NORTH CAROLINA WORKERS' COMPENSATION CLAIM HANDLING GUIDELINES
- 1 DEFINITIONS
- 2 EXCLUSIVE REMEDY
- 3 JURISDICTION AND LIMITATIONS OF ACTIONS
- 4 COMPENSABILITY
5 EXCLUSIONS AND DEFENSES
- 5.1 Course of Employment
- 5.2 Related to Employment
- 5.3 Employee’s Violation of the Law, Intoxication, and Illegal Use of Drugs
- 5.4 Employee’s Willful Misrepresentation in Applying for Employment
- 5.5 Employee’s Willful Neglect; Employer’s Willful Disobedience of Statutory Duty, Safety Regulation or Rule
- 5.6 Intentionally Self-Inflicted Injury or Death
- 6.1 Calculation of Average Weekly Wage
- 6.2 Total Disability
- 6.3 Partial Disability
- 6.4 Amputation or Loss of Use
- 6.5 Disfigurement/Scarring
- 6.6 Loss of Sight
- 6.7 Loss of Hearing
- 6.8 Death Benefits
- 6.9 Medical Benefits
- 6.10 Non-Compliance with Medical Care
- 7 SUBROGATION OR CREDIT
- 8 ATTORNEYS
- 9 CLAIMS PROFESSIONALS
- 10 LITIGATION AND APPEAL
- 11 SETTLEMENT
- 12.1 Requirement to Carry Insurance:
- 12.2 Consequences for Failure to Carry Insurance
- 12.3 Governance of North Carolina Workers’ Compensation Insurance:
- 12.4 North Carolina Workers’ Compensation Coverage: Who is covered in any particular business
- 12.5 Professional Employer Organizations (P.E.O.s)
- 12.6 Requirements of General and Sub Contractors for Proof of Insurance
The term “employer” means the State of North Carolina and all political subdivisions thereof, all public and quasi-public corporations therein, every person carrying on any employment, and the legal representative of a deceased person or the receiver or trustee of any person. N.C. Gen. Stat. § 97-2.
In order for a private employer to be subject to the Workers’ Compensation Act, they must regularly employ three or more employees.Woodliff v. Fitzpatrick, 205 N.C. App. 192, 695 S.E.2d 503 (2010).
When a general employer lends an employee to a special employer, the special employer becomes jointly liable for workmen's compensation only if:
(a) the employee has made a contract of hire, express or implied, with the special employer;
(b) the work being done is essentially that of the special employer; and
(c) the special employer has the right to control the details of the work. Anderson v. Demolition Dynamics, Inc., 136 N.C. App. 603, 525 S.E.2d 471 (2000).
In determining whether the special employer is jointly liable for workers' compensation to the general employer's employee, continuance of the general employment is presumed, and the party asserting otherwise must make a clear demonstration that a special employer was substituted for the old.
The term “statutory employer” is not defined in the North Carolina Workers’ Compensation Act. However, North Carolina Courts have applied the term in situations involving general and sub contractors when the sub contractor is the employer but has neglected to cover themselves with workers’ compensation insurance. The chain of liability for making workers' compensation payments extends from the immediate employer of the injured employee up the chain to the first responsible contractor who has the ability to pay. N.C. Gen. Stat. § 97–19. Spivey v. Wright's Roofing, 737 S.E.2d 745 (N.C. Ct. App. 2013).
Statutory employer statute is an exception to the general definitions of “employment” and “employee” set forth in the Workers’ Compensation Act, and provides that a principal contractor, intermediate contractor, or subcontractor may be held liable as a “statutory employer” where two conditions are met:
(1) the injured employee must be working for a subcontractor doing work which has been contracted to it by a principal contractor, and
(2) the subcontractor does not have workers' compensation insurance coverage covering the injured employee. Putman v. Alexander, 194 N.C. App. 578, 670 S.E.2d 610 (2009).
In Masood v. Erwin Oil Co., 181 N.C. App. 424, 639 S.E.2d 118 (2007), a petroleum wholesaler had a contractor/subcontractor relationship with its gas station operator, who did not have workers' compensation insurance, and thus the wholesaler was the gas station cashier's statutory employer for purposes of the cashier's workers' compensation claim.
As long as the general contractor obtains a certificate of insurance from the subcontractor, the general contractor will not be liable for workers’ compensation benefits for injured employees of the subcontractor. N.C. Gen. Stat. § 97–19. In Patterson v. Markham & Associates, 123 N.C. App. 448, 474 S.E.2d 400 (1996), a general contractor was not a statutory employer where the plaintiff worked for a subcontractor on a job which was contracted to the subcontractor by the general contractor because when work under the contract began, the subcontractor's insurance agent sent the general contractor a certificate of insurance indicating coverage for the subcontractor for one year; and when the subcontractor's insurance was canceled for its failure to pay its premium, the general contractor was not notified of the cancellation.
The term “employee” means every person engaged in an employment under any appointment or contract of hire or apprenticeship, express or implied, oral or written, including aliens, and also minors, whether lawfully or unlawfully employed, but excluding persons whose employment is both casual and not in the course of the trade, business, profession, or occupation of his employer. N.C. Gen. Stat. § 97-2 .
In general every executive officer elected or appointed and empowered in accordance with the charter and bylaws of a corporation shall be considered as an employee of such corporation under this Article. N.C. Gen. Stat. § 97-2. However, any such executive officer of a corporation may be exempt from the coverage of the corporation's insurance contract if the corporation specifically excludes such executive officer in the contract of insurance. During the period of the contract such executive officers exempted from the coverage of the insurance contract shall not be employees of the corporation under this Article.
Any sole proprietor or partner of a business or any member of a limited liability company may elect to be included as an employee under the workers' compensation coverage of such business if he is actively engaged in the operation of the business and if the insurer is notified of his election to be included. Any such sole proprietor or partner or member of a limited liability company shall, upon such election, be entitled to employee benefits and be subject to employee responsibilities provided in this Article. N.C. Gen. Stat. § 97-2 .
The term “special employee” generally refers to an individual who had an employer-employee relationship with one employer but then begins working for another employer without any change in his employment status. One of the critical elements for finding a special employee is that the special employer had the right to control the details of the alleged special employee's work. Shelton v. Steelcase, Inc., 197 N.C. App. 404, 406, 677 S.E.2d 485, 489 (2009).
The requirements for categorizing an employee as a “special employee” are the same as those listed above for determining liability of a special employer: when a general employer lends an employee to a special employer, the special employer becomes liable for workers' compensation only if: (1) the employee has made a contract of hire, express or implied, with the special employer; (2) the work being done is essentially that of the special employer; and (3) the special employer has the right to control the details of the work. Gregory v. Pearson, 736 S.E.2d 577 (N.C. Ct. App. 2012) review allowed, 748 S.E.2d 319 (N.C. 2013).
Whether a person employed to perform specified work for another is to be regarded as an independent contractor or as an employee within meaning of Workers’ Compensation Act is determined by application of ordinary common-law tests. Youngblood v. N. State Ford Truck Sales, 321 N.C. 380, 364 S.E.2d 433 (1988).
An independent contractor is an individual who generally falls outside of the structure of the Workers’ Compensation Act. To determine if an individual is an employee or an independent contractor under the Workers’ Compensation Act, there are generally eight factors, with no one factor being determinative, which indicate classification, namely, the person employed: (1) is engaged in independent business, calling, or occupation; (2) is to have independent use of his special skill, knowledge, or training in execution of work; (3) is doing specified piece of work at fixed price or for lump sum or upon quantitative basis; (4) is not subject to discharge because he adopts one method of doing work rather than another; (5) is not in regular employ of other contracting party; (6) is free to use such assistants as he may think proper; (7) has full control over such assistants; and (8) selects his own time. McCown v. Hines, 140 N.C. App. 440, 537 S.E.2d 242 (2000) aff'd, 353 N.C. 683, 549 S.E.2d 175 (2001).
The fact that the work must meet specific standards and requirements is not enough to find sufficient control. The control must be in the method in which the results were obtained, not in the results themselves. Grouse v. DRB Baseball Mgmt., Inc., 121 N.C. App. 376, 465 S.E.2d 568 (1996).
If the employee and the employer are subject to and have complied with the provisions of the Workers’ Compensation Act, then the rights and remedies herein granted to the employee, his dependents, next of kin, or personal representative shall exclude all other rights and remedies of the employee, his dependents, next of kin, or representative as against the employer at common law or otherwise on account of such injury or death. N.C. Gen. Stat. § 97-10.1 .
Workers’ Compensation Act was created to ensure that injured employees receive sure and certain recovery for their work-related injuries without having to prove negligence on the part of the employer or defend against charges of contributory negligence; in exchange for these limited but assured benefits, the employee is generally barred from suing the employer for potentially larger damages in civil negligence actions and is instead limited exclusively to those remedies set forth in the Act. Whitaker v. Town of Scotland Neck, 357 N.C. 552, 597 S.E.2d 665 (2003).
Under the Workers’ Compensation Act, an employee’s remedies are exclusive as against the employer where the injury is caused by an accident arising out of and in the course of employment. Thus, the exclusivity provision of the Act precludes a claim for ordinary negligence, even when the employer’s conduct constitutes willful or wanton negligence. However, an exception to this exclusivity exists for claims meeting the stringent proof standards of Woodson v. Rowland, 329 N.C. 330, 407 S.E.2d 222. Woodson permits a plaintiff to pursue both a workers’ compensation suit and a civil suit against an employer in those narrowly limited cases where injury or death was the result of intentional conduct by an employer which the employer knew was substantially certain to cause serious injury or death. Willful and wanton negligence alone is not enough to establish a Woodson claim; a higher degree of negligence is required. The conduct must be so egregious as to be tantamount to an intentional tort. Wake County Hosp. Sys. v. Safety Nat. Casualty Corp., 127 N.C. App. 33, 487 S.E.2d 789 (1997).
JURISDICTION AND LIMITATIONS OF ACTIONS
The North Carolina Workers’ Compensation Act is the exclusive remedy available to employees who sustain work-related injuries, illnesses, or diseases. N.C. Gen. Stat. § 97-10.1. The rights and remedies of an employee under the Workers’ Compensation Act exclude all other rights and remedies. Murphy v. American Enka Corp., 213 N.C. 218, 195 S.E.2d 536 (1938). The Act is “a compromise arrived at through the concessions of employees and employers alike. … By its terms, with certain exceptions the Act applies to all employees who work for employers with the requisite number of employees and are injured by accident during the course of and arising from their employment.” Bare v. Wayne Poultry Co., 70 N.C. App. 88, 318 S.E.2d 534 (1984), cert. denied, 312 N.C. 796, 325 S.E.2d 484 (1985).
N.C. Gen. Stat § 97-36 provides that where accidents happens outside North Carolina, and the accident would be compensable if it occurred in North Carolina, jurisdiction exists in the following circumstances:
1. if the contract of employment was made in North Carolina;
2. if the employer's principal place of business is in North Carolina; or
3. if the employee's principal place of employment is within North Carolina
Provided, however, that if an employee or his dependents or next of kin shall receive compensation or damages under the laws of any other state nothing herein contained shall be construed so as to permit a total compensation for the same injury greater than is provided for in this Article.
