Vogler v. Branch Erections Co., Inc. , 181 N.C. App. 457 ( 2007 )

BRYANT, Judge.

The North Carolina Insurance Guaranty Association (NCIGA) (defendant-appellee/cross-appellant) and Branch Erections, Co., Inc. (Branch) (defendant-appellant/cross-appellee) appeal from an Opinion and Award, entered 27 July 2005 by the North Carolina Industrial Commission (Commission).

On 23 March 2000, Billy Charles Vogler (plaintiff-decedent) suffered a compensable workplace injury by accident when he fell twenty feet to the ground after being struck by a crane. Plaintiff died as a result of the injuries sustained in the accident. In Vogler I, the Opinion and Award of the Full Commission granting plaintiff 10% additional compensation was reversed and remanded by this Court which held the Commission “abused its discretion by declining to receive the policy as evidence and by failing to take into account the terms of the [insurance] policy [between Branch and Reliance¹].” Vogler v. Branch Erections Co., 166 N.C. App. 169, 177, 601 S.E.2d 273, 278 (2004) (Vogler I).

The present case is before this Court on appeal by both parties from the Commission’s 27 July 2005 Opinion and Award which concluded: (1) the insurance policy between Branch and Reliance National Insurance Company provides for NCIGA to pay plaintiff the 10% increase in compensation awarded pursuant to N.C. Gen. Stat. § 97-12; and (2) NCIGA could seek reimbursement from Branch. Both defendants appeal.

NCIGA argues the Commission erred in determining NCIGA was obligated to pay the 10% additional workers’ compensation awarded to plaintiff. Branch argues the Commission erred in holding that NCIGA is entitled to seek reimbursement from Branch for the 10% additional compensation awarded to plaintiff.

Opinions and awards of the Commission are reviewed to determine whether competent evidence exists to support the Commission’s findings of fact, and whether the findings of fact support the Commission’s conclusions of law. Bondurant v. Estes Express Lines, Inc., 167 N.C. App. 259, 263, 606 S.E.2d 345, 348 (2004) (quotations and citations omitted). If supported by competent evidence, the Commission’s findings are binding on appeal even when there exists evidence to support findings to the contrary. Allen v. Roberts Elec. Contrs., 143 N.C. App. 55, 60, 546 S.E.2d 133, 137 (2001). The Commission’s conclusions of law are reviewed de novo. Id. at 63, 546 S.E.2d at 139. For the reasons stated herein, we affirm the decision of the Commission.

NCIGA Appeal

On appeal NCIGA argues the Commission erred in determining NCIGA was obligated to pay the additional 10% awarded to plaintiff. Specifically, NCIGA challenges the Commission’s finding that the additional 10% increase to plaintiff’s workers’ compensation award was a “covered claim.” In the alternative, NCIGA contends it should not be required to pay the additional compensation, asserting it constitutes “punitive and exemplary damages.”

The purpose of the North Carolina Insurance Guaranty Association Act (Guaranty Act), N.C. Gen. Stat. § 58-48-1 et seq. is:

to provide a mechanism for the payment of covered claims under certain insurance policies, to avoid excessive delay in payment, and to avoid financial loss to claimants or policyholders because of the insolvency of an insurer, to assist in the detection and prevention of insurer insolvencies, and to provide an association to assess the cost of such protection among insurers.

N.C. Gen. Stat. § 58-48-5 (2005) (emphasis added). All liability insurance companies licensed to conduct business in North Carolina are members of NCIGA. See N.C. Gen. Stat. § 58-48-25 (2005). When a member insurer becomes insolvent, NCIGA assumes responsibility for defending and paying covered claims against the insolvent company. NCIGA has a statutory liability limit of $300,000.00. See N.C. Gen. Stat. § 58-48-35 (2005). Furthermore, North Carolina General Statutes, Section 97-98 provides:

No policy of insurance against liability arising under this Article shall be issued unless it contains the agreement of the insurer that it will promptly pay to the person entitled to same all benefits conferred by this Article ....

N.C. Gen. Stat. § 97-98 (2005).

In the present case, NCIGA challenges the following findings of the Commission:

11. [] The policy specifically requires the employer to be responsible for any payment in excess of the benefits regularly provided by the Workers’ Compensation Act, including those imposed due to the employer’s.failure to comply with a health or safety law or regulation.

12. When an insurer becomes insolvent, the Guaranty Act . . . requires that NCIGA:

(1) Be obligated to the extent of the covered claims . .. [and]

(2) Be deemed the insurer to the extent of [NCIGA’s] obligation on the covered claims ... as if the insurer had not become insolvent. N.C. Gen. Stat. § 58-48-35(a)(l) and (2) (2003).

