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Bell v. Hype Mfg., LLC
NO. COA10-952
(Filed  1 March  2011)
Workers’  Compensation                                                 -  insurance  policy   -  termination  valid   -
nonpayment of premium
The  Industrial  Commission  did  not  err  in  finding  and
concluding   that   defendant   insurance   carrier’s   pre-term
cancellation  of  defendant  employer’s  workers’  compensation
coverage  was  valid  and  effective.    A  workers’  compensation
insurance  policy  may  be  cancelled  by  the  insurer  before  the
expiation  of  the  term  for  nonpayment  of  the  premium  and
defendant employer failed to pay its quarterly premium.




NO. COA10-952
NORTH CAROLINA COURT OF APPEALS
Filed:  1 March  2011
HERBERT M. BELL,
Employee, Plaintiff,
v.                                                                           From the North Carolina
                                                                             Industrial Commission
                                                                             I.C. File No.  890241
HYPE MANUFACTURING, LLC,
Employer,
and
AMERICAN ZURICH INSURANCE COMPANY,
Carrier,
Defendants.
Appeal  by  Defendant-employer  from  opinion  and  award  filed  2
June  2010  by  the  North  Carolina  Industrial  Commission.    Heard  in
the Court of Appeals  10 February  2011.
No brief for Plaintiff-employee.
Leicht  &  Associates,  by  Gene  Thomas  Leicht  and  Lynn  A.  Key,
for Defendant-employer.
Hedrick,  Gardner,  Kincheloe  &  Garofalo,  L.L.P.,  by  Kelli  A.
Burns and M. Duane Jones, for Defendant-carrier.
STEPHENS, Judge.
On  17 April  2008, Plaintiff-employee Herbert M. Bell filed a
claim  for  workers’  compensation  benefits,  alleging  a  compensable
injury   sustained   in   the   course   of   his   employment   with
Defendant-employer Hype Manufacturing, LLC, on  28 September  2006.
On 9 July 2008, Defendant-carrier American Zurich Insurance Company
denied  coverage  for  the  claim,  asserting  a  lapse  in  Hype’s




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coverage.   On  2 September 2008, Hype moved to join American Zurich
as a necessary and proper party.   By order filed  4 September 2008,
the deputy commissioner allowed the motion.   Hype and Bell reached
a settlement of all claims between them on  26 March  2009.
On                                                                               29  July                            2009,  a  hearing  was  held  before  the  deputy
commissioner on issues including whether Hype had insurance through
American Zurich on the date of Bell’s injury and whether American
Zurich was obligated to indemnify Hype for its settlement agreement
with  Bell.    In  an  opinion  and  award  issued  1  December  2009,  the
deputy  commissioner  denied  Hype’s  claim  for  reimbursement  after
finding   that   American   Zurich   had   cancelled   its   workers’
compensation  policy  with  Hype  such  that  the  policy  was  not  in
effect   when   Bell   was   injured.                                            Hype   appealed   to   the   Full
Commission.    After  reviewing  the  case  on  8  April  2010,  the  Full
Commission  entered  an  opinion  and  award  on  2  June  2010  affirming
the decision of the deputy commissioner with minor modifications.
From this opinion and award, Hype appeals.   Bell is not a party to
this appeal.    As discussed below, we affirm.
Hype,  a  California  corporation,  expanded  its  operations  in
2006  by  opening  two  facilities  in  North  Carolina  in  association
with  its  operation  of  a  NASCAR  race  team.     In  May                     2006,  Hype
secured  a  workers’  compensation  insurance  policy  with  American
Zurich  with  a  policy  period  of  17  May  2006  to  17  May  2007.    Hype
was  required  to  submit  a  premium  deposit  of                               $13,581.00  when  it
submitted its application.   The policy covered Hype’s facilities in
Statesville and Murphy.




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On 21 July 2006, American Zurich mailed a premium bill to Hype
at  its  California  headquarters  stating  that  a  quarterly  premium
installment  of  $4,526.00  was  due  by  17  August  2006.    This  amount
represented  one-third  of  the  balance  of  the  policy’s  cost  after
payment of the premium deposit.    On  28 July  2006, American Zurich
mailed  Hype  a  request  for  various  financial  documents.                  In
response, Hype’s insurance agent responded by email to Susie Smith,
American  Zurich’s  account  manager  underwriter,  stating  that  Hype
did  not  have  the  requested  documents.    In  addition,  Hype’s  agent
advised  Smith  that  Hype’s  Statesville  location  would  be  closed
effective 1 August 2006 and requested a premium adjustment.   On  21
August 2006, Smith entered premium adjustment changes into American
Zurich’s computer system as requested.   The result was a reduction
of Hype’s total estimated premium, effective 14 August 2006.   Hype
did not make an installment payment on or before  17 August  2006.
On 23 August 2006, Smith issued a request to American Zurich’s
underwriting  department  to  initiate  a  cancellation  of  Hype’s
workers’  compensation  coverage.    As  a  result,  on  24  August  2006,
American  Zurich  sent  Hype  a  notice  of  cancellation,  effective  11
September 2006.   The stated reason for cancellation was nonpayment
of  the  premium  due  17  August  2006,  along  with  a  past  due  premium
notice in the amount of  $4,526.00.    Hype received this mailing on
25  August                                                                     2006,  and,  on   28  September   2006,  Hype’s  accounting
department  processed  and  paid  the  past  due  amount  of                   $4,526.00
which American Zurich received and deposited.   American Zurich then
reinstated  Hype’s  coverage  with  a  policy  effective  date  of             29