Notice of injury
Every injured employee is required to give immediate notice of the condition/accident to the employer, followed by written notice no later than 30 days, unless reasonable excuse is made to the satisfaction of the Commission for not giving such notice and the Commission is satisfied that the employer has not been prejudiced thereby. N.C. Gen. Stat. § 97-22.
In occupational disease cases, a claim must be filed with the Commission within two (2) years after death, disability or disablement or it will be barred. N.C. Gen. Stat. § 97-58(c). Furthermore,
[t]hough the two year time limit for timely filing is a jurisdictional requisite, without which the Industrial Commission may not consider a workers’ compensation claim, the time does not begin to run against occupational disease claims until the employee is informed by competent medical authority of the nature and work-related cause of the disease.
McCubbins v. Fieldcrest Mills, Inc., 79 N.C. App. 409, 339 S.E.2d 497 (1986).
Statute of Limitations
N.C. Gen. Stat. §97-24 sets out that the right to compensation under the North Carolina Workers’ Compensation Act is barred after two years unless:
(i) a claim or memorandum of agreement as provided in G.S. 97-82 is filed with the Commission or the employee is paid compensation as provided under this Article within two years after the accident or (ii) a claim or memorandum of agreement as provided in G.S. 97-82 is filed with the Commission within two years after the last payment of medical compensation when no other compensation has been paid and when the employer's liability has not otherwise been established under this Article. The provisions of this subsection shall not limit the time otherwise allowed for the filing of a claim for compensation for occupational disease in G.S. 97-58, but in no event shall the time for filing a claim for compensation for occupational disease be less than the times provided herein for filing a claim for an injury by accident.
(b) If any claim for compensation is hereafter made upon the theory that such claim or the injury upon which said claim is based is within the jurisdiction of the Industrial Commission under the provisions of this Article, and if the Commission, or the appellate courts on appeal, shall adjudge that such claim is not within the Article, the claimant, or if he dies, his personal representative, shall have one year after the rendition of a final judgment in the case within which to commence an action at law.
(c) When all claims and reports required by this Article have been filed, and the cases and records of which they are a part have been closed by proper reports, receipts, awards or orders, these records, may after five years in the discretion of the Commission, with and by the authorization and approval of the Department of Cultural Resources, be destroyed by burning or otherwise.
N.C. Gen Stat. §97-25.1 places a limitation on an employee’s entitlement to future medical treatment. Specifically, the statute provides:
“The right to medical compensation shall terminate two years after the employer's last payment of medical or indemnity compensation unless, prior to the expiration of this period, either: (i) the employee files with the Commission an application for additional medical compensation which is thereafter approved by the Commission, or (ii) the Commission on its own motion orders additional medical compensation. If the Commission determines that there is a substantial risk of the necessity of future medical compensation, the Commission shall provide by order for payment of future necessary medical compensation.”
N.C. Gen. Stat. §97-47 states that in cases where an injured employee receives an award from the Commission or under the North Carolina Workers’ Compensation Act, the employee has two years of the date on which the last compensation was paid to apply for additional compensation on the grounds of a change in condition. The statute adds, “…except that in cases in which only medical or other treatment bills are paid, no such review shall be made after 12 months from the date of the last payment of bills for medical or other treatment, paid pursuant to this Article.”
N.C. Gen. Stat §97-47.1 sets out the limitation period for claims in which the employer has paid compensation without prejudice but timely denies liability as set out under N.C. Gen. Stat. §97-18(d): “the right, if any, to further indemnity compensation and medical compensation shall terminate two years after the employer's last payment of medical or indemnity compensation, whichever last occurs, unless the employee files with the Commission a claim for further compensation prior to the expiration of this period.”
In occupational disease cases, where compensation payments have been made and discontinued, and further compensational is claimed, the claim for further compensation shall be made within two years after the last payment in all cases of occupational disease, provided, that claims for further compensation for asbestosis or silicosis shall be governed by the final award as set forth in G.S. 97-61.6. N.C. Gen. Stat. §97-66.
Special Rules for Death Claims
In North Carolina, there are special rules for death claims. If death results proximately from a compensable injury or occupational disease, the employer shall pay within six years thereafter, or within two years of the final determination of disability, whichever is later, subject to the provisions of other sections of this Article weekly compensation checks to plaintiff's dependents as defined under N.C. Gen. Stat. §97-38.
The North Carolina Courts have found it is a condition precedent for the plaintiff to show a continuing total disability from the time of the accident to the time of the death in order to establish an award of death benefits where the death occurred more than two years after the accident. Burton v. Peter W. Blum & Son, 270 N.C. 695, 155 S.E. 2d 71 (1967).
Occupational Disease Claims
N.C. Gen. Stat. § 97-58 sets out the time limit for filing claims and states, in part that:
(b) The report and notice to the employer as required by G.S. 97-22 shall apply in all cases of occupational disease, except in cases of asbestosis, silicosis, or lead poisoning. The time of notice for an occupational disease shall run from the date that the employee has been advised by competent medical authority that he has the same.
(c) The right to compensation for occupational disease shall be barred unless a claim be filed with the Industrial Commission within two years after death, disability, or disablement as the case may be. Provided, however, that the right to compensation for radiation injury, disability or death shall be barred unless a claim is filed within two years after the date upon which the employee first suffered incapacity from the exposure to radiation and either knew or in the exercise of reasonable diligence should have known that the occupational disease was caused by his present or prior employment.
The North Carolina Industrial Commission has frequently waived the statutory requirement to provide written notice when the employer is aware of the condition(s) through either constructive notice or actual notice. Craver v. Dixie Furniture Co., 115 N.C. App. 570, 447 S.E.2d 589 (1994) (see also Parker v. Thompson-Arthur Paving Co., 100 N.C. App. 367, 396 S.E.2d 626 (1990) holding that defendants were equitably estopped from asserting the time bar limitation where the plaintiff could show that he was misled under the circumstances that the employer would or had filed the workers’ compensation claim).
An injury by accident is compensable under the North Carolina Workers’ Compensation Act when it arises out of and in the course of the employment. N.C. Gen. Stat. § 97-2(6). The injury must have its origins in the employment, meaning that it comes from the work the employee is to do or out of the services he is to perform, and as a natural result, one of the risks of the employment.
Disability is the incapacity because of injury to earn the wages which the employee was receiving at the time of injury in the same or any other employment. N.C. Gen. Stat. § 97-2(9). Hilliard v. Apex Cabinet Co., 54 N.C. App. 173, 282 S.E.2d 828 (1981), rev’d on other grounds, 305 N.C. 593, 290 S.E.2d 682 (1982).
Types of Injuries
Injury by Accident
An injury by accident is defined as an unlooked-for and untoward event which is not expected or designed by the injured employee, and which is a result produced by a fortuitous cause. Bowles v. CTS of Asheville, Inc., 77 N.C. App. 547, 237 S.E. 2d 502 (1985). An injury which occurs while the employee is performing his regular duties in the usual and customary manner is NOT compensable (but see back and hernia below). Raper v. Mansfield Sys., 189 N.C. App. 277, S.E. 2d 899 (2008).
Specific Traumatic Incident
Back injuries, however, utilize a slightly different legal standard than the typical “injury by accident” analysis for other body parts. In order for a back injury to be compensable, the injury must still arise out of and in the course and scope of the employment, but it must be the “direct result of a specific traumatic incident of the work assigned, [and] ‘injury by accident’ shall be construed to include any disabling physical injury to the back arising out of an causally related to such incident.” N.C. Gen. Stat. § 97-2(6). Back injuries that occur gradually, over long periods of time, are not specific traumatic incidents; however, events which occur contemporaneously, during a cognizable time period, and which cause a back injury, do fit the definition. Richards v. Town of Valdese, 92 N.C. App. 222, 374 S.E. 2d 116 (1988); Livingston v. James C. Fields & Co., 93 N.C. App. 336, 277 S.E.2d 788 (1989).
A specific traumatic incident is sufficient for a hernia to be compensable, as long as the hernia: 1) was not pre-existing; and 2) appeared suddenly following the incident. N.C. Gen. Stat. § 97-2(18). If the employee refuses to undergo surgical repair, then no compensation is allowed during the continuance of refusal. Id.
Occupational diseases are treated as an injury by accident. N.C. Gen. Stat. § 97-52. The purpose of N.C. Gen. Stat. § 97-52 and N.C. Gen. Stat. § 97-53 was to compensate employees for occupational disease as defined in the Act. Bowles v. CTS of Asheville, Inc., 77 N.C. App. 547, 335 S.E.2d 502 (1985).
N.C. Gen. Stat. § 97-53 enumerates diseases/conditions which are compensable as occupational diseases, but additionally includes a “catch-all” provision in subdivision (13). Except for those diseases specifically named in the statute, the legislature intended the present version of subdivision (13) to define the term “occupational disease.” Booker v. Duke Medical Ctr., 297 N.C. 458, 256 S.E.2d 189 (1979).
The North Carolina Supreme Court has held that “(f)or a disease to be occupational under N.C. Gen. Stat. § 97-53(13) it must be (1) characteristic of persons engaged in the particular trade or occupation in which the claimant is engaged; (2) not an ordinary disease of life to which the public generally is equally exposed with those engaged in that particular trade or occupation; and (3) there must be a causal connection between the disease and the claimant's employment.” Rutledge v. Tultex Corp., 308 N.C. 85, 93, 301 S.E.2d 359, 365 (1983). The first two elements of the Rutledge test are satisfied if, as a matter of fact, the employment exposed the worker to a greater risk of contracting the disease than the public generally. Id. at 93-94, 301 S.E.2d at 365. The third element is satisfied if the employment significantly contributed to, or was a significant causal factor in, the disease's development. Id. at 101, 301 S.E.2d 369-370.
Psychological injuries must still meet either the occupational disease requirements or the injury by accident requirements to be considered compensable.
The North Carolina Court of Appeals affirmed an award of compensation in Smith-Price v. Charter Pines Behavioral Ctr, 584 S.E.2d 881 where an employee who worked as a nurse claimed she suffered post traumatic stress disorder (PTSD) due to her employment at a behavioral center. Evidence presented showed the plaintiff had a conflict with a medical assistant who refused to follow instructions and experienced migraine headaches after the assistant accused her of sexual involvement with other male employees and shared the accusations with other personnel. The court also found persuasive that plaintiff was at all times in her employment caring for the mentally ill whose problems included suicide, anxiety and depression. The court held there was sufficient evidence to support the Commission’s determination that plaintiff’s mental disorders were a result of a job with unique stresses to which the general public is not exposed. The court noted that plaintiff’s case presented a situation far more severe than exposure to an abusive relationship presented in Woody v. Thomasville Upholstery Inc.
An example of psychological injury that was not found compensable because it was not “characteristic of and peculiar to” employment was Woody v. Thomasville Upholstery Inc., 146 N.C.App. 187, 552 S.E.2d 202 (2001), rev’d per curiam for reasons stated in the dissent, 355 N.C. 483 562 S.E.2d 422 (2002). In Woody, the North Carolina Supreme Court reversed an award of compensation issued by the Full Commission to an employee who alleged that her job-related stress caused her depression and aggravated her fibromyalgia. The plaintiff presented testimony that her supervisor continually demeaned her without cause and such abuse contributed both to her depression and fibromyalgia. However, the court held that the facts did not support the conclusion that plaintiff’s mental and physical conditions were occupational diseases as defined by the statute, but the findings indicated that she suffered from depression and fibromyalgia after being placed in the unfortunate position of working for an abusive supervisor. The court found persuasive that any employee in any industry or profession could be exposed to similar abusive relationships inside or outside of the workplace, therefore her conditions were not “characteristic of and particular to” her employment, but are ordinary diseases to which the general public is equally exposed outside the workplace in everyday life.