13. [] NCIGA is obligated [pursuant to the statutory definition of a covered claim] to pay claims only to the extent of a covered claim, which does not include any amount in excess of what the insolvent insurer would be required to pay.

14. The insurance policy between defendant-employer and Reliance provides in Part One, Section F, as follows:

F. Payments You [employer] Must Make You [employer] are responsible for any payments in excess of the benefits regularly provided by the workers’ compensation law including those required because:

1. Of your serious and willful misconduct;

. . .

3. You fail to comply with a health or safety law or regulation;

15.Based upon the clear language of the insurance policy between defendant-employer and Reliance, and therefore NCIGA as the successor to Reliance, the' Commission finds that the policy provides for payment by the carrier of any 10% increase in compensation awarded pursuant to N.C. Gen. Stat. § 97-12 and for the carrier to then seek reimbursement by defendant-employer.

NCIGA challenges the Commission’s conclusions:

8. [B]ased upon a clear reading of [N.C. Gen. Stat. § 97-12], the 10% additional compensation awarded ... is compensation and does not constitute exemplary or punitive damages.

9. Therefore, the additional compensation is part of a covered claim and must be paid by NCIGA, but is subject to reimbursement by defendant-employer, pursuant to the terms of the workers’ compensation policy.

(Emphasis in original).

NCIGA argues the Commission erred in finding plaintiff’s claim met the definition of a “covered claim” as defined by N.C. Gen. Stat. § 58-48-20. A “covered claim” is:

an unpaid claim, including one of unearned premiums, which is in excess of fifty dollars ($50.00) and arises out of and is within the coverage and not in excess of the applicable limits of an insurance policy to which this Article applies as issued by an insurer, if such insurer becomes an insolvent insurer ....

N.C. Gen. Stat. § 58-48-20(4) (2005); See Bowles v. BCJ Trucking Servs., 172 N.C. App. 149, 153, 615 S.E.2d 724, 727 (2005); and Hales v. North Carolina Ins. Guar. Ass’n, 337 N.C. 329, 343, 445 S.E.2d 590, 599 (1994).

The Branch-Reliance insurance policy provided that the insurer “will pay promptly when due the benefits required of [Branch] by the workers’ compensation law.” The policy also states “terms of this insurance that conflict with the workers’ compensation law are changed by this statement to conform to that law.” Plaintiff’s workers’ compensation claim, as a result of Branches’ conduct, arose out of and was within the provisions contemplated by the “Workers’ Compensation and Employers’ Liability Insurance Policy.”² When Reliance became insolvent, NCIGA became liable to compensate plaintiff under the terms of the Branch-Reliance insurance policy. This is clearly a covered claim as contemplated by N.C.G.S. § 58-48-20 such that NCIGA was required to compensate plaintiff (claimant) in order “to avoid financial loss to claimants or policyholders because of the insolvency of an insurer.” N.C.G.S. § 58-48-5 (2005). The N.C. Workers’ Compensation Act states “[w]hen the injury or death is caused by the willful failure of the employer to comply with any statutory requirement or any lawful order of the Commission, compensation shall be increased ten percent (10%).” N.C. Gen. Stat. § 97-12 (2005). See Felmet v. Duke Power Co., 131 N.C. App. 87, 504 S.E.2d 815 (1998) (legislature intended timely recovery for workers’ compensation claimants); see also Cabe v. Parker-Graham-Sexton, Inc., 202 N.C. 176, 162 S.E. 223 (1932) (holding insurer obligated to pay for employer’s wrongdoing in order “to grant certain and speedy relief to injured employees or . . . their dependents”). It is well-settled that, where “the language of the statute is clear and is not ambiguous, we must conclude that the legislature intended the statute to be implemented according to the plain meaning of its terms.” Hyler v. GTE Prods. Co., 333 N.C. 258, 262, 425 S.E.2d 698, 701 (1993).

In the instant case, the Commission reviewed the Branch-Reliance insurance policy and made specific findings of fact, including the finding that the clear language of the insurance “policy provides for payment ... of any 10% increase in compensation awarded pursuant to N.C. Gen. Stat. § 97-12. . . .” Those findings of fact, based on competent evidence in the record, support the Commission’s conclusions of law that the additional compensation is a part of a covered claim to be paid by NCIGA. This assignment of error is overruled.

NCIGA argues- in the alternative that the Commission erred in finding it was obligated to pay the additional 10% compensation because such payment constituted “punitive and exemplary damages.” We are unpersuaded by NCIGA’s alternative argument.

