No. 2 CA-IC 2017-0006
COUNSEL DeConcini McDonald Yetwin & Lacy, P.C., Tucson By Barry M. Corey Counsel for Petitioner Employer The Industrial Commission of Arizona, Phoenix By Jason M. Porter Counsel for Respondent Industrial Commission of Arizona, Special Fund Division/No Insurance Section, Phoenix By Afshan Peimani Counsel for Respondent Party in Interest Humphrey & Petersen, P.C., Tucson By Marshall Humphrey III and Andrew J. Petersen Counsel for Respondent Insurer
THIS DECISION DOES NOT CREATE LEGAL PRECEDENT AND MAY NOT BE CITED EXCEPT AS AUTHORIZED BY APPLICABLE RULES.
NOT FOR PUBLICATION
See Ariz. R. Sup. Ct. 111(c)(1); Ariz. R. Civ. App. P. 28(a)(1), (f); Ariz. R. P. Spec. Act. 10(k). Special Action - Industrial Commission
ICA Claim No. 20150-140304
Insurer No. None
Gary M. Israel, Administrative Law Judge
COUNSEL DeConcini McDonald Yetwin & Lacy, P.C., Tucson
By Barry M. Corey
Counsel for Petitioner Employer The Industrial Commission of Arizona, Phoenix
By Jason M. Porter
Counsel for Respondent Industrial Commission of Arizona,
Special Fund Division/No Insurance Section, Phoenix
By Afshan Peimani
Counsel for Respondent Party in Interest Humphrey & Petersen, P.C., Tucson
By Marshall Humphrey III and Andrew J. Petersen
Counsel for Respondent Insurer
Judge Brearcliffe authored the decision of the Court, in which Presiding Judge Staring and Chief Judge Eckerstrom concurred. BREARCLIFFE, Judge:
¶1 In this statutory special action, petitioner Tucson Youth Development (TYD) challenges the Decision Upon Hearing and Findings and Award Regarding Workers' Compensation Insurance Coverage (the Decision) of the Industrial Commission of Arizona (ICA), dated April 14, 2017, and the Decision Upon Review Affirming Decision Upon Hearing and Findings and Award Regarding Workers' Compensation Insurance Coverage, dated June 14, 2017 (the Decision Upon Review). In the Decision Upon Review, the administrative law judge (ALJ) found that the respondent carrier, CopperPoint Mutual Insurance Company (CopperPoint), had properly cancelled TYD's workers' compensation policy. TYD claims the ALJ erred in concluding that CopperPoint did not provide coverage for a claim by TYD's employee. We affirm the award.
The policy was originally issued by the State Compensation Fund, which changed its name to CopperPoint Mutual Insurance Company.
Respondent Party in Interest, Special Fund Division/No Insurance Section of the Industrial Commission of Arizona, joined in Petitioner's Writ of Certiorari/Special Action filed June 20, 2017, in accordance with Rule 8(g). Ariz. R. Civ. App. P.
¶2 "We view the facts in the light most favorable to upholding the award. Hackworth v. Indus. Comm'n, 229 Ariz. 339, ¶ 2 (App. 2012). CopperPoint issued workers' compensation policy G46899 (the policy) to TYD, effective January 1, 2014. The declaration page of the policy specifies the "policy period" was from January 1, 2014, to January 1, 2015, "12:01 a.m. Arizona Time." The "General Section" of the policy states that "[t]he only agreements relating to this insurance are stated in this policy. The terms of this policy may not be changed or waived except by endorsement issued by us to be part of this policy." The policy applied "to bodily injury by accident or bodily injury by disease" occurring "during the policy period." The policy also states that the insurer "will pay promptly when due the benefits required of you by the workers compensation law." The policy defines "workers compensation law" as "the workers or workmen's compensation law and occupational disease law," including "any amendments to that law which are in effect during the policy period."