The North Carolina Court of Appeals affirmed the Commission’s denial of compensation to an employee in Lewis v. Duke Univ. 163 N.C. App 408, 594 S.E.2d 100 (2004), where the plaintiff worked as a nurse for Duke University Medical Center and claimed she developed depression from working with terminally ill patients on a regular basis. She claimed the constant presence of death caused her to develop stress and anxiety, which led to her depression. The court found persuasive the fact that plaintiff had stopped working with terminally ill patients approximately six years before she stopped working at the hospital, therefore her exposure to death was not a significant factor in the development of her depression. The plaintiff was denied compensation as she failed to present sufficient evidence that the stresses in her workplace that caused her depression were characteristic of and peculiar to her position as a registered nurse.
Under the injury by accident analysis, the Industrial Commission or the Appellate Courts will look to whether the mental injury can be linked to a physical injury by accident. If so, the Commission is more likely to find the mental injury compensable.
In Schmidt v. UNC-Charlotte, the plaintiff, a public safety officer, was called to rescue a man who was crushed by a large cast iron pipe and as a result, had developed post-traumatic stress disorder. In finding the claim compensable, the Industrial Commission found that the plaintiff had sustained an injury by accident arising out of and in the course of his employment. The Commission opined that since this gruesome rescue had not become the usual or customary activities of the plaintiff’s job, it was an unlooked for and untoward event which was not expected or designed by the plaintiff, thus meeting definition of an accident. The Commission also considered testimony from the plaintiff’s psychiatrist and counselor supporting the finding that the plaintiff suffered from traumatic stress disorder stemming from the attempted rescue.
In Lovekin v. Lovekin & Ingle, 140 N.C. App., 244, 535 S.E.2d 610 (2000), the plaintiff was a senior attorney at a law firm which he founded with another individual. Throughout a period of months, plaintiff’s workload began to increase while the number of assistants in his office continually decreased. Eventually the plaintiff’s health had so declined that he went to see a doctor, at which time he was told he had suffered an acute cardiac incident and had to undergo coronary artery bypass surgery. Plaintiff’s doctor noted that while stress played a part in plaintiff’s health, he also had diabetes, a family history of heart disease, and a history of smoking. The Full Commission awarded benefits, finding that the claimant did in fact sustain an injury by accident arising out of and in the course of his employment. The North Carolina Court of Appeals reversed the Full Commission’s decision, holding that a series of events which occur over a period of approximately eight months do not constitute an “accident” within the meaning of the Workers’ Compensation Act.
EXCLUSIONS AND DEFENSES
Course of Employment
For a plaintiff to prove a compensable claim he/she must prove he/she experienced an injury by accident or specific traumatic incident arising out of and in the course and scope of the plaintiff’s employment. N.C. Gen. Stat. § 97-2(6).
While some cases have held that the “arising out of” and “in the course and scope” elements are not separate and distinguishable, most cases have held that “in the course and scope of employment” and “arising out of the employment” are different inquiries that warrant different tests
If an injury did not occur while the employee was in the course and scope of the employment, and/or if the injury did not arise out of the employment, the injury will not be compensable
In the course and scope
The “time, place, and circumstances” test:
“The phrase ‘in the course of employment’ refers to (1) the time, (2) the place, and (3) the circumstances in which the injury occurred.” Culpepper v. Fairfield Sapphire Valley, 377 S.E.2d 777, 778 (N.C. App. 1989).
(1) Time - The “course of employment” begins a reasonable time before work begins, continues a reasonable time after work ends, and includes intervals during the workday for rest and refreshment. Harless v. Flynn, 162 S.E.2d 47 (N.C. App. 1968).
While being off the clock at the time of the injury does not create a presumption that the employee was acting outside the course and scope of his employment at the time of his injury, it is a factor the Commission will strongly consider. See Sandy v. Stackhouse, Inc., 128 S.E.2d 218, 221 (1962) (stating that “[o]rdinarily, when an employee is off duty the relationship of master and servant is suspended; therefore, there is no causal relation between the employment and an accident which happens during such time”).
The further the injury occurs from the employee’s regular work hours, the more likely it is to be outside the course and scope of the employee’s employment.
(2) Place - In the traditional sense, the “place” of employment includes the premises of the employer. Harless v. Flynn, 162 S.E.2d 47 (N.C. App. 1968).
With that said, the employee need not be on the employer’s premises at the time of injury to be in the course and scope of his employment. If the employee is doing work at the direction and for the benefit of the employer, the time and place of work are for the benefit of the employer and a part of the employment of the employee. Brown v. Jim Brown’s Serv. Station, 262 S.E.2d 700 (1980).
(3) Circumstances - With respect to the “circumstances” surrounding the injury, the employee must be engaged in some activity or duty which 1) he is authorized to undertake and 2) which is calculated to further, directly or indirectly, the employer’s business, at the time of the injury, for the employee to be acting in the course and scope of his employment. Pittman v. Twin City Laundry & Cleaners, 61 N.C. App. 468, 472, 300 S.E.2d 899 (1983).
A) When is an employee “authorized to undertake” a particular activity?
In analyzing whether an employee is “authorized” to perform some duty for the employer, the Industrial Commission is to ask whether the service being performed by the employee at the time of the injury is one which the employee is “obligated to render under his contract of employment.” Watkins v. City of Wilmington, 225 S.E.2d 577, 582 (1976).
In determining whether the employee was “authorized to undertake” the activity in question, the Commission will determine whether the employee had “reasonable grounds” to believe he/she was authorized to undertake the activity in question. See Culpepper v. Fairfield Sapphire Valley, 377 S.E.2d 777, 778 (N.C. App. 1989).
Therefore, the employee can still be considered in the course and scope of his employment, even if the job duties in question were outside the plaintiff’s normal job duties, if 1) the employee reasonably believed his employer was authorizing him to perform the task in question and 2) the activity that led to the injury was calculated to further, directly or indirectly, the employer’s business.
Arising out of the employment
The words “arising out of the employment” refer to the origin or cause of the accidental injury. The Court will look to
1) whether the employment was a contributing cause of the injury, and
2) whether the injury occurred from a) a risk inherent or incidental to the employment and b) one to which the employee would not have been equally exposed in the general public aside from the employment. Culpepper v. Fairfield Sapphire Valley, 377 S.E.2d 777, 778 (N.C. App. 1989).
If the Commission finds the injury did not occur from a risk inherent or incidental to the plaintiff’s employment, or that the plaintiff’s employment did not expose him to a greater risk than the general public of experiencing the injury, then the injury did not “arise out of” Plaintiff’s employment and his claim will not be deemed compensable.
Engaged in the Furtherance of Employer’s Business
North Carolina Courts have held that a plaintiff was engaged in the furtherance of the employer’s business, when an off-duty waitress stopped after leaving work to help a frequent patron and was sexually assault and injured while escaping because the employer had instructed plaintiff to “offer any assistance she could” to patrons of the resort, and, even though plaintiff was off the clock at the time, the resort owners would have wanted plaintiff to stop to assist the resort patron who seemed to be stuck on the side of the road with car trouble. Culpepper v. Fairfield Sapphire Valley, 377 S.E.2d 777, 778 (N.C. App. 1989).
Not in Furtherance of Employer’s Business
Where an employee at the time of his injury is performing acts for his own benefit, and not connected with his employment, the injury does not arise out of his employment. This is true even if the acts are performed with the consent of the employer and the employee is on the payroll at the time. Lewis v. W.B. Lea Tobacco Co., 132 S.E.2d 877 (N.C. 1963).
Going and Coming Rule Exclusion
As a general rule an injury suffered by an employee while going to or returning from his work does not arise out of and occur in the course and scope of his employment. Bray v. W.H. Weatherly & Co., 165 S.E.332 (N.C. 1932); See also Stanley v. Burns Int’l Sec. Servs., 589 S.E.2d 176, 178 (N.C. App. 2003)
The rationale for this rule is that traveling to and from work is a risk all individuals face equally and there is nothing about the plaintiff’s particular job that increases his/her risk of being involved in a car accident.
While the “Going and Coming Rule” bars compensability in a number of situations, there are four noted exceptions to that rule, where, if the elements are satisfied, such exceptions can make a claim compensable even when an employee is going to or returning from his work. Those exceptions are laid out below in 184.108.40.206 – 220.127.116.11.
Traveling Salesman Exception
The basic statement of the “Traveling Salesman Exception” rule is that an employee is acting in the course and scope of his/her employment if the “employee has no definite time and place of employment, requiring her to make a journey to perform a service on behalf of the employer.” Stanley v. Burns Int’l Sec. Servs., 589 S.E.2d 176, 178 (N.C. App. 2003). Additionally, if “travel is contemplated as part of the employment, an injury from an accident during travel is compensable.” Hunt v. Tender Loving Care Home Care Agency, Inc., 569 S.E.2d 675, 678 (N.C. App. 2002).
An employee whose work entails travel away from the employer’s premises is held to be within the course of his employment continuously during the trip, except when a distinct departure on a personal errand is shown. Brewer v. Powers Trucking Co., 123 S.E.2d 608 (N.C. 1962).
Injuries arising out of the necessity of sleeping in hotels or eating in restaurants away from home are usually held compensable under the traveling salesman exception. Martin v. Georgia-Pacific Corp., 167 S.E.2d 790 (N.C. App. 1969).
Where an employee has no fixed hours or job location, and is required to report to the homes of multiple clients, the traveling salesman exception will apply even though the plaintiff stopped at the employer’s address to drop off time slips on the way to seeing the first client. This stop did not amount to enough of a “distinct departure on a personal errand” to prevent the traveling salesman exception from applying. Munoz v. Caldwell Mem’l Hosp., 614 S.E.2d 448 (N.C. App. 2005)
Of note, the traveling salesman exception will generally apply when plaintiff must report to a different job location each day that is not the employer’s facility, if the plaintiff, though not reporting to the employer’s facility, does consistently report to the same job location every day, the Court of Appeals has found the traveling salesman exception does not apply to those facts, and the “going and coming rule” could bar recovery. See Hunt v. Tender Loving Care Home Care Agency, Inc., 569 S.E.2d 675, 678 (N.C. App. 2002) (where Plaintiff was a home health nurse who was required to report to the homes of Employer’s elderly clients, but Plaintiff, during her more than two years of employment, had only been required to report to the home of the same elderly client every single day).
Special Errand Exception
The rule is stated as follows: An employee is acting in the course and scope of his employment when traveling if the travel is for “the performance of some duty, errand, or mission thereto.” Stanley v. Burns Int'l Sec. Servs., 161 N.C.App. 722, 725, 589 S.E.2d 176, 178 (2003).
