NC Ins. Guar. Ass'n v. Weathersfield Mgmt. ( 2019 )

IN THE COURT OF APPEALS OF NORTH CAROLINA
No. COA19-300
Filed: 5 November 2019
Wake County, No. 17 CVS 11899
NORTH CAROLINA INSURANCE GUARANTY ASSOCIATION, Plaintiff,
v.
WEATHERSFIELD MANAGEMENT, LLC, f/k/a ACCUFORCE STAFFING
SERVICES, LLC, f/k/a ACCUFORCE SMART SOLUTIONS, LLC, Defendant.
Appeal by defendant from order entered 4 January 2019 by Judge G. Bryan
Collins, Jr. in Wake County Superior Court. Heard in the Court of Appeals 15
October 2019.
Nelson Mullins Riley & Scarborough LLP, by Christopher J. Blake and Joseph
W. Eason, for plaintiff-appellee.
Hunter, Smith & Davis, LLP, by Rachel Ralston Mancl, for defendant-
appellant.
TYSON, Judge.
Weathersfield Management, LLC, f/k/a Accuforce Staffing Services, LLC, f/k/a
Accuforce Smart Solutions, LLC (“Defendant”) appeals an order granting summary
judgment for the North Carolina Insurance Guaranty Association (“Plaintiff”). We
affirm.
I. Background
N.C. INS. GUAR. ASS’N V. WEATHERSFIELD MGMT., LLC.
Opinion of the Court
Defendant is a regional worker staffing company with less than $50,000,000.00
in market value. Defendant experienced severe financial problems to the extent it
was forced to file for bankruptcy protection under Chapter 13 of the U.S. Bankruptcy
Code.
North Carolina employers, who employ above a threshold number of
employees, are statutorily required to maintain workers’ compensation insurance
coverage. Defendant’s bankruptcy filing made it difficult to obtain coverage to meet
this statutory requirement. Dallas National quoted coverage for Defendant, which
required a deductible of $800,000.00 per occurrence, but included a duty to defend
the insured. Defendant was unable to find another insurance carrier and accepted
the policy from Dallas National to meet North Carolina’s workers’ compensation
insurance coverage requirement beginning 18 August 2009.
This policy also required Defendant to maintain a collateral deposit of
$600,000.00. Defendant claims this collateral deposit has not been returned. At some
point during Defendant’s period of coverage, Dallas National ceased conducting
business as Dallas National and began using Freestone as its name.
In June 2012, Defendant’s employee, Tina Huffman (“Ms. Huffman”), asserted
a workplace injury and filed a workers’ compensation claim. Freestone acknowledged
in a Form 60 filing to the North Carolina Industrial Commission (“Commission”): (1)
coverage under Defendant’s policy; (2) that Ms. Huffman was an employee of
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Opinion of the Court
Defendant; and, (3) Ms. Huffman was injured during the course and scope of her
employment. The Commission determined Ms. Huffman was entitled to weekly
disability benefits totaling $165.40 and Ms. Huffman’s attorney was awarded $55.14
per week.
In 2014, Plaintiff’s involvement with Defendant’s policy was activated due to
the insolvency of Freestone. Plaintiff retained counsel to defend Defendant during
the pendency of Ms. Huffman’s claim. Plaintiff pursued settling Ms. Huffman’s claim
and a determination from the Commission of whether she can return to work. Ms.
Huffman’s counsel maintains that she “is completely disabled and unable to return
to work.” As of 10 August 2018, Plaintiff has paid $134,002.93 in indemnity and
expense payments on Ms. Huffman’s claim.
On 28 September 2017 Plaintiff commenced this action for reimbursement
under N.C. Gen. Stat. § 58-48-1 for payment of Ms. Huffman’s claims asserted under
coverage for Defendant’s policy with Freestone. Following written discovery, Plaintiff
moved for summary judgment. The trial court heard and granted Plaintiff’s motion
for summary judgment. Defendant appeals.
II. Jurisdiction
This Court possesses jurisdiction pursuant to N.C. Gen. Stat. § 7A-27(b) (2017).
III. Issues
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Opinion of the Court
Defendant argues the trial court erred by granting summary judgment for
Plaintiff under N.C. Gen. Stat. § 58-48-35 (2017) and asserts: (1) Defendant does not
have a self-insured retention; (2) Defendant is not a high-net-worth employer or
affiliate; (3) estoppel bars the claim; and, (4) genuine issues of material fact remain
undecided.