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September                                                                   2006.                                                                                                          Bell,  who  worked  as  a  machinist  for  Hype,
                                                                                                               sustained  an  injury  by  accident  to  his  back  when  he  fell  while
                                                                            descending  a  ladder  on          28  September                                                               2006.                                              American  Zurich
contends, and the Full Commission concluded, that a lapse in Hype’s
coverage existed from  11 through  28 September  2006.
On  appeal,  Hype  brings  forward  two  issues:     whether  the
Commission erred in finding and concluding that American Zurich’s
attempted  pre-term  cancellation  of  its  workers’  compensation
coverage  was  valid  and  effective,  and  whether  American  Zurich  is
bound by the good faith settlement entered into by Hype and Bell.
Standard of Review
It is well-established that
[t]he Workers’ Compensation Act provides that
the Industrial Commission is the sole judge of
the  credibility  of  the  witnesses  and  the
weight   of   the   evidence.                                               N.C.G.S.                           §
97-84,-85,-86  (2005); Adams v. AVX Corp.,  349
N.C.  676,  680-81,  509  S.E.2d  411,  413  (1998)
(citing  Anderson  v.  Lincoln  Constr.  Co.,  265
N.C. 431, 433-34, 144 S.E.2d 272, 274 (1965)).
We have repeatedly held that the Commission’s
findings  of  fact                                                          “are  conclusive  on  appeal
when  supported  by  competent  evidence,  even
though  there  be  evidence  that  would  support
findings  to  the  contrary.”     E.g.  Jones  v.
Myrtle Desk Co., 264 N.C. 401, 402, 141 S.E.2d
632, 633 (1965) (per curiam).   Further, “[t]he
evidence tending to support plaintiff’s claim
is to be viewed in the light most favorable to
plaintiff,  and  plaintiff  is  entitled  to  the
benefit  of  every  reasonable  inference  to  be
drawn from the evidence.”    Adams,  349 N.C. at
681,                                                                        509  S.E.2d  at                    414                                                                         (citation  omitted);
accord Deese v. Champion Int’l Corp., 352 N.C.
109,                                                                        115,                               530   S.E.2d                                                                549,                                               553                (2000).
Appellate review   of an opinion and award from
the Industrial Commission is generally limited
to  determining                                                             “(1)  whether  the  findings  of
fact are supported by competent evidence, and
(2)   whether   the   conclusions   of   law   are




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justified by the findings of fact.”    Clark v.
Wal-Mart, 360 N.C. 41, 43, 619 S.E.2d 491, 492
(2005) (citing Hendrix v. Linn-Corriher Corp.,
317   N.C.                                                                     179,   186,   345   S.E.2d   374,   379
(1986)).
Davis v. Harrah’s Cherokee Casino, 362 N.C. 133, 137-38, 655 S.E.2d
392,  394-95  (2008).    We  review  alleged  errors  of  law  by  the  Full
Commission  de  novo.    Hawley  v.  Wayne  Dale  Constr.,  146  N.C.  App.
423,  427,  552 S.E.2d  269,  272  (2001).
Analysis
Hype  first  argues  that  the  Commission  erred  in  finding  and
concluding that American Zurich’s attempted pre-term cancellation
of its workers’ compensation coverage was valid and effective.   We
disagree.
Cancellation of a workers’ compensation policy is governed by
N.C. Gen. Stat.  §  58-36-105, which provides in pertinent part:
(a)   No   policy   of   workers’   compensation
insurance  or  employers’  liability  insurance
written   in   connection   with   a   policy   of
workers’   compensation   insurance   shall   be
cancelled by the insurer before the expiration
of the term or anniversary date stated in the
policy  and  without  the  prior  written  consent
of  the  insured,  except  for  any  one  of  the
following reasons:
(1)  Nonpayment  of  premium  in  accordance
with the policy terms.
N.C. Gen. Stat. § 58-36-105 (2010).   In addition, American Zurich’s
policy  issued  to  Hype  specified  that  it  could  not  be  cancelled
without  Hype’s  prior  written  consent  except  for  various  reasons,
one  of  which  was  “[n]onpayment  of  premium  in  accordance  with  the
policy terms.”