In Powers v. Lady’s Funeral Home, the plaintiff was employed by employer funeral home as a mortician and embalmer. On July 29, 1978 Plaintiff began his employment at 8:00 a.m. and was to remain at the Funeral Home or at his own home “on call” until 8:00 a.m. the next morning. While “on call,” Plaintiff was required to remain near a phone and had to return to the Funeral Home at any time until 8:00 a.m. in the event the Funeral Home needed him to embalm a corpse. Plaintiff worked at the Funeral Home from 8:00 a.m. until 10:30 p.m. on July 29. At 10:30 p.m., the night man took over for plaintiff, allowing plaintiff to return to his personal residence. Around midnight, Plaintiff received a call from the night man indicating he needed to return to the Funeral Home to embalm a corpse. After completing that task, he returned to his home around 2:30 a.m. and parked his car on an incline in his driveway, which sloped down toward the back door of his house. Plaintiff exited the vehicle and walked toward the back door. Unfortunately, the automobile began rolling down the incline, running over Plaintiff and causing injuries to his bilateral lower extremities. The North Carolina Supreme Court determined plaintiff was in the course and scope of his employment at the time of his injury because the “special errand exception” applied. The Court held that Plaintiff was on a special errand when taking the call to embalm the body in the middle of the night. The Court found that after embalming the body, Plaintiff was required to shower and change clothes, since he was still on call until 8:00 a.m. and might be required to take more calls later. Since there was not a showering/changing facility at the Funeral Home, the Court found plaintiff was required to return home to shower and change, and that his “special errand” would not conclude until completing that task. Therefore, the Court found Plaintiff was still engaged in a special errand when struck by the car in his driveway, making his claim compensable. 295 S.E.2d 473 (N.C. 1982)
Contractual Duty Exception
The rule is stated as follows: An employee is in the course and scope of his/her employment while traveling to or from a job if the employer “contractually provides transportation or allowances to cover the cost of transportation.” Stanley v. Burns Int'l Sec. Servs., 161 N.C.App. 722, 725, 589 S.E.2d 176, 178 (2003).
For the contractual duty exception to apply, the transportation must be provided as a matter of right to the employee under the terms of the employment contract. If “the transportation is provided permissively, gratuitously, or as an accommodation, the employee is not within the course of employment while in transit.” Hunt, 153 N.C.App. at 270, 569 S.E.2d at 678.
Under the premises exception, if an employee sustains an injury while going to or returning from his work, but said injury occurs while the employee is on premises that are 1) owned or 2) controlled by Employer-Defendant, the injury will generally be deemed to have arisen out of and occurred in the course and scope of employment. Strickland v. King, 239 S.E.2d 243 (N.C. 1977).
If employee “unreasonably delayed” his departure from Employer-Defendant’s premises and is injured while leaving his employment on premises that are owned or controlled by Employer-Defendant, Plaintiff’s claim will not be deemed to have arisen out of and in the course of employment and the “going and coming rule” will bar compensability.
For discussion of when an employee “unreasonably delays” his/her departure from Employer-Defendant’s premises, see Bass v. Mecklenburg County, 128 S.E.2d 570 (N.C. 1962). See also Maurer v. Salem Co., 146 S.E.2d 432 (N.C. 1966)
Related to Employment
See above analysis regarding “arising out of the employment.”
Employee’s Violation of the Law, Intoxication, and Illegal Use of Drugs
Pursuant to N.C. Gen. Stat. § 97-12, “No compensation shall be payable if the injury or death to the employee was proximately caused by:
1) His intoxication, provided the intoxicant was not supplied by the employer or his agent in a supervisory capacity to the employee; or
2) His being under the influence of any controlled substance listed in the N.C. Gen. Stat. § 90-86, et seq., where such controlled substance was not by prescription by a practitioner.”
“Intoxication” and “under the influence” shall mean that the employee shall have consumed a sufficient quantity of intoxicating beverage or controlled substance to cause the employee to lose the normal control of his or her bodily or mental faculties, or both, to such an extent that there was an appreciable impairment of either or both of these faculties at the time of the injury. N.C. Gen. Stat. § 97-12.
A result consistent with “intoxication” or being “under the influence” from a blood or other medical test conducted in a manner generally acceptable to the scientific community and consistent with applicable State and federal law, if any, shall create a rebuttable presumption of impairment from the use of alcohol or a controlled substance. N.C. Gen. Stat. § 97-12.
Once an employer proves the employee’s use of a non-prescribed controlled substance, it is presumed that the employee was impaired; once the employer presents competent evidence that the impairment was a proximate cause of the accident, the burden shifts to the employee to rebut the presumption of impairment or to show that the impairment was not a contributing proximate cause of the accident. Willey v. Williamson Produce, 562 S.E.2d 1 (N.C. App. 2002).
If Defendants are trying to prove a plaintiff is barred from recovering under this section, Defendants bear the burden of proving each element above. Anderson v. Century Data Sys., Inc., 322 S.E.2d 638 (N.C. App. 1984).
Employee’s Willful Misrepresentation in Applying for Employment
Pursuant to N.C. Gen. Stat. § 97-12.1, a Plaintiff shall not be able to prove a compensable claim if “the employer proves that i) at the time of hire, (ii) at the time of receiving notice of the removal of conditions from a conditional offer of employment, or (iii) during the course of a post-offer medical examination . . . 1) the employee knowingly and willfully made a false representation as to the employee’s physical condition; 2) the employer relied upon one or more false representations by the employee, and the reliance was a substantial factor in the employer’s decision to hire the employee; and 3) there was a causal connection between [the] false representation by the employee and the injury or occupational disease.”
There must be a causal connection between the false representation and the injury/occupational disease. Thus, the misrepresentation made on the employment application (or otherwise in entering into the employment) must be in regard to the same body part the plaintiff injured. For instance, if the plaintiff had a prior back surgery and lied about not having prior back problems on his employment application, but the injury he sustained and for which he claims compensation is a shoulder injury, 97-12.1 would likely not bar Plaintiff from recovering workers’ compensation benefits, because his misrepresentation was not causally related to his work injury.
If the misrepresentation is in regard to an amount Plaintiff can safely lift in tandem with Plaintiff having permanent work restrictions, the amount Plaintiff was lifting at time of injury must exceed Plaintiff’s permanent work restrictions.
NOTE: Because N.C. Gen. Stat. § 97-12.1 was adopted in 2011, there are not N.C. Supreme Court or http://en.wikipedia.org/wiki/North_Carolina_Court_of_Appeals cases interpreting it yet
Employee’s Willful Neglect; Employer’s Willful Disobedience of Statutory Duty, Safety Regulation or Rule
Pursuant to N.C. Gen. Stat. § 97-12, “[w]hen the injury or death is caused by the willful failure of the employee to use a safety appliance or perform a statutory duty or by the willful breach of any rule or regulation brought to the knowledge of the employee prior to the injury compensation shall be reduced ten percent (10%).”
The negligence of an employee while performing the act that led to his injury does not act as a bar to the plaintiff recovering. Stubblefield v. Watson Elec. Constr. Co., 177 S.E.2d 882 (N.C. 1970). Not even gross negligence or “willful neglect” is a defense to compensability. Hartley v. North Carolina Prison Dept, 128 S.E.2d 598 (N.C. 1962).
N.C. Gen. Stat. § 97-12 also places an obligation on the employer to comply with federal/state safety laws. Thus, “[w]hen the [employee’s] 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%).
An Employer can be liable when it “willfully” violates an OSHA regulation. See Brown v. Kroger Co., 610 S.E.2d 447 (N.C. App. 2005) holding that the 10% penalty was justified where employee tripped and fell over an extension cord in a hallway at work, because the presence of the extension cord in the hallway violated a federal regulation that was adopted by the State of North Carolina pursuant to G.S. 95-126 et seq., and the employer was put on sufficient notice regarding the duties, consequences, and application of the N.C. Gen. Stat. 95-126, and its relevant standards.)
When is Employer’s behavior “willful”
“An act is considered willful when there exists a deliberate purpose not to discharge some duty necessary to the safety of the person or property of another, a duty assumed by contract or imposed by law.” Jenkins v. Easco Aluminum, 598 S.E.2d 252 (N.C. App. 2004).
Intentionally Self-Inflicted Injury or Death
Pursuant to N.C. Gen. Stat. § 97-12, “[n]o compensation shall be payable if the injury or death to the employee was proximately caused by: … 3) His willful intention to injure or kill himself or another.”
To prove the above, “it requires a finding that the claimant had the willful intention to injure or kill himself or another and that this intention was the proximate cause of the claimant’s injuries.” Rorie v. Holly Farms Poultry, Co., 295 S.E.2d 458 (N.C. 1982). The burden of proof is on the employer in these cases to show the above elements. Rorie v. Holly Farms Poultry Co., 295 S.E.2d 458 (N.C. 1982) (holding that the plaintiff (decedent Rorie), was barred from recovering under N.C. Gen. Stat § 97-12(3) because 1) she did have a willful intent to injure her co-employee and 2) plaintiff's death/injury was proximately caused by the actions she carried out with the intent of willfully injuring the co-employee.)
However, exceptions exist to the bar of benefits when an injury or death is proximately caused by the employee’s willful intention to kill himself or another. For example, suicide can be excluded “where the injuries suffered by the deceased [employee] result in his becoming devoid of normal judgment and dominated by a disturbance of mind directly caused by his injury and its consequences, his suicide cannot be considered “willful” within the meaning and intent of the Act [meaning, within the intent of the 97-12(3) defense].” Petty v. Associated Transp., 173 S.E.2d 321 (N.C. 1970).
A second exception to this rule is where a police office is injured while trying to willfully inflict death/bodily injury on a crime suspect. In this instance, the police officer will not be barred by 97-12(3).
Calculation of Average Weekly Wage
The North Carolina Workers’ Compensation Act provides five possible methods to calculate an employee’s Average Weekly Wage (AWW). N.C. Gen. Stat. §97-2(5) establishes the methods for determining the average weekly wage of an injured worker. The North Carolina Courts have held that when the first method can be used, it must be used. The dominant intent of N.C. Gen. Stat. §97-2(5) is to calculate an average weekly wage that is fair and just to both parties. The five possible methods of calculating an injured worker’s average weekly wage are paraphrased as follows:
Method #1: If the injured worker has been employed by the employer for at least 52 weeks prior to the date of injury and the injured worker has not lost more than seven consecutive days (in other words, eight or more continuous days) during one or more periods of time, then the injured worker’s average weekly wage equals the total wages earned by the injured worker over the 52 weeks prior to the date of injury divided by 52.
Method #2: If the injured worker has been employed by the employer for at least 52 weeks prior to the date of injury and the injured worker has lost more than seven continuous days (in other words, eight or more continuous days) during one or more periods of time, then the injured worker’s average weekly wage equals the total wages earned by the injured worker over the 52 weeks prior to the date of injury divided by the number of weeks, including fractional weeks, after subtracting the periods of more than seven continuous days lost.
Method #3: If the injured worker has not been employed by the employer for at least 52 weeks prior to the date of the injury, then the injured worker’s average weekly wage equals the total wages earned by the injured worker over the actual number of weeks, including fractional weeks, over when the injured worker was employed by the employer, provided that the results are fair and just to both the injured worker and the employer.