IV. Standard of Review
“Our standard of review of an appeal from summary judgment is de novo; such
judgment is appropriate only when the record shows 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.’” In re Will of Jones, 362 N.C. 569, 573, 669 S.E.2d 572, 576 (2008) (quoting
Forbis v. Neal, 361 N.C. 519, 524, 649 S.E.2d 382, 385 (2007)).
V. Analysis
A. Self-Insured Retention
Defendant argues Plaintiff has no claim under N.C. Gen. Stat. § 58-48-35
because Defendant’s policy does not contain a self-insured retention. We disagree.
N.C. Gen. Stat. § 58-48-35, articulates Plaintiff’s statutory authority:
(a) The Association Shall:
(1) Be obligated to the extent of the covered claims existing
prior to the determination of insolvency and arising within
30 days after the determination of insolvency, or before the
policy expiration date if less than 30 days after the
determination, or before the insured replaces the policy or
causes its cancellation, if he does so within 30 days of the
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determination. This obligation includes only the amount of
each covered claim that is in excess of fifty dollars ($50.00)
and is less than three hundred thousand dollars
($300,000). However, the Association shall pay the full
amount of a covered claim for benefits under a workers’
compensation insurance coverage, and shall pay an
amount not exceeding ten thousand dollars ($10,000) per
policy for a covered claim for the return of unearned
premium. The Association has no obligation to pay a
claimant’s covered claim, except a claimant’s workers’
compensation claim if:
a. The insured had primary coverage at the time of the loss
with a solvent insurer equal to or in excess of three
hundred thousand dollars ($300,000) and is applicable to
the claimant’s loss; or
b. The insured’s coverage is written subject to a self-insured
retention equal to or in excess of three hundred thousand
dollars ($300,000).
If the primary coverage or the self-insured retention is less
than three hundred thousand dollars ($300,000), the
Association’s obligation to the claimant is reduced by the
coverage and the retention. The Association shall pay the
full amount of a covered claim for benefits under a workers’
compensation insurance coverage to a claimant
notwithstanding any self-insured retention, but the
Association has the right to recover the amount of the self-
insured retention from the employer.
In no event shall the Association be obligated to a
policyholder or claimant in an amount in excess of the
obligation of the insolvent insurer under the policy from
which the claim arises. Notwithstanding any other
provision of this Article, a covered claim shall not include
any claim filed with the Association after the final date set
by the court for the filing of claims against the liquidator
or receiver of an insolvent insurer.
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(2) Be deemed the insurer to the extent of the Association’s
obligation on the covered claims and to such extent shall
have all rights, duties, and obligations of the insolvent
insurer had not become insolvent. However, the Association
has the right but not the obligation to defend the insured
who is not a resident of this State at the time of the insured
event unless the property from which the claim arises is
permanently located in this State in which instance the
Association does not have the obligation to defend the
matter in accordance with policy.
N.C. Gen. Stat. § 58-48-35 (emphasis supplied).
The highlighted provisions in the statute refer to a “self-insured retention.”
Defendants argue the statute is inapplicable to them because their policy had a
deductible. N.C. Gen. Stat. § 58-48-20 (2017) does not define either “self-insured
retention” or “deductible.”
B. Rules of Statutory Interpretation
When interpreting the parties’ arguments, we must first determine the
meaning of the terms in N.C. Gen. Stat. § 58-48-35. In reviewing the definitions of
self-insured retention and deductible we are guided by several well-established
principles of statutory construction.
“The principal goal of statutory construction is to accomplish the legislative
intent.” Lenox, Inc. v. Tolson, 353 N.C. 659, 664, 548 S.E.2d 513, 517 (2001) (citations
omitted). “The best indicia of that intent are the [plain] language of the statute . . . ,
the spirit of the act and what the act seeks to accomplish.” Coastal Ready-Mix
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Concrete Co. v. Bd. of Comm’rs, 299 N.C. 620, 629, 265 S.E.2d 379, 385 (1980)
(citations omitted).
“When construing legislative provisions, this Court looks first to the plain
meaning of the words of the statute itself[.]” State v. Ward, 364 N.C. 157, 160, 694
S.E.2d 729, 731 (2010). Additionally, when dealing with insurance policies “[a]ny
doubt as to coverage is to be resolved in favor of the insured.” Waste Mgmt. of
Carolinas, Inc. v. Peerless Ins. Co., 315 N.C. 688, 693, 340 S.E.2d 374, 378 (1986).
“Interpretations that would create a conflict between two or more statutes are
to be avoided, and statutes should be reconciled with each other whenever possible.”
Taylor v. Robinson, 131 N.C. App. 337, 338, 508 S.E.2d 289, 291 (1998) (internal
quotation marks, citations, and ellipses omitted). “Statutes in pari materia must be
read in context with each other.” Cedar Creek Enters. v. Dep’t of Motor Vehicles, 290
N.C. 450, 454, 226 S.E.2d 336, 338 (1976).