¶3 During the policy period, on August 4, 2014, CopperPoint requested corporate officer information and rejection forms from TYD. CopperPoint did not receive the requested information and sent TYD follow-up requests on August 29, September 2, and September 18.
¶4 On October 6, 2014, CopperPoint issued a "Notice of Non-Renewal Final Notice" (non-renewal notice) addressed to TYD and showing a copy sent to the ICA. The non-renewal notice stated, "THIS POLICY WILL EXPIRE AT 12:01 AM ON 01/01/2015" and "Reason for Non-Renewal: Renewal Denied - Unable to Define Liability." In a note to its file dated November 4, 2014, CopperPoint acknowledged it had received two checks from TYD totaling $12,375, dated mid-October, 2014, and stated that the payments would be applied to the policy for the third quarter's premium "as written on check stubs." No evidence was presented that TYD made any additional payments.
¶5 On October 31, 2014, CopperPoint issued a "Notice of Cancellation" (cancellation notice) addressed to TYD and showing a copy to the ICA that stated, "THIS POLICY WILL BE CANCELLED AT 12:01 AM ON 12/09/2014," and provided, "Reason for Cancellation: Non-Payment of Premium." The cancellation notice also stated, "To avoid cancellation, please remit all past due premium balances and payroll reports prior to the time and date listed above. Your policy will be cancelled if on that date you have any past due premium balances or delinquent payroll reports." On December 9, 2014, CopperPoint issued a "Confirmation of Cancellation," addressed to TYD and showing a copy to the ICA, which stated, "THIS POLICY WAS CANCELLED AT 12:01 AM ON 12/09/2014," and, "Reason for Cancellation: Non-Payment of Premium." It is undisputed—at least it is not otherwise claimed by TYD and no evidence appears in the record—that a policy covering calendar year 2015, whether by a new policy or by an endorsement to the 2014 policy, was never issued by CopperPoint for TYD after the policy period ended on January 1, 2015.
At some point after December 9, 2014, TYD submitted a request to reinstate the policy. On January 16, 2015, CopperPoint sent a notice addressed to TYD stating that its request to reinstate the policy was declined because it had been submitted too late.
¶6 On January 6, 2015, an employee of TYD (the Employee) suffered an industrial injury. On January 12, 2015, the Employee filed a claim for workers' compensation benefits (the claim). The claim was referred to the Special Fund Division/No Insurance Section of ICA (the Special Fund), for a determination of compensability. On March 9, 2015, the Special Fund issued its Findings and Award for Compensable Claim, Statutory Judgment, and Notice of Lien (the Findings and Award) pursuant to A.R.S. § 23-907. In the Findings and Award, the Special Fund determined that TYD did not have workers' compensation insurance to cover the claim. The Employee's benefits were subsequently paid by the Special Fund, and TYD was found liable to the Special Fund for the payments to the Employee. TYD challenged the Findings and Award by filing a request for hearing on April 6, 2015. TYD also requested that the ALJ consolidate with the coverage hearing the separate ICA complaint it intended to file against CopperPoint for bad faith and unfair claim processing practices. CopperPoint and the Special Fund opposed consolidation, and the ALJ denied the request. The ALJ subsequently joined CopperPoint as a party to the litigation of the coverage issue, which the ALJ heard during three days of hearings in September 2016, and January 2017.
The Employee was excused from attending hearings and otherwise participating in the litigation of the coverage issue because her claim was being covered by the Special Fund and the ALJ's decision would therefore have no effect on her benefits.
¶7 TYD argued below that CopperPoint improperly cancelled the policy because neither it nor the ICA received either the cancellation notice or the non-renewal notice, it had paid, and CopperPoint had accepted, all past due premiums, and the submission of certain reports was not required by the policy. It argued, therefore, that CopperPoint should have covered the claim. CopperPoint argued that it had properly cancelled the policy and properly refused to reinstate it, and that, in any event, it did not renew the policy and, therefore, there was no CopperPoint policy in place at the time of the Employee's industrial injury.