Method #4: If methods #1 and #2 do not apply because the injured worker was not employed by the employer for at least 52 weeks prior to the date of injury AND use of method #3 is impractical because of the shortness of the period of time that the injured worker was employed by the employer OR because of “casualness” of the employment, then the average weekly wage may be calculated based on the wages that were being earned by a person of the same grade or character employed in the same class of employment in the same locality or community.
Method #5: If “exceptional circumstances” exist that would make application of methods #1, #2, #3, or #4 unfair, either to the injured worker or the employer, then some other method that would as nearly as possible approximate what the injured worker would have been earning but for the injury may be used.
Earnings received by an injured employee earned from employments other than the employment in which the injured worker sustained his/her injury, should not be considered in calculating an injured employee’s average weekly wage. McAninch v. Buncombe County Schools, 347 N.C. 126, 489 S.E.2d 375 (1997).
In North Carolina, the Industrial Commission primarily uses a Form 22 wage chart when determining an injured worker’s average weekly wage. A completed Form 22 notes the days an injured employee has worked for the 52 weeks prior to his/her work injury and the injured employee’s earnings over the 52 week period prior to the work injury.
An injured worker’s compensation rate is 66 and 2/3 percent of the injured worker’s average weekly wage. In North Carolina, the minimum compensation rate is $30.00 per week. North Carolina also has maximum compensation rates which vary according to the year of the work injury. The following is a list of maximum compensation rates for the last several years:
In North Carolina, in order to be entitled to disability benefits, an injured employee must prove that he/she is disabled. Pursuant to N.C. Gen. Stat. §97-2(9), disability is defined as “incapacity because of injury to earn the wages which the employee was receiving at the time of injury in the same or any other employment.” In Russell v. Lowes Product Distribution, 108 N.C. App. 762, 765, 425 S.E.2d 454, 457 (1993), the Court of Appeals laid out the following four ways in which an employee may prove that he is disabled: (1) by producing medical evidence that he is physically or mentally incapable of work in any employment as a consequence of the work-related injury, (2) by producing evidence to show he is capable of some work, but after a reasonable effort on his part has been unsuccessful in obtaining employment, (3) by producing evidence to show that it would be futile to look for work because of preexisting conditions, such as age, inexperience, lack of education, etc., or (4) by producing evidence to show he has obtained other employment at a wage less than what was earned prior to injury. Id.
Temporary Total Disability benefits are paid weekly at the injured employee’s compensation rate, which is 66 and 2/3% of the injured employee’s average weekly wage. Pursuant to N.C. Gen. Stat. §97-28, compensation is not due for the first seven calendar days of disability resulting from an injury unless the injury results in a disability lasting more than 21 days. Therefore, if the disability lasts more than 21 days, compensation must be paid from the date of the disability.
Pursuant to N.C. Gen. Stat. §97-29(c), for claims arising on/after June 24, 2011, an injured worker shall not be entitled to greater than 500 weeks of temporary total disability benefits from the date of first disability unless the employee qualifies for extended compensation by filing an application with the Industrial Commission to exceed the 500-week limitation. For claims arising on on/after June 24, 2011, an injured employee may apply for temporary total disability benefits to exceed 500 weeks if 425 weeks have passed since the date of first disability. In order to be entitled to temporary total disability benefits that exceed 500 weeks, the employee must prove by a preponderance of the evidence that he has sustained a total loss of wage-earning capacity. For claims arising before June 24, 2011, there is no cap on the duration of an injured employee’s ability to receive temporary total disability benefits.
Permanent Partial Disability is payable at the employee’s compensation rate based on the following schedule, which sets forth the number of weeks of compensation paid for a total 100 percent loss of the affected body part:
First Finger………………………….45 weeks
Second Finger……………………...40 weeks
Third Finger…………………………25 weeks
Fourth Finger……………………….20 weeks
Great Toe……………………………35 weeks
Any Other Toe……………………...10 weeks
Pursuant to N.C. Gen. Stat. §97-27(b), if the injured employee is dissatisfied with the permanent disability rating assigned by the authorized health care provider, the employee is entitled to have second opinion evaluation solely on the percentage of permanent disability by a physician of the employee’s choosing. If an employee is assigned two different permanent partial disability ratings, the Industrial Commission may award payment of the average of the ratings or the Commission may award payment of either of the ratings assigned.
An employee is NOT entitled to payment for permanent partial disability and temporary total disability/temporary partial disability at the same time. The employee may elect to receive whichever form of compensation provides the more favorable payout
A new law passed on June 24, 2011 amending the definition of “medical compensation” to include “vocational rehabilitation.” N.C. Gen. Stat. §97-2(19). In addition, N.C. Gen. Stat. §97-32.2, which is a provision specifically dealing with vocational rehabilitation, was adopted on June 24, 2011.
N.C. Gen. Stat. §97-32.2 provides that in a compensable claim, the employer may engage vocational rehabilitation services at any point during a claim, regardless of whether the employee has reached maximum medical improvement. N.C. Gen. Stat. §97-32.2 further provides that if an employee has not returned to work or has returned to work earning less than 75% of the employee’s average weekly wages and is receiving temporary partial disability benefits, the employee may request vocational rehabilitation services, including education and retraining in the North Carolina community college or university systems so long as the education and retraining are reasonably likely to substantially increase the employee’s wage-earning capacity following completion of the education or retraining program. Under the North Carolina Workers’ Compensation Act, the expense of vocational rehabilitation is borne by the defendants. If the employee is noncompliant with vocational rehabilitation, the defendants may file a motion to compel compliance with vocational rehabilitation with the Industrial Commission. If an Order is subsequently issued, ordering the employee to comply with vocational rehabilitation, but the employee continues to be noncompliant, the defendants may file a Form 24 Application, requesting that the employee’s disability benefits be terminated. N.C. Gen. Stat. §97-32.2(g) provides that “[t]he refusal of the employee to accept or cooperate with vocational rehabilitation services when ordered by the Industrial Commission shall bar the employee from further compensation until such refusal ceases, and no compensation shall at any time be paid for the period of suspension, unless in the opinion of the Industrial Commission the circumstances justified the refusal.”
Return to Work with Loss of Earnings
Pursuant to N.C. Gen. Stat. §97-30, when an injured employee returns to work earning less than he was earning at the time of his work injury due to his injury, the defendants shall pay to the injured employee during such disability, a weekly compensation equal to sixty-six and two-thirds percent (66 2/3%) of the difference between his average weekly wage before the injury and the average weekly wage which he is able to earn thereafter.
For claims arising on/after June 24, 2011, there is a 500 week cap on temporary partial disability benefits (in no case shall the employee receive more than 500 weeks of payments, and payment of temporary total disability benefits shall be deducted from the 500 weeks of payments available). N.C. Gen. Stat. §97-30. However, for claims arising before June 24, 2011, there is a 300 week cap on temporary partial disability benefits (the 300 weeks begins to run from the date of injury).
N.C. Gen. Stat. 97-2(22) defines “suitable employment” as “employment offered to the employee . . . that (i) prior to reaching maximum medical improvement is within the employee’s work restrictions, including rehabilitative or other noncompetitive employment with the employer of injury approved by the employee’s authorized health care provider or (ii) after reaching maximum medical improvement is employment that the employee is capable of performing considering the employee’s preexisting and injury-related physical and mental limitations, vocational skills, education, and experience and is located within a 50-mile radius of the employee’s residence at the time of injury or the employee’s current residence if the employee had a legitimate reason to relocate since the date of injury.”
There is a distinction made in the statute between “pre-MMI” and “post-MMI” employment. This distinction allows “rehabilitative or other noncompetitive employment with the employer of injury (also known as make-work) during the healing period and up until the point at which the worker has reached maximum medical improvement (MMI), so long as the employee’s authorized health care provider has approved the employment. However, after an employee has reached maximum medical improvement, in order for employment to be considered “suitable employment,” the job must be competitive employment and cannot be “make-work.”
Amputation or Loss of Use
N.C. Gen. Stat. §97-31 provides a schedule for compensation for the loss of use/amputation of particular body parts. Please refer to section "Impairment Rating" noting the schedule.
If an employee loses the first phalange of the thumb or any finger, the employee is entitled to 50% of the number of weeks allotted for the particular finger or thumb. N.C. Gen. Stat. § 97-31(6). However, if the employee loses more than one phalange, the employee is entitled to an amount for the total loss of the finger or thumb. N.C. Gen. Stat. §97-31(7).
If an employee loses the first phalange of any toe, the employee is entitled to 50% of the number of weeks allotted for the particular toe. N.C. Gen. Stat. §97-31(10). However, if the employee loses more than one phalange of any toe, the employee is entitled to an amount for the total loss of the toe.
Pursuant to N.C. Gen. Stat. §97-31(21), in the case of serious facial or head disfigurement, the Industrial Commission shall award proper and equitable compensation not to exceed twenty thousand dollars ($20,000.00). In the case of the loss of an eye, when an artificial eye cannot be fitted and used, the Industrial Commission may award the employee an amount for facial disfigurement.
Pursuant to N.C. Gen. Stat. §97-31(22), in case of serious bodily disfigurement for which no compensation is payable under any other subdivision of N.C. Gen. Stat. §97-31, but excluding the disfigurement resulting from permanent loss or permanent partial loss of use of any member of the body for which compensation is fixed in the schedule contained in N.C. Gen. Stat. §97-31, the Industrial Commission may award proper and equitable compensation not to exceed ten thousand ($10,000.00) dollars. In order to be entitled to an amount for serious bodily disfigurement, the employee must show that the disfigurement hampers his or her ability to secure employment. See Liles v. Charles Lee Byrd Logging Co., 309 N.C. 150, 305 S.E.2d 523 (1983). Compensation for serious bodily disfigurement is not required by the Act. Instead, its allowance or disallowance is within the legal discretion of the Industrial Commission. This differs from serious facial or head disfigurement since the Act makes it mandatory for the Industrial Commission to award proper and equitable compensation in case of serious facial or head disfigurement.
Loss of Sight
N.C. Gen. Stat. §97-31(19) provides that total loss of vision of an eye shall be considered as the equivalent of the loss of the eye. In addition, that statutory provision further provides that when there is 85% or more loss of vision in any eye, that loss shall be deemed “industrial blindness” and the employee shall be compensated for total loss of vision of such eye. Pursuant to N.C. Gen. Stat. §97-31(16), an employee is entitled to 120 weeks of disability benefits for the loss of an eye.
Loss of Hearing
N.C. Gen. Stat. §97-31(18) provides that for complete loss of hearing in one ear, the employee is entitled to disability benefits for 70 weeks and for the complete loss of hearing in both ears, the employee is entitled to disability benefits for 150 weeks.
Death benefits are payable when the death of the employee results from a compensable injury or occupational disease and occurs either within six years of the occupational injury or disease or two years from the final determination of disability, whichever is later. N.C. Gen. Stat. §97-38. In addition, the claim must be filed within two years of the date of death.
N.C. Gen. Stat. §97-38 provides the following priority of death benefit payments:
1. Persons Wholly Dependent upon Deceased Employee
a) Share and share alike, to exclusion of all others; and
b) If only one wholly dependent, receive all death benefits.
2. Persons Partially Dependent upon Deceased Employee
a) Only get benefits if none wholly dependent; and
b) Benefits are proportional to support.
