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Brickstreet Mutual Insurance Co. v. Zurich American Insurance Co.

Supreme Court of West Virginia

April 5, 2018

BRICKSTREET MUTUAL INSURANCE COMPANY, Petitioner,
v.
ZURICH AMERICAN INSURANCE COMPANY, Respondent.

          Submitted: January 17, 2018

          Certified Questions from the United States Court of Appeals for the Fourth Circuit Honorable Barbara Milano Keenan; J. Harvie Wilkinson, III; and Stephanie D. Thacker, Circuit Judges Appeal No. 16-2204 CERTIFIED QUESTIONS ANSWERED.

          Don C.A. Parker Spilman Thomas & Battle, PLLC Charleston, West Virginia Attorney for the Petitioner Trevor K. Taylor Taylor Law Office Morgantown, West Virginia Attorney for Amicus Curiae, American Insurance Association.

          Philip J. Sbrolla Jeffrey B. Brannon Cipriani & Werner, PC Wheeling, West Virginia Attorneys for the Respondent.

         SYLLABUS BY THE COURT

         1. The Workers' Compensation Office of Judges does not possess jurisdiction over a declaratory judgment action initiated by an insurance carrier for the purpose of determining whether coverage for a workers' compensation claim exists under a second policy of insurance such that a second carrier is obligated to contribute to the payment of workers' compensation benefits to an injured employee who suffered a single workplace accident.

         2. Pursuant to W.Va. Code § 33-46A-7(a) (2008) (Repl. Vol. 2011), parties to a professional employer agreement must designate either the professional employer organization or the client-employer as the responsible party for obtaining workers' compensation insurance coverage for covered employees.

         3. Pursuant to W.Va. Code § 33-46A-7(b) (2008) (Repl. Vol. 2011), and W.Va. C.S.R. § 85-31-6.3, when parties to a professional employer agreement designate the professional employer organization ("PEO") as the responsible party for obtaining workers' compensation insurance coverage for covered employees, the policy obtained by the PEO is primary over a policy obtained by a client-employer. Therefore, coverage under a workers' compensation policy purchased by the client-employer is triggered only if the PEO or its carrier default on their obligation to provide workers' compensation coverage.

          DAVIS JUSTICE.

         This Court is herein presented with three certified questions from the United States Court of Appeals for the Fourth Circuit. The underlying action is a dispute between two insurance companies, petitioner BrickStreet Mutual Insurance Company ("BrickStreet") and respondent Zurich American Insurance Company ("Zurich"), over whether both companies should contribute to the payment of workers' compensation benefits arising from a single uncontested work-related injury. The subject injury was to an employee who had been hired by BrickStreet's insured, Employers' Innovative Network, LLC ("EIN"), a professional employer organization ("PEO"), and assigned by EIN to work for Zurich's insured, Taggart Site Services Group ("Taggart"). Our resolution of this matter necessitates that we answer only two of the questions certified:[1]

(1) Does jurisdiction lie exclusively with the West Virginia Workers' Compensation Office of Judges to hear disputes between insurance carriers regarding whether one or both carriers are responsible for contributing toward payment of an employee's workers' compensation benefits?
(2) West Virginia Code § 33-46A-7(a) requires that parties to a professional employer agreement designate "either" the professional employer organization (PEO) "or" the client-employer as responsible for obtaining workers' compensation insurance coverage for covered employees . . .; and under subsection (b) of the statute, if the PEO is the designated party, the client-employer "shall at all times remain ultimately liable" to provide workers' compensation coverage for covered employees. Do these statutory provisions mandate the designated party's workers' compensation policy as the primary policy over coverage provided by the other party, precluding the PEO and client-employer from agreeing to provide shared coverage? And, if the PEO is designated as the responsible party to obtain workers' compensation coverage, does the term "ultimately" trigger liability by the client-employer for such coverage only if the PEO, or its carrier, defaults?

(Footnote defining "covered employee" omitted).

         We reformulate the first question and answer it in the negative, finding that the Workers' Compensation Office of Judges does not have jurisdiction over a declaratory judgment action such as the one underlying the instant proceeding. We answer the second question in the affirmative, and conclude that, pursuant to W.Va. Code § 33-46A-7(a) (2008) (Repl. Vol. 2011), parties to a professional employer agreement must designate either the professional employer organization or the client-employer as the responsible party for obtaining workers' compensation insurance coverage for covered employees. Moreover, pursuant to W.Va. Code § 33-46A-7(b), and W.Va. C.S.R. § 85-31-6.3, when parties to a professional employer agreement designate the PEO as the responsible party for obtaining workers' compensation insurance coverage for covered employees, the policy obtained by the PEO is primary over a policy obtained by a client-employer. Therefore, coverage under a workers' compensation policy purchased by the client-employer is triggered only if the PEO or its carrier default on their obligation to provide workers' compensation coverage.[2]

         I.

