purposes of determining the premium for
workers' compensation coverage, there was a genuine issue of
material fact as to whether certain individuals and businesses were
"independent contractors" or defendant's employees.
A motion for summary judgment may be granted "if the
pleadings, depositions, answers to interrogatories, and admissions
on file, together with the affidavits, if any, show that there is
no genuine issue as to any material fact and that any party is
entitled to a judgment as a matter of law." N.C. Gen. Stat. §
1A-1, Rule 56 (2003). In considering a motion, the trial court is
to consider all evidence in the light most favorable to the
nonmovant. Huntley v. Howard Lisk Co., 154 N.C. App. 698, 702, 573
S.E.2d 233, 236 (2002), disc. review denied, 357 N.C. 62, 579
S.E.2d 389 (2003). In order to succeed on a motion for summary
judgment,
the [movant] must show either that: (1) an
essential element of the plaintiff's claim is
nonexistent; or (2) the plaintiff is unable to
produce evidence that supports an essential
element of his claim; or, (3) the plaintiff
cannot overcome affirmative defenses raised
against him.
Culler v. Hamlett, 148 N.C. App. 389, 391, 559 S.E.2d 192, 194
(2002).
Once a movant has forecast evidence which tends to establisha right to judgment as a matter of law, the adverse party must
present a forecast of evidence which tends to support its claim for
relief. Best v. Perry, 41 N.C. App. 107, 110, 254 S.E.2d 281, 284
(1979). N.C.G.S. § 1A-1, Rule 56 provides that
[w]hen a motion for summary judgment is made
and supported as provided in this rule, an
adverse party may not rest upon the mere
allegations or denials of his pleading, but
his response, by affidavits or as otherwise
provided in this rule, must set forth specific
facts showing that there is a genuine issue
for trial. If he does not so respond, summary
judgment, if appropriate, shall be entered
against him.
In the case before us, plaintiff argues that there is a
material issue of fact as to whether certain individuals and
businesses were "independent contractors" or employees of defendant
for purposes of determining the insurance premium owed. This
classification is essential to plaintiff's claim for relief.
The classification of an individual or business as an
independent contractor or as an employee is a mixed question of
fact and law. Rhoney v. Fele, 134 N.C. App. 614, 616, 518 S.E.2d
536, 538 (1999), disc. review denied, 351 N.C. 360, 542 S.E.2d 217
(2000). Where a party is an independent contractor there is no
employee-employer relationship and the Workers' Compensation Act
will not be applicable. Doud v. K & G Janitorial Services, 69 N.C.
App. 205, 211, 316 S.E.2d 664, 669, disc. review denied, 312 N.C.
492, 322 S.E.2d 554 (1984). "Whether one employed to perform
specified work for another is to be regarded as an independent
contractor or as an employee within the meaning of the Act is
determined by the application of ordinary common law tests." Youngblood v. North State Ford Truck Sales, 321 N.C. 380, 383, 364
S.E.2d 433, 437 (1988).
At common law, an independent contractor is "one who exercises
an independent employment and contracts to do certain work
according to his own judgment and method, without being subject to
his employer except as to the result of his work." Id. at 384, 364
S.E.2d at 437. Our Courts have generally recognized eight factors,
with no single one being determinative, which indicate independent
contractor status:
The person employed (a) is engaged in an
independent business, calling, or occupation;
(b) is to have the independent use of his
special skill, knowledge, or training in the
execution of the work; (c) is doing a
specified piece of work at a fixed price or
for a lump sum or upon a quantitative basis;
(d) is not subject to discharge because he
adopts one method of doing the work rather
than another; (e) is not in the regular employ
of the other contracting party; (f) is free to
use such assistants as he may think proper;
(g) has full control over such assistants; and
(h) selects his own time.
McCown v. Hines, 140 N.C. App. 440, 443, 537 S.E.2d 242, 244
(2000), aff'd, 353 N.C. 683, 549 S.E.2d 175 (2001). "The vital
test is to be found in the fact that the employer has or has not
retained the right of control or superintendence over the
contractor or employee as to details [of how the work is to be
performed]." Hayes v. Elon College, 224 N.C. 11, 15, 29 S.E.2d
137, 140 (1944).