3. Next of Kin
a) Only if none wholly dependent;
b) All partially dependent (if any) are Next of Kin;
c) Can share commuted (present) value of all benefits;
d) All Next of Kin share equally.
N.C. Gen. Stat. §97-39 provides that a widow/widower are conclusively presumed wholly dependent for support upon the deceased employee. This presumption does not apply to a common law spouse.
A widow is defined by N.C. Gen. Stat. §97-2(14) as the decedent’s wife living with or dependent for support on the decedent at the time of his death, or living apart for justifiable cause or by reason of his desertion at the time of death.
A widower is defined by N.C. Gen. Stat. §97-2(15) as the decedent’s husband living with or dependent for support upon her at the time of her death or living apart for justifiable cause or by reason of her desertion at such time
Where spouses are living apart pursuant to a legally executed separation agreement, they are not living apart for justifiable cause. Sloop v. Williams Exxon Service, 24 N.C. App. 129, 210 S.E.2d 111 (1974).
N.C. Gen. Stat. §97-39 provides that a child shall be conclusively presumed to be wholly dependent for support upon the deceased employee.
The definition of child in the North Carolina Workers’ Compensation Act includes posthumous child, child legally adopted prior to the injury of the employee, stepchild or acknowledged illegitimate child dependent upon the deceased employee. N.C. Gen. Stat. §97-2(12). The definition of “child” does not include married children, unless totally dependent. A child must be under 18 at the time of the death of the deceased employee. N.C. Gen. Stat. §97-2(12). A stepchild must be substantially dependent upon the deceased employee to qualify as a dependent.
Death Benefits/Parents and Siblings
If the deceased employee leaves neither whole nor partial dependents, then the compensation that would be payable to whole dependents is commuted to its present value and paid in a lump sum to next of kin.
“Next of kin” is defined in N.C. Gen. Stat. §97-40 as the child, father, mother, brother or sister of the deceased employee, including adult children or adult brothers and sisters, but excluding a parent who has willfully abandoned the care and maintenance of a child decedent and not resumed care and maintenance at least one year prior to the child attaining majority or the death of the child and continued care until the child’s death or majority.
Benefits that are distributed to next of kin are distributed in accordance with the law applicable to the distribution of the personal estate of persons dying intestate, with the order of priority being that the person or persons in one class take to the exclusion of all others.
Death Benefits/Amounts of Benefits
Pursuant to N.C. Gen. Stat. §97-38, the defendants are responsible for paying burial expenses, not to exceed $10,000.00.
N.C. Gen. Stat. §97-38 provides that compensation payments due on account of death of the employee shall be paid for a period of 500 weeks from the date of the death of the employee. However, if a widow/widower is unable to support him/herself due to mental or physical disability as of the date of the employee’s death, the widow/widower is entitled to receive death benefits until death or remarriage. In addition, death benefits due to a dependent child shall continue until the child reaches the age of 18. Death benefits are paid at a rate of 66 2/3% of the average weekly wage of the deceased employee at the time of the accident.
Following an alleged injury, the defendants may pay for medical treatment without prejudice to later deny the compensability of the claim. N.C. Gen. Stat. §97-25 provides for the payment of medical benefits. If the defendants have accepted a claim as compensable, the defendants are required to provide the injured employee with medical treatment for the accepted injury that is reasonably required to effect a cure, provide relief or lessen the period of the injured employee’s disability. Charlotte-Mecklenburg Hosp. Auth. v. North Carolina Indus. Comm., 336 N.C. 200, 443 S.E2d 716 (1994). The defendants have the right to direct medical treatment. However, an injured employee may obtain approval for a physician of his/her choosing by filing a motion for change in treating physician with the Industrial Commission. In order for the Industrial Commission to grant an injured employee’s request to change a treating physician, the employee must show by a preponderance of the evidence that the change is reasonably necessary to affect a cure, provide relief, or lessen the period of disability. N.C. Gen. Stat. §97-25.
If the defendants accept an injury as compensable by filing a Form 60 or Form 63 or if the Industrial Commission has issued an Opinion and Award, concluding the employee’s injury is compensable, there is a presumption that any treatment the injured employee requires for the injury in the future is related to the work injury. The defendants may rebut this presumption by offering evidence that the current condition for which treatment is sought is unrelated to the injured worker’s work injury.
N.C. Gen. Stat. §97-25.1 provides that “[t]he right to medical compensation shall terminate two years after the employer’s last payment of medical or indemnity compensation unless, prior to the expiration of this period, either: (i) the employee files with the Commission an application for additional medical compensation which is thereafter approved by the Commission, or (ii) the Commission on its own motion orders additional medical compensation.” N.C. Gen. Stat. §97-25.1 provides that “[i]f the Commission determines that there is a substantial risk of the necessity of future medical compensation, the Commission shall provide by order for payment of future necessary medical compensation.”
A Form 18M Application is normally filed with the Industrial Commission to request future medical treatment for life. For a Form 18M Application to be approved, the injured employee must prove that there is a substantial risk of requiring future medical treatment. The injured employee must file a Form 18M before two years have passed following the defendants’ last payment of medical or indemnity compensation. Administrative Orders are issued on the Form 18Ms with no evidentiary hearing. However, either party may appeal the Administrative Order by filing a Form 33 requesting a hearing such that an evidentiary hearing is subsequently held.
Non-Compliance with Medical Care
N.C. Gen. Stat. §97-25 provides “[t]he refusal to accept any medical compensation when ordered by the Industrial Commission shall bar the employee from further compensation until such refusal ceases, and no compensation shall at any time be paid for the period of suspension unless in the opinion of the Industrial Commission the circumstances justified the refusal.”
In practice, when an injured employee fails to comply with medical treatment in an accepted claim, the defendants may file a motion to compel the injured employee to comply with medical treatment. If an Order is issued by the Industrial Commission, ordering the injured employee to comply with medical treatment but the injured employee still fails to comply with treatment, the defendants may file a Form 24 Application to terminate disability benefits. An informal telephonic hearing will take place on the Form 24 Application and then an Order is issued approving or disapproving the Form 24 Application. N.C. Gen. Stat. §97-25 requires that if the Industrial Commission issues an Order approving a Form 24 Application, allowing the defendants to suspend disability benefits, the Industrial Commission must specify what action the employee should take to end the suspension and reinstate the compensation.
SUBROGATION OR CREDIT
General Rule Subrogation
Pursuant to N.C. Gen. Stat. sec. 97-10.2(f)(1), “[i]f the employer has filed a written admission of liability for [workers’ compensation benefits] under this Chapter with, or if an award final in nature in favor of the employee has been entered by the Industrial Commission, then any amount obtained by any person by settlement with, judgment against, or otherwise from the third party by reason of such injury or death shall be disbursed by order of the Industrial Commission for the following purposes and in the following order of priority;
a. First to the payment of actual court costs taxed by judgment and/or reasonable expenses incurred by the employee in the litigation of the third-party claim.
b. Second to the payment of the fee of the attorney representing the person making settlement or obtaining judgment, and except for the fee on the subrogation interest of the employer such fee shall not be subject to the provisions of G.S. 97-90 but shall not exceed one third of the amount obtained or recovered of the third party.
c. Third to the reimbursement of the employer for all benefits by way of compensation or medical compensation expense paid or to be paid by the employer under award of the Industrial Commission.
d. Fourth to the payment of any amount remaining to the employee or his personal representative.
f(2) The attorney fee paid under (f)(1) shall be paid by the employee and the employer in direct proportion to the amount each shall receive under (f)(1)c and (f)(1)d hereof and shall be deducted from such payments when distribution is made.
This means that defendants are entitled to a lien for all workers’ compensation benefits they have paid in a claim against any award or settlement plaintiff receives from a third party stemming from the underlying event that caused both plaintiff’s workers’ compensation claim and plaintiff’s third party claim.
While defendants are entitled to a lien for all workers’ compensation benefits they have paid, defendants can only recover up to 1/3 of the plaintiff’s total third party settlement (after court costs and other fees have been deducted from the third party settlement). While defendants could technically recover up to a third of plaintiff’s third party settlement/award, a portion of the plaintiff’s attorney’s fee is deducted and paid from defendants’ portion of the amount to which defendants are entitled for satisfaction of any lien rights. Therefore, defendants could not actually recover up to a full third of plaintiff’s third party settlement.
Pursuant to N.C. Gen. Stat. sec. 97-42, “[p]ayments made by the employer to the injured employee during the period of his disability, or to his dependents, which by the terms of this Article were not due and payable when made, may, subject to approval of the Commission be deducted from the amount to be paid as compensation
Assigning a credit is in the discretion of the Commission. Therefore, Defendants are not automatically entitled to a credit, even if the facts suggest a credit would likely be awarded by the Commission. Moretz v. Richards & Assoc., 327 S.E.2d 290 (N.C. App. 1986).
Certifying OrganizationTo become a specialist in North Carolina Workers’ Compensation Law, an attorney must receive certification from the North Carolina State Bar.
The minimum standards for certification as a specialist include the following:
(1) the applicant must be licensed and in good standing to practice law in North Carolina;
(2) the applicant must be “substantially involved” in the practice area, usually for a minimum of five years;
(3) the applicant must take a certain number of continuing legal education credits in the specialty area during the three years prior to application;
(4) the applicant must make a satisfactory showing of qualification in the specialty through peer review
(5) the applicant must achieve a satisfactory score on a written examination in the practice area.
Certification is granted for a period of 5 years. To become recertified, an attorney is not required to pass an additional examination. Instead, the attorney must just show that he/she is substantially involved in the practice of workers’ compensation law; attend CLEs in workers’ compensation law; and be favorably reviewed by peers.
If an attorney meets the above requirements, he/she will be provided a certificate of specialization from the North Carolina State Bar.
Claims professionals must be at least 18 years old and licensed and certified to manage and adjust workers’ compensation claims in the state of North Carolina. To obtain certification, an adjuster must take and pass the Pearson VUE Insurance Examination. Certification lasts for 2 years once received. North Carolina does maintain a reciprocal licensing program with a select few other states, so if an adjuster is licensed in one state, it is possible he/she would not have to take the exam to become certified in the state of North Carolina.
After an adjuster becomes certified in North Carolina, the adjuster must take additional steps to maintain his/her license. The adjuster is responsible for taking 24 hours of continuing education classes (including 3 ethics and 3 flood credits) every two years. The adjuster must also pay renewal and license fees periodically to maintain the license.
LITIGATION AND APPEAL
Deputy Commissioner Hearing
After either party files a Form 33 Request for Hearing, the claim will proceed to a hearing before a deputy commissioner at the N.C. Industrial Commission. Lay testimony is taken at the hearing. Then, the parties have an opportunity to take post-hearing depositions of experts, including medical experts and other experts retained, such as ergonomic experts. Following completion of the depositions, each party has an opportunity to submit “contentions,” which is a brief setting forth their arguments. Subsequently, the deputy commissioner files an Opinion and Award, with findings of fact, conclusions of law and award.