Further, “where a literal interpretation of the language of a statute will lead
to absurd results, or contravene the manifest purpose of the Legislature, as otherwise
expressed, the reason and purpose of the law shall control.” State v. Beck, 359 N.C.
611, 614, 614 S.E.2d 274, 277 (2005) (quoting Mazda Motors of Am., Inc. v. Sw.
Motors, Inc., 296 N.C. 357, 361, 250 S.E.2d 250, 253 (1979)).
C. Persuasive Authority
The use and application of the terms “self-insured retention” or “deductible” in
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our statutes is an issue of first impression. In reconciling the uses and application of
“self-insured retention” or “deductible,” it is helpful to review definitions in
persuasive authorities and how other courts have addressed this issue. When this
Court reviews an issue of first impression, it is appropriate to look to decisions from
other jurisdictions for persuasive guidance. See Skinner v. Preferred Credit, 172 N.C.
App. 407, 413, 616 S.E.2d 676, 680 (2005) (“Because this case presents an issue of
first impression in our courts, we look to other jurisdictions to review persuasive
authority that coincides with North Carolina’s law.”), aff’d, 361 N.C. 114, 638 S.E.2d
203 (2006). Our review has revealed the following:
The United States District Court for the Central District of California reviewed
an analogous issue in Gen. Star. Nat’l Ins. Corp. v. World Oil Co., 973 F. Supp. 943,
948-49 (C.D. Cal. 1997). In Gen. Star, an oil company insured its company
automobiles using a policy with a deductible. Additionally, the oil company
purchased a second policy to cover the deductible on the first policy. Id. at 945. The
federal district court found a deductible
is a portion of an insured loss for which the insured is
responsible. The deductible is generally a specific sum that
the insured must pay before the insurer owes its duty to
indemnify the insured for a loss. A deductible usually
relates only to the damages sustained by the insured, not
to defense costs.
Id. at 948 (citation omitted).
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The federal district court further found a self-insured retention is “a specific
amount of loss that is not covered by the policy but instead must be borne by the
insured . . . . [The policy] may provide that the insurer shall have the right, but not
the duty, to assume charge of the defense and settlement of any claim, including those
below the [self-insured retention].” Id.
The courts in Wisconsin agree with the federal district court’s holding. See
Burgraff v. Menard, Inc., 853 N.W.2d 574, 581 (Wis. Ct. App. 2014) (“When an insured
has a deductible, the insurance company is typically required to provide a defense
from dollar one, in contrast, the insured whose coverage is subject to a self-insured
retention is usually obligated to retain its own defense counsel.” (citations omitted)).
Also, when considering the plain meaning and text of a statute, it is
appropriate to review dictionary definitions and meanings of undefined terms in the
statute. A “self-insured retention” is defined:
The amount of an otherwise-covered loss that is not
covered by an insurance policy and that usu. must be paid
before the insurer will pay benefits the defendant had a
$1 million CGL policy to cover the loss, but had to pay a
self-insured retention of $100,000, which it had agreed to
do so that the policy premium would be lower. Abbr. SIR.
Cf. Deductible, n.
Self-Insured Retention, BLACK’S LAW DICTIONARY (11 ed. 2019). A “deductible” is
defined as “Under an insurance policy, the portion of the loss to be borne by the
insured before the insurer becomes liable for payment. Cf. Self-Insured Retention.”
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Deductible, BLACK’S LAW DICTIONARY (11 ed. 2019). The reasoning of these decisions
and the differences in the definitions are instructive. A self-insured retention is
clearly treated differently under the policy and in the law from a deductible.
D. N.C. Gen. Stat. § 58-48-35(a)(2)
However, these differences do not end the analysis on this issue. N.C. Gen.
Stat. §§ 58-48-35(a)(1) and 58-48-35(a)(2) must be read together. It would create an
absurd result and violate § 58-48-35(a)(2) to strictly limit coverage of the statute to
policies simply with a self-insured retention. First, a self-insured retention does not
provide for the defense of the claim, unless otherwise provided for in the policy. A
self-insured retention serves as a “first insurance” by the insured up to the dollar
limit of the retained risk, when coverage available under the policy is then activated.
A deductible with a duty to defend, as in this policy and the facts before us,
requires more involvement from an insurance carrier from the initiation of the claim.