A subcontractor is defined as "[o]ne who is awarded a portion
of an existing contract by a contractor . . . . For example, a
contractor who builds houses typically retains subcontractors toperform specialty work such as installing plumbing [and] laying
carpet[.]" Black's Law Dictionary 1437 (7th ed. 1999). North
Carolina's Workers' Compensation Act addresses the status of the
employees of a subcontractor. Specifically, N.C. Gen. Stat. § 97-
19 (2003) provides that:
Any principal contractor, intermediate
contractor, or subcontractor who shall sublet
any contract for the performance of any work
without requiring from such subcontractor or
obtaining from the Industrial Commission a
certificate . . . stating that such
subcontractor has complied with G.S. 97-93
. . . shall be liable . . . to the same extent
as such subcontractor . . . for the payment of
compensation and other benefits . . . on
account of the injury or death of any employee
of such subcontractor due to an accident
arising out of and in course of the
performance of the work covered by such
subcontract.
The statute protects the employees of the subcontractor and not the
subcontractor himself. N.C.G.S. § 97-19. Thus, an employer is not
required to provide workers' compensation coverage to a
subcontractor he has hired who has no employees. In the present
case, the distinction as to whether the individuals and businesses
at issue are independent contractors, subcontractors with
employees, or employees is at the heart of plaintiff's claim.
Plaintiff's complaint and affidavit summarily contend that
defendant owes plaintiff $22,689.00 for unpaid premiums for
workers' compensation insurance issued by plaintiff to defendant.
Neither plaintiff's complaint, affidavit, nor its motion for
summary judgment states how the premiums owed were calculated. In
support of its allegation, and as permitted by N.C. Gen. Stat. §1A-1, Rule 33(c) (2003), plaintiff submitted a copy of the
insurance policy and the audit report in lieu of answering
defendant's interrogatory.
In the audit report, the auditor noted:
I questioned the insured to determine control
and supervision of these subs. Insured
informed me that all the subs were operating
under his HVAC license and that the contract
required that the job is completed at a time
determined by the insured, and in a manner
determined by the insured. They worked
exclusively for the insured and [were]
supervised on some jobs by the insured. The
insured visited during and upon completion.
All equipment was purchased by the insured.
All payments to subs were for labor. Included
all subs in the audit.
Thereafter, plaintiff admitted that the auditor made findings of
"subcontractor" classification as to eight of the entities
initially determined by the auditor to be employees. Among those
eight originally included in the audit were a pawn shop from which
defendant purchased tools and a distributor of heating and air
conditioning units from whom defendant purchased equipment.
According to plaintiff, these eight individuals and businesses were
excluded from the calculation of the premium. Thus, there remained
fourteen entities that plaintiff maintained were employees for
which coverage was provided without a premium payment by defendant
to plaintiff. Defendant submitted subcontractor information forms
to plaintiff stipulating that two individuals listed were in fact
employees and presented no argument as to the classification of a
third, thus leaving the classification of eleven at issue.
Defendant submitted an affidavit signed by Brown on 20 May2002 in support of its motion for summary judgment. In that
affidavit, defendant accounted for the scope of work completed by
each of the remaining eleven individuals and businesses at issue.
In his affidavit, Brown averred that each was an "independent
contractor" who generally worked under minimal supervision, set
their own hours, supplied their own tools and transportation, and
were paid a fixed amount. The subcontractor information forms
submitted by defendant to plaintiff were attached to a second
affidavit signed by Brown. In these forms, Brown detailed the work
provided by these individuals and businesses and asserted that each
was a "subcontractor". After reviewing both affidavits and all
accompanying documents, we are unable to discern whether these
businesses and individuals were employees, independent contractors,
or subcontractors with employees.
Furthermore, Brown stipulated in his first affidavit that none
of these individuals or businesses had any employees; however,
later in the same affidavit, Brown stated that defendant had no
authority to "hire or fire any of the above independent
contractors' employees." Thus, we cannot determine whether these
individuals and businesses had employees which would trigger the
protections of N.C.G.S. § 97.19.
If the disputed individuals and businesses were independent
contractors, then defendant was not required to provide workers'
compensation coverage. However, under N.C.G.S. § 97.19, defendant
may have been required to provide workers' compensation coverage
for employees of subcontractors if defendant failed to obtain thenecessary certificates of coverage from the purported
subcontractors.
After considering all evidence in the light most favorable to
plaintiff, the nonmovant, we conclude that defendant failed to meet
its initial burden of establishing that the contested individuals
and businesses were not subject to the workers' compensation
insurance policy maintained by plaintiff. See N.C.G.S. § 1A-1,
Rule 56. Therefore, there is a genuine issue of material fact as
to the classification of these individuals and businesses, which
determination is essential to plaintiff's claim for relief. The
trial court erred in granting defendant's motion for summary
judgment. It is incumbent on the trial court to make a
determination as to the status of each of the individuals and
businesses at issue.
Reversed and remanded.
Judges HUNTER and CALABRIA concur.
Report per Rule 30(e).
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