Appeal by defendants from judgment entered 16 February 2006 by
Judge Robert H. Hobgood in Superior Court, Wake County. Heard in
the Court of Appeals 21 March 2007.
Young Moore and Henderson, P.A. by Walter E. Brock, Jr. for
plaintiff-appellee.
Eric P. Handler, P.C. by Eric P. Handler for defendant-
appellants.
STROUD, Judge.
This is a breach of contract action involving an insurance
contract for workers' compensation and employers' liability
insurance. Plaintiff North Carolina Farm Bureau Mutual Insurance
Company, Inc. insured defendant T-N-T Carports, Inc. (“T-N-T”)
pursuant to two workers' compensation insurance policies.
Plaintiff issued each policy with an initial premium determined bythe estimated annual payroll of covered T-N-T employees. This
initial premium was subject to an audit from which a final premium
would be calculated. Defendants Venancio and Deborah Torres
personally guaranteed “payment of all premiums.”
The dispositive issue before this Court is whether T-N-T
subcontractors and their helpers, who transport and assemble steel
carports and garages, are properly classified as “Labor Only”
employees or “Mobile Equipment with Operators” employees for the
purpose of calculating T-N-T's final workers' compensation
insurance policy premium. We hold that the trial court did not err
by concluding that the work of T-N-T's subcontractors is “Labor
Only.” Accordingly, we affirm the trial court order entered 16
February 2006 by Judge Robert H. Hobgood in Superior Court, Wake
County awarding plaintiff $260,046.50 in additional premium
payments under both policies.
I. Background
Defendant T-N-T manufactures unassembled steel carports and
garages at its plant in Mount Airy, North Carolina. Between March
2001 and September 2002, defendant T-N-T sold carports and garages
to buyers in approximately twenty states. Defendant T-N-T
contracted with uninsured subcontractors to transport the
unassembled steel materials from Mount Airy to job sites and to
assemble the carports and garages on arrival. Defendant T-N-T's
subcontractors and the subcontractors' helpers used heavy-duty
pickup trucks to transport the unassembled steel and used various
hand tools to assemble the carports and garages. Plaintiff issued two workers' compensation insurance policies
to defendant T-N-T. Policy One was in effect from 16 March 2001 to
16 March 2002. Policy Two was in effect from 16 March 2002 to 6
September 2002. Plaintiff issued each policy with an initial
premium determined by the estimated annual payroll of covered T-N-T
employees. For each policy, this initial premium was subject to
audit from which an actual premium would be calculated. The
estimated annual payroll of T-N-T subcontractors and their helpers
was not included when plaintiff calculated the initial premium for
either policy. However, N.C. Gen. Stat. § 97-19 requires North
Carolina employers to provide workers' compensation benefits to the
employees of uninsured subcontractors. N.C. Gen. Stat. § 97_19 (
2005).
Because defendant T-N-T did not require, or provide proof of,
workers' compensation insurance coverage from its subcontractors,
plaintiff included the annual payroll of defendant T-N-T's
subcontractors and their helpers when calculating the final
premiums for both policies. This inclusion caused the final
premium to exceed the estimated premium. Plaintiff had calculated
the initial estimated premium for Policy One to be $17,005.00, but
plaintiff's complaint alleged that the audit revealed that the
actual premium for covered T-N-T employees, including T-N-T
subcontractors and their helpers, should have been $135,462.00.
Plaintiff also calculated the estimated premium for Policy Two to
be $11,912.50, but plaintiff's complaint alleged that the audit
revealed that the actual premium for covered T-N-T employees shouldhave been $66,138.00. Based on these audits, plaintiff sought
additional premiums in the amount of $172,682.50 plus interest.
Defendants do not dispute that the payroll of T-N-T
subcontractors and their helpers must be included when calculating
the policy premiums. Defendants dispute plaintiff's classification
of these employees as “Labor Only” employees for purposes of
determining the amount of additional premiums due. Defendants
argue that T-N-T subcontractors and their helpers should be
classified as “Mobile Equipment with Operators” employees.
Defendants refused to pay the additional premiums demanded by
plaintiff as a result of the policy audits.
On 9 February 2004, plaintiff filed suit in Superior Court,
Wake County alleging breach of contract. In a consent pretrial
order, plaintiff and defendants stipulated that
10. T-N-T contends, and the Court held in its
order granting partial summary judgment
entered herein on August 3, 2005,[
(See footnote 1)
]that the
Uninsured Subcontractor payments are adjusted
under Subcontractor Table 2 of the Basic
Manual according to the category for 'Mobile
Equipment with Operators (such as but not
limited to earth movers, graders, bulldozers
or log skitters)',[sic] which applies not less
than 33 1/3% of the subcontractor payments to
the applicable rate per $100.00. Should that
category be deemed to apply, Farm Bureau would
in fact apply precisely 33 1/3% of thesubcontractor payments to the rate to
calculate the final premium.