¶8 On April 14, 2017, the ICA issued its Decision. The ALJ determined that, after CopperPoint issued its non-renewal notice, it pursued the process of cancellation of the policy. Because a cancelled policy cannot be renewed (or "non-renewed"), the ALJ concluded that CopperPoint had "essentially abandoned" non-renewal. The ALJ ultimately determined that CopperPoint had properly cancelled the policy, and therefore there was no coverage for the claim under the policy. Specifically the ALJ determined
the Notice of Cancellation was properly mailed following CopperPoint's routine business practice . . . [and was] assumed to have been received by [TYD], and that the . . . payroll report was not received by CopperPoint until December 15 . . . so that, even though money was tendered and received, the correct premium was never able to be determined and there was essentially non-payment . . . .
¶9 On May 12, 2017, TYD filed its Request for Review of Findings and Award Pursuant to A.R.S. §§ 23-942(D) and 23-943(A), (B). In its request, TYD challenged the ALJ's determination that the cancellation was proper, and argued he had erred as a matter of law by "failing to consider and apply the law of contracts and the equitable doctrines of estoppel and waiver" as well. In its response, CopperPoint argued, among other things, that the ALJ had correctly concluded it had validly cancelled the policy but had erred in finding that it had abandoned non-renewal. CopperPoint argued "there is not a single written communication between [it] and TYD where CopperPoint signals intent to continue insuring TYD," nor could TYD draw that inference from the notice of cancellation of the policy. TYD filed a motion to strike the response both as untimely and because it raised issues not raised either in TYD's request for review or a timely, independent request for review, as required by A.R.S. § 23-942(D). Thereafter, the ALJ issued his Decision Upon Review, affirming the Decision, denying TYD's motion to strike CopperPoint's response, and denying CopperPoint's request that he "reverse his decision regarding nonrenewal" of the policy.
¶10 We have jurisdiction over TYD's petition for special-action review, pursuant to A.R.S. §§ 23-951 and 12-120.21(A)(2). See also Ariz. R. P. Spec. Act. 10. Our jurisdiction is, however, limited to entering judgment "either affirming or setting aside the award, order or decision." A.R.S. § 23-951(D).
¶11 As an initial matter, TYD argues in its reply brief that CopperPoint failed to preserve its argument on non-renewal by not filing its own request for review of the ALJ's Decision under § 23-942(D). Relying on Larson v. Indus. Comm'n, 114 Ariz. 155 (App. 1976), TYD argues, therefore, that the issue may not be raised here. In Larson, this court stated that we "will not consider on review an issue not raised before the Industrial Commission where the petitioner has had an opportunity to do so." Id. at 158. The rule "stems from the requirement that administrative remedies be exhausted before court relief is sought" and "upon the assumption . . . that the 'administrative agency, if given a complete chance to pass upon the matter, will decide correctly.'" Id. at 158, quoting Ross v. Indus. Comm'n, 82 Ariz. 9, 11-12 (1957) (internal citation omitted). In Larson, we refused to consider an argument never raised before the ALJ, and only raised for the first time before this court. Id. at 157-58. CopperPoint, however, did not raise the non-renewal argument for the first time before this court; it had raised the argument throughout the proceedings before the ALJ. In fact, in its denial of the motion to strike, the ALJ stated that "The Parties have sufficiently outlined their positions throughout the course of these lengthy proceedings." This court cannot say that the ALJ did not have a complete chance to pass upon the nonrenewal matter.
¶12 For TYD's principal arguments, it asserts that the ALJ erred by finding that CopperPoint properly cancelled the policy. TYD argues that, because it delivered the past-due premium payments to CopperPoint in October 2014, and they were accepted, this was enough to avoid cancellation. TYD also argues that the ALJ correctly found that CopperPoint had abandoned the non-renewal process. CopperPoint counters that it correctly cancelled the policy, and, even assuming the policy was not cancelled, the policy was not renewed, leaving no policy in place between CopperPoint and TYD at the time of the Employee's injury.
