Issue: Fraudulently misrepresenting your business on a workers comp policy will risk voiding any and all coverage!
Submitted by New Jersey Workers Compensation Lawyer, Jeffrey Hark.
In this case, in 2007, petitioner Roman started a business, Treeminator Tree Service, Inc. He and his girlfriend, Sandra Flores, were both employees of the business and by 2012 it employed two others. The company’s insurance needs were handled by the Barry Paul Rose insurance agency. As indicated by the name, the business was incorporated at its inception. However, the workers compensation policy issued by Technology Insurance Company (TIC) was to Treeminator LLC, with a minimum premium and coverage based on a company with no employees.
While cutting down a tree, Roman sustained serious injuries in February 2012 and filed a claim for medical and disability benefits from TIC. The carrier denied coverage on the grounds that “petitioner misrepresented that his company was a [LLC] with no employees.” After a hearing the workers compensation judge ruled that based on material misrepresentations made by Roman in his insurance application, he was not entitled to coverage under the policy. This appeal followed. Roman argues that he had a reasonable expectation of coverage as a result of having paid a premium. He contends that a mistake was made by either the insurance broker or TIC in issuing a policy to Treeminator, LLC rather than Treeminator Inc. Since this was not his error, Roman posits that he should be afforded coverage. Finally, he argues that, contrary to the position of TIC, he never opted out of coverage for himself. These arguments, however, do not address the findings of the compensation judge and her specific reasons for the denial of coverage.
Following several days of trial, the judge found that Roman provided false information in the course of obtaining the insurance policy. All of the policies issued to Treeminator from 2007 to the time of this accident were for a company without employees. In the original insurance application, Roman indicated the business had no employees. The application for the TIC policy effective at the time of Roman’s accident described the business as a “one man operation – no employees.”
Noting the lack of credibility of both Roman and the representatives of the insurance broker, the judge stated that it was likely that the broker did know that Roman was incorporated and not eligible for LLC status. However, she also determined that “[w]hen it was evident that a policy that would have afforded coverage to Mr. Roman was far in excess of what [he] wanted to pay, the broker arranged for a policy that met the bare minimum.” When apprised of the increased costs of insuring a company with employees, Roman chose to “take coverage as cheaply as he could find it. He wanted to pay the least and hoped for the best.” In choosing not to cover himself or any other employees, Roman could purchase an inexpensive policy as an LLC.
The judge also determined that false information was given when Flores, Roman’s employee and business manager, told the insurance broker that Treeminator did landscaping work. “There is [a] significant difference between insuring a landscaping company and a tree service. Tree service workers have a far greater risk of injury.
Appellate review of a workers compensation judge’s decision
The appellate division then stated: “[T]he scope of appellate review of factual findings by a judge of compensation is limited.” Renner v. AT&T, 218 N.J. 435, 448 (2014) (citing Close v. Kordulak Bros., 44 N.J. 589, 599 (1965)). “The question for a court is ‘whether the findings made could reasonably have been reached on sufficient credible evidence present in the record,’ considering ‘the proofs as a whole,’ with due regard to the opportunity of the one who heard the witnesses to judge of their credibility.” Hobson v. New Jersey State Parole Bd., 435 N.J. Super. 377, 388 (App. Div. 2014) (quoting Kordulak Bros., supra, 44 N.J. at 599). A petitioner bears the burden of establishing the compensability of the claim being made. Perez v. Monmouth Cable Vision, 278 N.J. Super. 275, 279 (App. Div. 1994), certif. denied, 140 N.J. 277 (1995).
Conclusions of law for appellate review are reviewed de novo. Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995) (“A trial court’s interpretation of the law and the legal consequences that flow from established facts are not entitled to any special deference.”). The same standard applies to the legal rulings of a compensation judge. Sexton v. Cnty. of Cumberland/Cumberland Manor, 404 N.J. Super. 542, 548 (App. Div. 2009). We conclude the judge’s findings were based upon sufficient credible evidence and supported the dismissal of Roman’s claim. N.J.S.A. 34:15-57.4(c)(1) (The Division may terminate or deny benefits upon its determination that a claimant has made a false statement in obtaining benefits.
Therefore, after hearing all the testimony and weighing the evidence, the workers compensation court judge is given the deference he is entitled to outlined above. This judge concluded the workers compensation policy will not be required to cover this clearly compensable injury because the policy was secured under false pretenses and terms the insurer did not sign onto at the inception of the policy.