11. Farm Bureau contends that the Uninsured
Subcontractor payments are adjusted under
Subcontractor Table 2 of the Basic Manual
according to the category for “Labor only,”
which applies not less than 90% of the
subcontractor payments to the applicable rate
per $100.00. Should that category be deemed
to apply, Farm Bureau would in fact apply
precisely 90% to the subcontractor payments to
the rate to calculate the final premium.
This matter was heard by bench trial before Superior Court Judge
Robert H. Hobgood on 9 January 2006.
Plaintiff tendered Sue Taylor (“Taylor”), director of the
North Carolina Rate Bureau Workers' Compensation Department (“Rate
Bureau”), as an expert witness at trial. Taylor explained how the
Rate Bureau classifies employees and how the Rate Bureau would
apply the Basic Manual for Workers Compensation and Employers
Liability Insurance (“Basic Manual”) to the disputed policies.
The Basic Manual contains insurance rates and classification
plans adopted by the North Carolina Rate Bureau and approved by the
Commissioner of Insurance. N.C. Gen. Stat. § 58-36-100(k) and (o)
(2005). N.C. Gen. Stat. § 58-36-100(k) and (o) provide that all
workers' compensation insurance carriers must comply with the Basic
Manual.
Id. The Basic Manual states that “[f]or each
subcontractor not providing . . . evidence of workers compensation
insurance, additional premium must be charged on the contractor's
policy for the uninsured subcontractor's employees according to
Subcontractor Table 1 and 2” contained therein. Basic Manual forWorkers Compensation and Employers Liability Insurance, Rule
2(H)(2) (2001).
Subcontractor Table 1 notes that
[i]f the contractor has not furnished evidence
of workers compensation insurance and . . .
[d]oes not furnish complete payroll records,
but documentation of a specific job discloses
that a definite amount of the subcontract
price represents payroll, . . . [t]hen to
calculate the additional premium . . . [u]se
the payroll amount indicated by the
documentation as the payroll, subject to the
minimums in Subcontractor Table 2.
Basic Manual, Subcontractor Table 1. Subcontractor Table 2
provides that “[i]f the job involves . . .
[l]abor only, . . .
[t]hen the minimum to calculate [the] additional premium is . . .
[n]ot less than 90% of the subcontract price.” Basic Manual,
Subcontractor Table 2 (emphasis added). Subcontractor Table 2
further provides that “[i]f the job involves . . .
[m]obile
equipment with operators (such as but not limited to earth movers,
graders, bulldozers, or log skidders) . . . [t]hen the minimum to
calculate [the] additional premium is . . . [n]ot less than 33 1/3%
of the subcontract price.” Basic Manual, Subcontractor Table 2
(emphasis added).
Based on the job description of T-N-T subcontractors and their
helpers, Taylor testified that the uninsured subcontractors “should
be labor only.” Taylor further testified that, because the
erection and installation of carports and garages required only the
use of hand tools and not “mobile equipment . . . such as earth
movers, graders, bulldozers, or log skidders,” the majority of each
subcontract price was attributable to labor. Taylor added that themere use of motor vehicles to transport equipment and materials to
job sites does not remove the subcontractors' job from the “Labor
Only” category.
Defendants called a T-N-T subcontractor and subcontractor's
helper to testify at trial. These witnesses explained that they
used heavy-duty pickup trucks, such as Ford 250 or Chevrolet 3500
pickup trucks, to pull trailers carrying up to ten carports at a
time. The trailers are designed specifically for hauling carports
and garages.
Judge Hobgood entered judgment on 16 February 2006, finding as
follows:
19. A typical job contracted by the uninsured
contractors involved transporting steel
materials manufactured by T-N-T from Mount
Airy, North Carolina, to a buyer's location
and then erecting the carport or garage at
that location. The transportation was done
using trailers, which held steel materials at
least 21 feet long and carried materials for
multiple carports or garages at once, pulled
by DOT-registered, heavy-duty pick-up trucks .
. . The erection of the carports and garages
was done using hand tools provided by the
uninsured subcontractors.
20. Samples of the business auto insurance
policy form and general liability insurance
policy form used by Farm Bureau each contain a
definition of the term “mobile equipment,”
which definition expressly excludes “motor
vehicles” and a definition of the term “motor
vehicle” which expressly excludes “mobile
equipment.”
21. The workers compensation insurance
policies issued to T-N-T by Farm Bureau
contain no terms defining “mobile equipment
with operators” except the parenthetical
phrase “(including but not limited to earth
movers, graders, bulldozers or log skidders .
. .).” Instead, the Basic Manual contains therules for additional premium calculation for
uninsured subcontractors, including
Subcontractor Table 2 containing the terms in
dispute, and is part of the uniform
classification plan and rules that were filed
by the North Carolina Rate Bureau with the
North Carolina Department of Insurance,
approved by the Department of Insurance, and
required to be followed by all North Carolina
workers compensation insurers.
Based upon these findings, Judge Hobgood concluded:
5. The installation of carports and garages
by the uninsured subcontractors of T-N-T is
not a job that involves “Mobile Equipment with
Operators.” Therefore, the job of uninsured
subcontractors, who are paid for the
installation of carports and garages, most
appropriately falls into the category of
“Labor only”. Under the category of “Labor
only”, 90% of the subcontractor payments are
subject to application of the rate for the
additional premium due.