Either party has an opportunity to appeal from a deputy commissioner’s Opinion and Award to the Full Commission within 15 days from the date the party received the Opinion and Award. N.C. Gen. Stat. §97-85. The parties each have an opportunity to submit briefs to the Full Commission stating their arguments. The appellant first submits a brief to the Full Commission and thereafter, the appellee submits a responsive brief to the Full Commission. After the parties have submitted briefs to the Full Commission, oral arguments are scheduled before the Full Commission. A panel of three Commissioners hears the oral arguments and issues an Opinion and Award following the oral arguments. Significantly, the Full Commission is the ultimate fact-finder such that the Full Commission may weigh the evidence presented to the deputy commissioner and make its own determination as to the weight and credibility of the evidence. Keel v. H & V, Inc., 107 N.C. App. 536, 421 S.E.2d 362 (1992).
North Carolina Court of Appeals and Supreme Court
Either party to a claim may appeal from a Full Commission decision to the North Carolina Court of Appeals pursuant to N.C. Gen. Stat. §97-86 within 30 days from the date of receiving the Opinion and Award. If there is any competent evidence supporting the Commission’s findings of fact, the findings are conclusive on appeal, even if there is evidence that would have supported a finding to the contrary. Woodell v. Starr Davis Co., 77 N.C. App. 352, 335 S.E.2d 48 (1985). If the findings of fact are supported by competent evidence in the record and the findings support the Commission’s conclusions of law, the Court of Appeals must affirm the Full Commission’s Opinion and Award. Priddy v. Cone Mills Corp., 58 N.C. App. 720, 294 S.E.2d 743 (1982). Considering this standard of review, it is very difficult to have a Full Commission’s Opinion and Award reversed.
Each party has an opportunity to file a brief with the North Carolina Court of Appeals. A panel of three judges on the North Carolina Court of Appeals considers the appeal and files an Opinion. The Court of Appeals has the ability to hear oral arguments concerning the appeal. However, more often than not, the Court files an Opinion without hearing oral arguments.
If one of the three judges on the panel dissents from the majority opinion, the decision can be further appealed to the N.C. Supreme Court. Otherwise, appeal to the N.C. Supreme Court generally occurs only in cases when the Supreme Court allows a Petition for Discretionary Review, which statistically is quite rare.
The North Carolina Industrial Commission has established the Rules for Mediated Settlement and Neutral Evaluation Conferences. Mediation is mandatory in all Industrial Commission cases in North Carolina where a Form 33, Request for Hearing has been filed. Mediation is also mandatory when ordered by the Commission (Commissioners and Deputy Commissioners). Rule 1
The deadline to select a mediator is 55 days from the filing of the Form 33R, Response to Request for Hearing, or 21 days after the Commission’s Order to Mediate. The actual mediation must take place within 120 days of the mediation order. Either party is able to waive the 55/21 day deadlines and request that a mediator be appointed immediately. Id.
In cases where the plaintiff is unrepresented, the Commission will automatically dispense with mediation, unless the unrepresented plaintiff requests it. Rule 1(j)
Only the Commission may dispense with mediation. The parties may only dispense with mediation if 1) all disputed issues set forth in the hearing request (Form 33) are fully and completely resolved and the not of settlement is given to the dispute resolution coordinator. Rule 1(g)
The parties to a claim may also agree to voluntarily mediate a claim. In this instance, the parties may schedule and proceed with mediation on their own or they may submit a request for a mediation order. In both cases, the mediator must file a report of mediation with the Commission as required by Rule 6(b)(4). Rule 1(a)
If one party wishes to request mediation, that party may move the Commission for an order. The motion must state the reason(s) why the order should be allowed and, if the case is on a hearing docket, whether the party prefers the case to be set for hearing on the next docket, to wait for further notice from the parties, or for it to not be set before a specified date. The motion must be served on non-moving parties who have ten (10) days to respond. Rule 1(d)
A voluntary mediation with an unrepresented plaintiff is possible, but the plaintiff must request it and it could place the mediator in the awkward position of having to potentially render legal advice. Rule 1(j)
Mediated Settlement Agreements
At the conclusion of the mediation, the parties agree to finalize the terms agreed upon in a Mediated Settlement Agreement. This document is then signed by all the parties and indicates the material terms agreed upon. All agreements for payment of compensation must be submitted in proper form (usually an Industrial Commission Form already designated) for I.C. approval and must be filed with the Commission within 20 days of the conclusion of the mediation conference. Rule 4(d) Mediated Settlement Agreements are enforceable and once the terms have been reduced to writing and signed by the parties, the Industrial Commission will enforce it.
If the mediation ends with a complete resolution of the case, then the Mediated Settlement Agreement becomes the basis for a Compromise Settlement Agreement drafted by the attorneys and executed by all parties to the case. The Compromise Settlement Agreement is then submitted to the Commission for review and approval. Rule 502 of the Workers’ Compensation Rules of the North Carolina Industrial Commission.
A Compromise Settlement Agreement can be used to settle the indemnity portion of the claim only, the medical portion of the claim only, or both indemnity and medical portions of the claim.
Requirement to Carry Insurance:
N.C. Gen. Stat. §97-93, definitively establishes that, “[e]very employer subject to the provisions of this Article relative to the payment of compensation shall either:
1. Insure and keep insured his liability under this Article in any authorized corporation, association, organization, or in any mutual insurance association formed by a group of employers so authorized; or
3. Obtain a license from the Commissioner of Insurance under Article 5 of this Chapter, or under Article 47 of Chapter 58 of the General statutes (for self-insurance).”
In sum, if an entity or person qualifies as an employer, North Carolina requires that you carry workers’ compensation insurance or qualify as a self-insured entity.
Consequences for Failure to Carry Insurance
N.C. Gen. Stat. §97-94 establishes the mandate that every employer file evidence of its compliance with the requirement to carry insurance as defined by N.C. Gen. Stat. §97-93. Any employer who refuses or neglects to carry such coverage shall be punished by no less than $50.00 and no more than $100.00 per employee for each day that such refusal or neglect continues. This statutory sanction is levied on top of any necessary payment toward compensation owed an injured worker under the Act while the failure to provide coverage continues. Enforcement of this penalty is made by the Office of the Attorney General and the proceeds/penalties provided are remitted to the Civil Penalty and Forfeiture Fund in accordance with G.S. 115C-457.2.
Moreover, any employer who fails to provide coverage willfully ‘shall’ be guilty of a Class H felony. Those who have the ability and authority to bring the employer in compliance with the requirement for providing coverage, and are found to have willfully neglected to do so, will also be found guilty of a Class H Felony.
Finally, upon the Industrial Commission’s discretion, any person who violates N.C. Gen. Stat. §97-94 can be assessed a civil penalty of up to 100% of the amount of compensation due to the employer’s employees injured during the time the employer failed to comply.
Governance of North Carolina Workers’ Compensation Insurance:
The Department of Insurance (DOI) is the regulatory body for all types of insurance. Amongst other duties, it sets rates across all insurance industries; deals with fraud on the insurance companies, agents and others; and passes governing regulations. The DOI also serves as oversight to the various State authorities providing state-wide regulatory management. In North Carolina, that authority is the North Carolina Rate Bureau (NCRB). All companies writing business in North Carolina must be a part of either the NCRB or National Council on Compensation Insurance (NCCI). N.C.G.S. § 58-36-1(5)a; N.C.G.S. § 58-36-5.
While not an agency or insurance carrier itself, the NCRB is the organization which represents the state's workers’ compensation insurance companies (among other insurance industries) before the DOI, and exists only as a result of the statute which provides its regulatory authority. N.C.G.S. § 58-36-1. By statute, the NCRB is empowered to assign policies to carriers in North Carolina as well as file/set rates on behalf of member companies.
Additionally, the NCRB is charged with setting workers' compensation insurance rates, class codes, experience modifiers, determining eligibility for coverage, placing assigned risk coverage, and instituting the Workers' Compensation Insurance Plan (WCIP). The WCIP contains rules and regulations regarding who is entitled to coverage, effective dates, types of coverage, reporting requirements, reasons that a carrier can cancel a policy, and things that a carrier can ask for from an employer.
Assigned Risk Policies
‘Assigned risk’ translates into a policy or application for coverage which is difficult to place, or of a risk-dynamic that would not otherwise be able to obtain voluntary coverage. Often times, new businesses or high-risk jobs (such as construction) require the NCRB’s assistance, through its assigned risk process, to obtain the mandatory workers’ compensation coverage required to perform work in North Carolina.
Applying this knowledge, an employer must first go through an agent in order to submit an application to the NCRB for a direct assignment policy (that application is provided by the NCRB). Note, however, that the application is only submitted for initial/interim coverage, and not for renewals of coverage in good standing. In order to receive such interim coverage during the application process, an applicant must be in good standing without outstanding audits or premiums with a prior carrier. Once the NCRB receives the application, it randomly assigns the policy to an insurance company. The assigned insurance company is unable to alter the terms as assigned by the NCRB in any way, shape or form. The assigned insurance company must then write the policy as assigned pursuant to the application submitted to the NCRB.
Supposed ‘Ghost Policies’
There is no such thing as a ghost policy. This term represents industry jargon for what is properly identified as a ‘minimum premium policy.’ Such policies are legal in North Carolina. A minimum premium policy will cover any potential employees or uninsured subcontractors of the policy holder, but the policy holder has rejected coverage for his own injuries under the policy.
Recall that, if an insurance entity is not a part of the NCRB, they must be a part of the NCCI. The NCCI is a not-for-profit entity in place since 1922, and which studies and compiles data on workplace injuries impacting workers compensation. These studies provide insight on industry trends, and inform recommendations for workers compensation insurance rates and loss costs. The NCCI’s analysis also assists in proposing legislation impacting over 900 insurance companies and nearly 40 state governments. While North Carolina is not one of these state governments, North Carolina does recognize the NCCI’s import and analysis. Indeed, the NCRB’s WCIP is based upon the NCCI plan.
NCCI's services include:
• Rate and advisory loss cost filings
• Cost analyses of proposed and enacted legislation
• Residual market management
• Production of experience ratings
• Statistical and compliance services
• Maintenance of workers compensation classifications, rules, plans, and forms
As a point of clarification, it was noted earlier that all companies writing business in North Carolina must be a part of either the NCRB or the NCCI. N.C. Gen. Stat. § 58-36-1(5)a; N.C. Gen. Stat. § 58-36-5. While many member companies of the NCRB or NCCI are direct policy/coverage writers, groups known as Servicing Carriers may technically participate even while not actually writing coverage themselves.
What is a Servicing Carrier?1. Provides coverage to eligible employers on behalf of all pool participants.
2. Is fully reinsured through the National Reinsurance Pool.
3. Selected for a 3-year period through a bid process.
4. Quota determined as part of bid process.
What is a Direct Assignment Carrier?
1. Not reinsured through the National Reinsurance Pool.
2. Solely responsible for financial results of assignments.
3. Notification to NCRB annually on desire to be a direct assignment carrier.
4. Quota is equal to percentage share in voluntary market.
North Carolina Workers’ Compensation Coverage: Who is covered in any particular business
N.C. Gen. Stat. § 97-2(2) controls as the general rule of coverage in North Carolina, and is specific as to those rules governing coverage of owners, shareholders, executives, and sole proprietors as it relates to the particular types of companies or businesses which are applying for workers' compensation insurance.