         FACTUAL AND PROCEDURAL HISTORY

         In 2010, EIN executed a professional employer agreement (sometimes referred to as a "PEO agreement") with Taggart "to provide professional employer organization services at [Taggart's] workplace(s) through the assignment to [Taggart's] workplace(s) of qualified EIN employees ('Worksite Employees'), including supervisory personnel." (Emphasis added).[3]

         EIN and other PEOs in this State are governed by W.Va. Code § 33-46A-1 et seq. With respect to workers' compensation, the West Virginia Code requires, in relevant part:

(a) The responsibility to obtain workers' compensation coverage for covered employees in compliance with all applicable law shall be specifically allocated in the professional employer agreement to either the client-employer or the PEO.
(b) If the responsibility is allocated to the PEO under the agreement:
(1) The agreement shall require that the PEO maintain and provide workers' compensation coverage for the covered employees from a carrier authorized to do business in this state: Provided, That the provisions of section seven [§ 23-2-7], article two, chapter twenty-three of this chapter[4] may not be abrogated by a PEO agreement and the client-employer shall at all times remain ultimately liable under chapter twenty-three of this code to provide workers' compensation coverage for its covered employees[5];

          W.Va. Code § 33-46A-7 (footnotes and emphasis added). Accordingly, and of particular relevance to the instant dispute, the professional employer agreement between EIN and Taggart expressly required that "EIN shall obtain and maintain workers' compensation coverage on all Worksite Employees assigned to [Taggart's] workplace(s) and shall administer all related workers' compensation claims. [Taggart] shall, however, maintain its status as a complying employer with its current insurance carrier. . . ."

         In compliance with the foregoing agreement, EIN secured workers' compensation coverage through a multiple coordinated policy issued by BrickStreet.[6] The BrickStreet policy names Taggart as an insured and provides that BrickStreet "will pay promptly when due the benefits required of you by the workers [sic] compensation law."

         Likewise, Taggart had workers' compensation coverage through a policy issued by Zurich. The policy was issued to Taggart's parent company and listed Taggart as a named insured. Thus, by virtue of this policy, Taggart complied with both its obligation imposed by W.Va. Code § 33-46A-7 to "remain ultimately liable under chapter twenty-three [§ 23-1-1 et seq.] of this code to provide workers' compensation coverage for its covered employees, " and its obligation under the professional employer agreement with EIN to "maintain its status as a complying employer with its current insurance carrier. . . ."

         Jonathan Gutierrez ("Mr. Gutierrez") was hired by EIN and assigned to work at a Taggart workplace. In January 2012, during the coverage periods of the two aforementioned workers' compensation policies, Mr. Gutierrez sustained serious injuries in the course of and resulting from his employment. Mr. Gutierrez filed a claim for workers' compensation benefits with EIN. He did not file a claim with Taggart. Mr. Gutierrez's claim was submitted to BrickStreet. BrickStreet determined Mr. Gutierrez's claim was compensable, and this decision was not protested. Accordingly, BrickStreet began paying Mr. Gutierrez's workers' compensation benefits.

         BrickStreet explains that it learned of the Zurich policy through a deliberate intent action filed by Mr. Gutierrez against Taggart in relation to the injuries he sustained in January2012.[7] Accordingly, in December 2014, BrickStreet sought contribution from Zurich toward the substantial workers' compensation benefits it had paid to or on behalf of Mr. Gutierrez.[8] Zurich refused, and, on May 13, 2015, BrickStreet filed a declaratory judgment action against Zurich in the United States District Court for the Southern District of West Virginia. Zurich filed a motion to dismiss that was denied. Thereafter, both parties moved for summary judgment. By order entered September 15, 2016, the district court granted summary judgment to BrickStreet and denied Zurich's summary judgment motion. The district court concluded that Zurich was obligated to reimburse BrickStreet for half of all past and future benefits paid to or on behalf of Mr. Gutierrez. Zurich appealed the decision to the United States Court of Appeals for the Fourth Circuit. The Fourth Circuit then certified three questions to this Court. The two dispositive questions are:[9]

(1) Does jurisdiction lie exclusively with the West Virginia Workers' Compensation Office of Judges to hear disputes between insurance carriers regarding whether one or both carriers are responsible for contributing toward payment of an employee's workers' compensation benefits?
(2) West Virginia Code § 33-46A-7(a) requires that parties to a professional employer agreement designate "either" the professional employer organization (PEO) "or" the client-employer as responsible for obtaining workers' compensation insurance coverage for covered employees . . .; and under subsection (b) of the statute, if the PEO is the designated party, the client-employer "shall at all times remain ultimately liable" to provide workers' compensation coverage for covered employees. Do these statutory provisions mandate the designated party's workers' compensation policy as the primary policy over coverage provided by the other party, precluding the PEO and client-employer from agreeing to provide shared coverage? And, if the PEO is designated as the responsible party to obtain workers' compensation coverage, does the term "ultimately" trigger liability by the client-employer for such coverage only if the PEO, or its carrier, defaults?

(Footnote defining "covered employee" omitted). By corrected order[10] entered August 30, 2017, this Court accepted the certified questions. Having considered the parties' briefs, the brief of Amicus Curiae, [11] the relevant authorities, and the oral arguments presented, we now answer the first certified question in the negative, and the second certified question in the affirmative.

         II.

         STANDARD OF REVIEW

         It is well established that "[t]his Court undertakes plenary review of legal issues presented by certified question from a federal district or appellate court." Syl. pt. 1, Bower v. Westinghouse Elec. Corp., 206 W.Va. 133, 522 S.E.2d 424 (1999). See also Syl. pt. 2, Valentine v. Sugar Rock, Inc., 234 W.Va. 526, 766 S.E.2d 785 (2014) ("When reviewing a question certified from a federal district or appellate court, this Court will give the question plenary review, and may consider any portions of the federal court's record that are relevant to the question of law to be answered."). Having acknowledged the de novo standard to be herein applied, we proceed to answer the dispositive certified questions presented.

         III.

         DISCUSSION

         We will address in turn the two dispositive certified questions ...


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