6. For the “Labor only” category, Farm Bureau
applies precisely 90% of the subcontract
payment to the applicable rate, no more. The
parties stipulated that if the 90% rule
applies then the additional premium due for
the policy period March 16, 2001 to March 16,
2002, is $150,516.00. Therefore, that sum is
the additional premium due for that policy
period.
7. The parties have stipulated that if the
90% rule applies, then the additional premium
due for the policy period March 16, 2002 to
September 6, 2002, is $109,530.50. Therefore,
that sum is the additional premium due for
that policy period.
Accordingly, Judge Hobgood ordered defendants to pay plaintiff
$260,046.50 in additional premiums. Defendants appeal, arguing
that Judge Hobgood erred by concluding that the work of T-N-T
subcontractors and their employees was “Labor Only.”
II. “Labor Only” vs. “Mobile Equipment with Operators”
[1] Defendants argue that Judge Hobgood erred by concluding
that the work of T-N-T subcontractors and their employees was
“Labor Only.” In support of their argument, defendants assert that
the trial court's conclusion is illogical because the trial court's
findings reveal that installation of carports and garages is only
part of the subcontractors' job. We disagree.
“The standard of review on appeal from a judgment entered
after a non-jury trial is 'whether there is competent evidence to
support the trial court's findings of fact and whether the findings
support the conclusions of law and ensuing judgment.'”
Friday v.
United Dominion Realty Tr., Inc., 155 N.C. App. 671, 674, 575
S.E.2d 532, 534 (2003) (internal citation omitted). In a non-jury
trial setting, “the court's findings of fact have the force and
effect of a verdict by a jury and are conclusive on appeal if there
is evidence to support them, even though the evidence might sustain
findings to the contrary.”
Williams v. Pilot Life Ins. Co., 288
N.C. 338, 342, 218 S.E.2d 368, 371 (1975).
Here the trial court found that T-N-T subcontractors and their
helpers transport materials on trailers pulled by heavy-duty pickup
trucks. The trial court further found that when referring to
“Mobile Equipment with Operators,” both policies expressly state
that mobile equipment is equipment “such as but not limited to
earth movers, graders, bulldozers or log skidders.” These “mobile
equipment” construction vehicles are inherently different from the
trailers and heavy-duty pickup trucks used by T-N-T subcontractors
and their helpers. Such construction vehicles are designedprincipally for use off public roads, generally travel on crawler
threads, and are maintained to provide mobility to permanently
mounted construction equipment. The heavy-duty pickup trucks and
trailers used by T-N-T subcontractors and their helpers are
designed to travel on public roads and to transport the unassembled
steel materials.
We hold that the use of trailers and heavy-duty pickup trucks
to transport materials to job site locations does not transform
T-N-T subcontractors from “Labor Only” employees to “Mobile
Equipment with Operators” employees for purposes of calculating
defendant T-N-T's final workers' compensation insurance policy
premiums. This holding is consistent with the testimony of North
Carolina Rate Bureau, Workers Compensation Department Director Sue
Taylor, as discussed above.
For the reasons stated above, the trial court did not err by
concluding that the work of T-N-T subcontractors and their helpers
is “Labor Only.” This assignment of error is overruled.
III. “Vehicle Rule”
[2] Alternatively, defendants argue that the trial court
should have calculated the additional premiums based on a “Vehicle
Rule” classification, by which 33 1/3% of the subcontract price is
used to determine additional premiums. However, defendants failed
to assign error to Judge Hobgood's fourth conclusion of law which
was: “The parties stipulated that either the Basic Manual category
for 'Mobile Equipment with Operators (such as but not limited to
earth movers, graders, bulldozers or log skidders' or the BasicManual category for 'Labor only' applied to the T-N-T uninsured
installers.” “[S]tipulations are judicial admissions and are
therefore binding in every sense, preventing the party who agreed
to the stipulation from introducing evidence to dispute it . . . .”
Thomas v. Poole, 54 N.C. App. 239, 241, 282 S.E.2d 515, 517 (1981),
cert. denied, 304 N.C. 733, 287 S.E.2d 902 (1982) (internal
citation omitted). Thus because defendants did not assign error to
this conclusion, that either the “Mobile Equipment with Operators”
or the “Labor Only” categories applied, defendants' rights to
review of the conclusion on appeal is deemed waived. N.C.R. App.
P., Rule 10(a) (2005).
IV. Conclusion
We hold that the use of trailers and heavy-duty pickup trucks
to transport materials to job site locations does not transform T-
N-T subcontractors from “Labor Only” employees to “Mobile Equipment
with Operators” employees for purposes of calculating defendant T-
N-T's final workers' compensation insurance policy premiums.
Accordingly, we affirm the trial court order entered 16 February
2006 by Judge Robert H. Hobgood in Superior Court, Wake County
awarding plaintiff $260,046.50 in additional premium payments under
both policies.
AFFIRMED.
Judges McCULLOUGH and CALABRIA concur.
Footnote: 1