¶13 We view the evidence in the light most favorable to affirming the ALJ's findings and award. Roberts v. Indus. Comm'n, 162 Ariz. 108, 110 (1989). "This court deferentially reviews factual findings of the ALJ, but independently reviews any legal conclusions." Young v. Indus. Comm'n, 204 Ariz. 267, ¶ 14 (App. 2003), as corrected (Feb. 25, 2003). Here, the ALJ correctly determined that there was no coverage for the claim under a CopperPoint policy. However, because we conclude that there was no coverage for the claim because the policy was not renewed, we need not address whether the ALJ was correct in finding no coverage due to cancellation. Salt River Project v. Indust. Comm'n, 126 Ariz. 196, 200 (App. 1980) (ruling upheld if correct for any reason).
¶14 Section 23-961(E), A.R.S., states, "[e]xcept in the event of nonpayment of premiums, each insurance carrier shall carry a risk to the conclusion of the policy period unless the policy is cancelled by the employer or unless one or both of the parties to a professional employer agreement terminate the agreement." It further states that "[t]he policy period shall be agreed upon by the insurance carrier and the employer." Id. Under § 23-961(F), if an insurance carrier elects not to renew a policy, it must give a minimum of thirty days' notice to the ICA and the employer. TYD claims that it did not receive the required thirty-day non-renewal notice. However, § 23-961(F) further states that the failure of an insurer to give notice of non-renewal to either the employer or the ICA does "not extend coverage beyond the policy period."
¶15 It is undisputed that the policy provided coverage to TYD for any injury that occurred during the policy period, and that the policy period stated in the policy was from January 1, 2014 to January 1, 2015. Thus, the policy expired by its terms on January 1, 2015. Citing no statutory or other authority, TYD argues, however, that unless a policy is cancelled or is "non-renewed," it is automatically renewed. The Employee was injured on January 6, 2015, after the policy period. No policy was issued by CopperPoint in favor of TYD and effective after 12:01 a.m. on January 1, 2015. Consequently, there was no coverage under a CopperPoint policy for the Employee's injury, and CopperPoint is not contractually or statutorily obligated to cover the claim.
Though the ALJ determined that CopperPoint had "essentially abandoned non-renewal," there is no authority cited that such abandonment, if it occurred, has a legal effect on CopperPoint's obligation to renew the policy, which is controlled by A.R.S. § 23-961.
¶16 TYD also asserts that CopperPoint accepted all policy premium payments tendered and that it thus complied with its policy obligation, and therefore CopperPoint was estopped from denying coverage. Even if, as TYD asserts, CopperPoint had accepted TYD's premium payments for the policy period, that would not compel it to provide coverage for an injury that occurred after the policy expired on January 1, 2015. As this court stated in State Compensation Fund:
[t]he law is well settled in Arizona that the operation of the theory of estoppel cannot bring within the coverage of an insurance policy risks not covered by its terms[.] In this case, to impose continued coverage past the anniversary date of the policy would have the effect of using estoppel to create a new insurance policy.State Comp. Fund v. Indus. Comm'n, 136 Ariz. 442, 443-44 (App. 1983) (citations omitted). At most, had CopperPoint accepted the tendered past-due premium payments and any late-submitted records, TYD might have argued that CopperPoint was estopped only from denying coverage through the end of the policy period, January 1, 2015.
During oral argument, TYD asserted for the first time on appeal that the parties' course of conduct reasonably led it to believe that the policy had been "automatically renewed" for 2015. CopperPoint, however, argued that its conduct here was not consistent with how it handled renewals in prior years. --------
¶17 For the foregoing reasons, because the ALJ reached the correct decision, albeit for a different reason, the award is affirmed.