Resolution of this issue revolves around the language used in “Section F” of the Branch-Reliance irisurance policy which excludes coverage for an insured’s intentional failure to comply with a health or safety statute, and whether that language overrides the statutory requirements of section 97-12 which allows for a 10% increase in compensation when such a violation occurs. This appears to be an issue of first impression in the appellate courts of North Carolina. However, there is strong persuasive authority from the Kentucky courts which have examined this precise issue. In a case involving the identical language used in “Section F” of the Branch-Reliance insur-anee policy³ and a statute analogous to N.C. Gen. Stat. § 97-12, the Kentucky court held:

There is no indication that the 15% increase in compensation required by KRS 342.165(1)^[4] was intended to fall outside the framework of workers’ compensation benefits. Even if the [insurance] contract did apply, we do not believe the 15% increase in compensation could be considered in “excess” of workers’ compensation benefits, as provided in [Section F. of] the [] contract.

AIG/AIU Ins. Co. v. S. Akers Mining Co., 2004 Ky. App. LEXIS 338, - S.W.3d -, (Ky. Ct. App. 2004). In affirming the lower court, the Kentucky Supreme Court made clear that the Kentucky statute, similar to N.C. Gen. Stat. § 97-12, “authorizes an increase or decrease in compensation if an ‘intentional failure’ to comply with the safety regulation [] contributes to causing an accident, implying only that the increase or decrease serves to compensate the party that benefits from it for the effects of the opponent’s misconduct.” AIG/AIU Ins. Co. v. S. Akers Mining Co., 192 S.W.3d 687, 689, 2006 Ky. LEXIS 8, - S.W.3d - (Ky. Jan. 19, 2006). The Kentucky Supreme Court held that “the employer’s insurance carrier is liable for any increase in benefits under KRS 342.165(1) despite a contractual term to the contrary.” Id. The court went on to acknowledge that the consequence of the 15% increase under the Kentucky statute may appear to penalize the employer or the carrier, but that, unlike other statutes where punitive damages are explicitly mentioned, the statute at issue did not explicitly mention punitive damages, only an increase in compensation.

We are strongly persuaded by the reasoning of the Kentucky courts as N.C. Gen. Stat. § 97-12 is very similar to the Kentucky statute and the provision in “Section F” of the Branch-Reliance contract is the same as the provision in the Kentucky contract. While the effect of the 10% increase may appear to penalize NCIGA, § 97-12 does not explicitly mention punitive damages, but in fact says “compensation shall be increased ten percent.” The language of the insurance policy does not preclude NCIGA’s liability for the increase. NCIGA is obligated to pay the additional 10% compensation. This assignment of error is overruled.

Branch Appeal

Branch claims the Commission erred in holding that NCIGA is entitled to seek reimbursement from Branch for the 10% additional compensation awarded to plaintiff for Branches’ willful violations of OSHA regulations under North Carolina statute and the terms of the Branch-Reliance policy. Where there is no ambiguity in a policy’s language, the courts must apply the plain meaning of the policy language and enforce the policy as written. Wachovia Bank & Tr. Co. v. Westchester Fire Ins. Co., 276 N.C. 348, 354, 172 S.E.2d 518, 522 (1970).

Based on the specific findings and conclusions of the Commission,- the policy expressly included the right to seek reimbursement if the insurer had to pay amounts “in excess of the benefits regularly provided by the workers’ compensation law including those required because: [] you fail to comply with a health or safety law or regulation.” Branch has received the benefits of the insurance policy as NCIGA has paid the workers’ compensation benefits to date, exclusive of the additional 10% compensation. Thus, according to the plain language of the policy the Commission correctly concluded that the “additional 10% amount is subject to reimbursement by [Branch], as provided by the insurance policy,” where Branch has been found to have wilfully violated the OSHA regulations and must therefore reimburse NCIGA for any compensation attributed to such conduct. This assignment of error is overruled.

Affirmed.

Judge LEVINSON concurs. Judge TYSON dissents in a separate opinion.

1 . On 3 October 2001, Reliance “was declared insolvent in an order of liquidation” and the North Carolina Insurance Guaranty Association (NCIGA) assumed its statutory obligations in connection with this claim.

2 . Paragraph A of the policy states “[t]his workers’ compensation insurance applies to bodily injury by accident [which] includes death.”

3 . In pertinent part, this language is taken from the “Part One Workers’ Compensation” portion of the standard contract issued by the National Council on Compensation Insurance and approved for use in all states, except Michigan:

F. Payments You [employer] Must Make

You [employer] are responsible for any payments in excess of the benefits regularly provided by the workers’ compensation law including those required because:

1. Of your serious and willful misconduct;

. . .

3. You fail to comply with a health or safety law or regulation;

[4] 4. The referenced Kentucky statute states:

If an accident is caused in any degree by the intentional failure of the employer to comply with any specific statute or lawful administrative regulation made thereunder, communicated to the employer and relative to installation or maintenance of safety appliances or methods, the compensation for which the employer would otherwise have been liable under this chapter shall be increased thirty percent (30%) in the amount of each payment....

KRS 342.165(1) (2005) (emphasis added).