Plaintiff’s involvement in the reduced insurer responsibilities of self-insured
retention contravenes the purpose of the statute “to avoid financial loss to claimants
or policyholders because of the insolvency of an insurer.” N.C. Gen. Stat. § 58-48-5
(2017). Additionally, § 58-48-35(a)(2) provides Plaintiff shall have “rights, duties, and
obligations of the insolvent insurer as if the insurer had not become insolvent.”
A right of Dallas National and later Freestone under the policy was to seek
reimbursement of the deductible amount from Defendant, if advanced, and be
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provided the safeguard of the collateral deposit in the event the financially struggling
company faced further financial difficulties. Defendant’s assignment of error is
overruled.
E. High-Net-Worth Employer
Defendant asserts the trial court improperly granted Plaintiff’s summary
judgment motion because Plaintiff is not a high-net-worth employer without
derivative rights to reimbursement. We disagree.
Defendant’s policy provides in its Benefits Deductible Endorsement:
4. We will pay the deductible amount for you, but you must
reimburse us within 30 days after we send you notice that
payment is due. If you fail to fully reimburse us, we may
cancel the policy as provided in Part Six (Conditions),
Section D. Cancelation, of the policy. We may keep the
amount of unearned premium that will reimburse us for
the payments we made. These rights are in addition to
other rights we have to be reimbursed.
N.C. Gen. Stat. § 58-48-50(a) (2017) provides:
Any person recovering under this Article shall be deemed
to have assigned his rights under the policy or at law to the
Association to the extent of his recovery from the
Association. Every insured or claimant seeking the
protection of this Article shall cooperate with the
Association to the same extent as such person would have
been required to cooperate with the insolvent insurer. The
Association shall have no cause of action against the
insured of the insolvent insurer for any sums it has paid
out except such causes of action as the insolvent insurer
would have had if such sums had been paid by the insolvent
insurer. In the case of an insolvent insurer operating on a
plan with assessment liability, payments of claims of the
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Association shall not operate to reduce the liability of
insureds to the receiver, liquidator, or statutory successor
for unpaid assessments.
Additionally, N.C. Gen. Stat. § 58-48-35(a)(2) provides Plaintiff: “[b]e deemed the
insurer to the extent of the Association’s obligation on the covered claims and to such
extent shall have all rights, duties, and obligations of the insolvent insurer had not
become insolvent.
Plaintiff’s statutory grant of authority transfers all rights retained or assigned
to the insolvent insurer under the Defendant’s policy. The policy specifically retains
and provides the insurer the right to seek indemnification for deductible payments it
advanced and paid.
Defendant’s assertion they are not covered under Plaintiff’s statutory
authority due to their net worth is misplaced. The section of § 58-48-50(a) containing
the language of “net worth in excess of $50,000,000” pertains to Plaintiff’s seeking
reimbursement for the entire claim. See N.C. Ins. Guar. Ass’n v. Bd. of Tr. of Guilford
Tech. Cmty. Coll., 364 N.C. 102, 691 S.E.2d 694 (2010).
Plaintiff is not pursuing reimbursement for the entire claim in this matter,
simply the deductible as defined in the insurance contract. This claim is allowed by
statute and this Court’s binding precedent. Id. Defendant’s argument is overruled.
F. Handling of the Claim
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Defendant asserts the trial court improperly granted Plaintiff’s summary
judgment when Plaintiff had failed in its obligation to Defendant in the handing of
this claim. We disagree.
Defendant argues Plaintiff’s purportedly mishandled the claim, which bars
their recovery. Nowhere in the statutes nor the insurance policy do we find a clause
barring the insurer’s or Plaintiff’s recovery for reimbursement of the deductible for
purported mismanagement of a claim. Defendant does not cite any case or authority
to relieve them from this contractual obligation. Defendant’s argument is dismissed.
E. Material Facts
Defendant asserts genuine issues of material fact remain and argues the trial
court erred by granting summary judgment for Plaintiff. Defendant does not
highlight or argue any issue of fact that remains undecided. Where a party “does not
set forth any legal argument or citation to authority to support the contention, [it is]
deemed abandoned.” State v. Evans 251 N.C. App. 610, 625, 725 S.E.2d 444, 45 (2017).
This issue is abandoned and dismissed.
VI. Conclusion
Viewed in the light most favorable to Defendants and giving them the benefit
of any disputed inferences, no genuine issues of material fact exist. Plaintiff had
statutory authority to step into the shoes of the insolvent insurer and be subrogated
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to seek reimbursement for amounts advanced toward the stated deductible as
provided and determined by Defendant’s insurance policy and contract.
Plaintiff was entitled to summary judgment as a matter of law. The trial
court’s order is affirmed. It is so ordered.
AFFIRMED.
Judges BRYANT and BROOK concur.
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