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In  its  brief,  Hype  contends  that  the  Commission  erred  in
making findings of fact  7,  9,  12 and  13, which state:
7.   The   terms   of   the   Hype   Manufacturing
workers’  compensation  policy  called  for  an
initial  50%  deposit  of  $13,583.00 1with  three
future  installments  of                                                  $4,526.00  to  be  paid
quarterly.
9.  The  three  quarterly  installment  premium
payments of $4,526.00 were to be due on August
17,  2006, November  17,  2006, and February  17,
2007, per agreement of the parties.
12. Hype Manufacturing’s request for a premium
reduction was processed on August 21, 2006 and
the premium was reduced by $2,193.00 2effective
August  14,  2006.    A  copy  of  the  amendment  to
the policy was mailed to Hype Manufacturing on
August                                                                    21,                       2006.   The   language   in   the
statement  Hype  Manufacturing  received  stated
that   the   premium   adjustments   would   be
reflected on the next billing cycle, which was
November  17,  2006.
13. Pursuant to the policy, Hype Manufacturing
was  required  to  pay  all  premiums  when  due.
Hype  Manufacturing  did  not  pay  the  $4,526.00
quarterly  premium  due  on  August  17,  2006,  or
any portion of it, by the due date.
Specifically, Hype asserts that the “Premium Due Date Endorsement”
is  ambiguous  about  when  premium  payments  are  due  and  that  the
premium adjustment it requested and received absolved it of making
an installment payment in some amount due 17 August 2006.   However,
1
The record indicates that the policy actually called for an
initial  50% deposit of  $13,581.00, rather than  $13,583.00.
2
Our review of the record, including the parties’ stipulated
exhibits,  indicates  that  the  premium  was  reduced  by                $7,193.00
rather than the  $2,193.00 amount quoted in the opinion and award.




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upon careful review of the record and Hype’s brief, it appears that
Hype is not, with a small exception, asserting that these findings
are  not  supported  by  competent  evidence  in  the  record.    Instead,
Hype appears to be rearguing its case to this Court and asking that
we re-weigh the evidence in order to reach a different conclusion
than the Full Commission.    As noted above, this is not our task.
Hype  acknowledges  that  the  North  Carolina  Rate  Bureau’s
deposit   premium   table,   which   specifies   billing   methods   and
practices, mandates a minimum of 50% as a premium deposit and three
additional  equal  payments  to  be  made  quarterly  for  policies  with
estimated  annual  premiums  in  excess  of  $10,000.00  such  as  Hype’s
policy here.    Hype made a premium deposit of  50% of the estimated
annual  premium,  and  then  received  a                                      21  July   2006  notice  for  an
installment  payment  of  $4,526.00  due  17  August  2006.    This  bill
included a statement that, if Hype disputed the amount due, it must
send written documentation of the dispute to American Zurich by the
payment  due  date  and  also  pay  the  undisputed  portion  of  the
installment by the due date.   American Zurich processed the request
by Hype on  21 August  2006, reducing the premium by  $7,193.00, and
made  the  change  effective  as  of  14  August  2006.    Thus,  although
Hype  requested  a  premium  reduction  on  14  August  2006,  it  did  not
make any part of the installment payment by the due date, 17 August
2006.    Because Hype had closed one facility but increased payroll
at  the  remaining  location,  no  final  determination  of  the  new
premium amount was made until after the 17 August 2006 installment
due  date.     In  any  event,  the  new  total  annual  premium  was




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$19,968.00  and  Hype  had  paid  only                                         $13,581.00  in  its  initial
deposit.    Thus, even after the adjustment, under the terms of the
Rate   Bureau’s   table,   Hype   would   have   owed   three   quarterly
installments  of  at  least  $2,129.00,  a  sum  which  had  not  been  and
could  not  have  been  determined  as  of                                     17  August                     2006  when  the
premium installment came due.
Hype does argue that the Commission erred in finding  12 when
it  stated  that  Hype’s  premium  was  reduced  by  $2,193.00,  when  the
evidence  shows  the  reduction  was  $7,193.00.    However,  we  believe
this to be a mere clerical error, with the Commission typing a  “2”
in  place  of  the  correct  “7.”    Even if  this  portion  of finding  12
were actual error, it would not alter the Commission’s conclusions
of law.   Regardless of the amount of reduction, Hype still owed an
outstanding  balance  as  of  17  August  2006  and  by  the  terms  of  the
Rate Bureau table, it owed an installment payment of one-third of
that amount.   Yet it paid nothing by the due date.   Thus, American
Zurich’s  pre-term  cancellation  of  Hype’s  workers’  compensation
coverage was both valid and effective.
Competent  evidence  in  the  record  supports  these  findings,
which,  in  turn,  support  the  Commission’s  conclusions  of  law.
Further,  because  Hype’s  second  argument,  that  American  Zurich  is
bound by the good faith settlement entered into by Hype and Bell,
is premised on its first, we need not address it.   Accordingly, the
Commission’s opinion and award is affirmed.
AFFIRMED.
Judges GEER and MCCULLOUGH concur.

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