The term “employee” means every person engaged in an employment under any appointment or contract of hire or apprenticeship, express or implied, oral or written, including aliens, and also minors, whether lawfully or unlawfully employed, but excluding persons whose employment is both casual and not in the course of the trade, business, profession, or occupation of his employer. N.C. Gen. Stat. § 97-2.
Sole Proprietors, LLC/LLP’s, partnerships
N.C. Gen. Stat. § 97-2(2) specifically states: “Any sole proprietor or partner of a business or any member of a limited liability company may elect to be included as an employee under the workers' compensation coverage of such business if he is actively engaged in the operation of the business and if the insurer is notified of his election to be so included.” N.C. Gen. Stat. § 97-2(2). It is a general rule of statutory construction that when the language of a statute is clear and without ambiguity, it is the duty of court to give effect to the plain meaning of the statute, and judicial construction of legislative intent is not required. Oxendine v. TWL, Inc., 184 N.C.App. 162, 167, 645 S.E.2d 864, 867 (2007). The statute that controls in this case is very specific. There is no precedential case law interpreting this part of N.C. Gen. Stat. § 97-2(2). However, the Court of Appeals has previously discussed this issue and its ruling is indicative of how they would rule on this issue in the future.
In Southerland v. B.V. Hedrick Gravel & Sand Co.,, the Court of Appeals discussed the impact of the injured plaintiff’s rejection of coverage pursuant to N.C. Gen. Stat. § 97-2(2) and the impact of N.C. Gen. Stat. § 97-19 that was in effect at the time the case was decided. 123 N.C.App. 120, 124, 472 S.E.2d 216, 219-20 (1996), rev’d 345 N.C. 739, 483 S.E.2d 150 (1997). At the time Southerland was decided, N.C. Gen. Stat. § 97-19 allowed for the coverage of the actual subcontractor by the general contractor when no certificate of insurance was provided. Southerland, at 122-23, 472 S.E.2d at 218-19. However, the Court of Appeals ignored this language in the statute and found that the injured plaintiff in Southerland, a sole proprietor and subcontractor who did not provide a certificate of insurance to the general contractor on the job, was not covered by N.C. Gen. Stat. § 97-19 and thus, was not entitled to any benefits. Id. at 123-24, 472 S.E.2d at 219. This finding was ultimately reversed by the North Carolina Supreme Court in Southerland v. B.V. Hedrick Gravel & Sand Co., 345 N.C. 739, 483 S.E.2d 150 (1997). However, the Court of Appeals decision also addressed the injured plaintiff’s insurance coverage in relation to his own personal insurance policy. The Court of Appeals cited to N.C.Gen. Stat. § 97-2(2) and stated that the plaintiff failed to elect to be included under his policy and therefore, was not afforded coverage for his injuries. Southerland, 123 N.C.App. at 122, 124, 472 S.E.2d at 220. While it is not precedent, it is persuasive on how the Court of Appeals would interpret N.C. Gen. Stat. § 97-2(2).
The statute requires that the Insurer be aware of the intent of coverage AND the injured worker’s active engagement in business operations. N.C. Gen. Stat. § 97-2(2). Both elements must be satisfied for coverage to bind. If Plaintiff only meets one of the two requirements, coverage cannot be found. Sole proprietors have the choice on the NCRB application of electing or excluding themselves from coverage under the policy. Without the insured contacting the insurance company or checking off the box of inclusion of coverage when completing the application, there is no way that the insurance company would otherwise know that a sole proprietor wanted to be included under the coverage in a workers' compensation policy. If a person wants to include themselves, then either their actual wages or the maximum payroll set by the NCRB are used in the calculations. The payroll is multiplied by the experience modifier, and the class code set by the NCRB is used to calculate the premium, whichever is less. The class code is the designator for the risk of work, i.e. whether the premium is $.48 per $100 up to $55 per $100 and changes based on the nature of the business. In sum, the premium increases, sometimes exponentially, when a sole proprietor chooses to be included. Further, an endorsement page is added to the policy to signify coverage. Without the endorsement, the general rule applies that the owner is not covered.
Corporations are very different. With Corporations, the officers are generally INCLUDED, unless there is specific notice that each one wishes to be excluded. N.C. Gen. Stat. § 97-2(2) specifically states: “[e]very executive officer elected or appointed and empowered in accordance with the charter and bylaws of a corporation shall be considered as an employee of such corporation. Any such executive officer of a corporation may be exempt from the coverage of the corporation’s insurance contract by such corporations specifically excluding such executive officer.”
This becomes tricky as well. An endorsement policy must be made to exclude the officers of a corporation. Also, an estoppel argument may come into play if, as an example, the president of the company completes the application and elects to exclude all of the officers without notifying each of them, or having them complete and sign the application. In such an instance, the Industrial Commission will likely find that the officers who did not have notice of the election would be covered. Many times, insurance agents require that all the officers sign individually election forms to avoid this problem.
Professional Employer Organizations (P.E.O.s)
Professional Employer Organizations (hereinafter “PEOs”) allow clients to outsource the management of human resources, employee benefits, payroll and workers’ compensation via a co-employment relationship. They offer these services by establishing and maintaining a co-employer relationship with the employees (sometimes at the client's worksite), and by contractually assuming certain employer rights, responsibilities, and risk.
These employment arrangements are governed by N.C. Gen.Stat. § 58-89A-1 to -180, which establishes licensing and operating standards for PEOs. Within the Act, N.C. Gen.Stat. § 58-89A-110 specifies a PEO’s requirements relating to workers’ compensation coverage. First, and foremost, that statutory section maintains the overarching precept that the relationship of a PEO to its clients is one defined by contract. Each contract between a PEO and its client(s) establishes its own regime of shared responsibilities for “assigned employees”.
Understanding this, N.C. Gen.Stat. § 58-89A-110 further delineates responsibilities a PEO may have to ‘assigned’ workers as distinct from other of its or its clients’ workers. Indeed the Act contemplates the parties to a PEO/client contract may require multiple workers compensation policies in order to provide the proper coverage required under the North Carolina Workers’ Compensation Act: one policy held by the PEO client for non-assigned employees of the underlying business; one OR MORE policies held by either or both the PEO and/or its client for assigned employees (for which a joint employer relationship exists); and one policy providing coverage for the employees of the PEO itself.
With respect to workers’ compensation carriers overseeing policies arranged by the PEO on behalf of the PEO clients (for assigned employees), the PEO Act, and the case law interpreting it, contemplates the carrier’s and PEO’s release from liability for injuries to unreported or unassigned workers. Hughart v Dasco Transportation Inc., 167 N.C. App 685 606 S.E. 2d 379 (2005). This is so regardless of whether the non-assignment of a particular injured worker resulted from a failure or omission of the PEO itself. Id. In Hughart, Defendant Dasco (Dasco) was a furniture delivery corporation, which entered into an agreement with Defendant Strategic Outsourcing, Inc. (SOI), in which Defendant SOI was to provide administrative and payroll services, including workers’ compensation coverage for employees assigned to Dasco. The decedent, James Boyd, was brought in to assist with Dasco deliveries in June 1999. There was a dispute as to whether the plaintiff completed an application; however, he began working for Dasco. Shortly thereafter, he was killed in a fatal car accident and his family sought workers’ compensation benefits from Dasco and SOI. Initially, the Industrial Commission concluded the decedent was a joint employee of Dasco and SOI. As such, both parties were responsible for providing workers’ compensation coverage. SOI appealed on the basis that the decedent was solely a Dasco employee.
The North Carolina Court of Appeals examined the nature of the relationship between employees and employers with respect to joint employment and indicated “joint employment as to one employer cannot be found in the absence of a contract with that employer.” Hughart at 690, 606 S.E.2d at 383 (quoting Anderson v. Texas Gulf, Inc., 83 N.C. App. 634, 638, 351 S.E.2d 109, 111 (1986)). The Court concluded there was no evidence of a contractual relationship between SOI and the decedent. Specifically, the Court relied upon the fact that the contract between SOI and Dasco required that an employee be assigned, in order to be covered. Hughart at 690, 606 S.E.2d at 383. Notably, SOI had not received the decedent’s application and the decedent had not been accepted as an employee by SOI; thus, he had not met the requirements to become an assigned employee.
See also, Jones v Fleet Source Inc. & Spectrum HR, LLC, (I.C. nos. 452843 & PH-1598); Sheets v Good Will Publishers, Inc. & Spectrum HR, LLC (I.C. nos 502281 & PH-1677); Maines v. Bentley Companies, Inc., & Spectrum HR, LLC (I.C. No: 420240 & PH-1559); Smith v. Administrative Transfer Systems, LLC (IC. Nos 452837 & PH-1398).
However, by nature of the joint-employment relationship which arises from a PEO/client relationship, in combination with other statutory defaults such as N.C. Gen. Stat. § 97-19, such avoidance of liability by one carrier, may result in exposure to another – whether that secondary carrier provides coverage for the underlying PEO client, or even an up-the-chain carrier for a general contractor working alongside the PEO client who failed to obtain a certificate of insurance.
The contract between an underlying employer and the PEO governs the legal employment status of workers for the purposes of workers’ compensation, and may act as a shield for the PEO or the carrier handling duly reported/designated ‘assigned workers.’ However, barring such a shield from liability, the PEO, its client(s), and all carriers inbetween, should concern themselves with possible joint and severally liablility for compensable injuries under the Workers’ Compensation Act. Omissions and failures to properly comply with the Workers’ Compensation Act will further expose the underlying employer, the PEO, and the individual managers to civil and criminal sanctions. This is regardless as to which party participated in the failure or omission.
Requirements of General and Sub Contractors for Proof of Insurance
If an injured worker is not an ‘employee’ of the insured, then there is no coverage for that worker under the policy. The policy terms of all companies limit the workers' compensation coverage to ‘employees.’ However, under certain circumstances, coverage is legally extended to an injured worker despite their facially absent status as a direct employee.
N.C. Gen. Stat. § 97-19 requires the general or principle contractor to procure a certificate of insurance from an insurance agent or company in order to protect themselves from liability if a subcontractor’s employee is hurt on the job. N.C. Gen. Stat. § 97-19. To become a statutory employer under N.C. Gen. Stat. § 97-19, two conditions must be met. "First, the injured employee must be working for a subcontractor doing work which has been contracted to it by a principal contractor. Second, the subcontractor does not have workers' compensation insurance coverage covering the injured employee." Rich v. R.L. Casey, Inc., 118 N.C.App. 156, 159, 454 S.E.2d 666, 667, disc. review denied, 340 N.C. 360, 458 S.E.2d 190 (1995); see also Patterson v. Markham and Assoc., 123 NC App 448, 474 SE.2d 400 (1996). If these conditions are met, then the principal contractor is a statutory employer and may be held liable for the payment of compensation and other benefits for its subcontractors’ employees if it did not procure a certificate of insurance from its subcontractor. Id. This does not, necessarily, apply to the actual subcontractor if they are injured; only the subcontractor’s employees.
The North Carolina Court of Appeals and the Industrial Commission have previously identified four factors which must be met in order for a general contractor (and its carrier) to avoid liability for work related injuries sustained by an employee of a lower tiered contractor. These four factors are very strictly applied:
1. There must be an actual Certificate of Insurance obtained by the higher tiered contractor;
2. The Certificate must be issued by a workers’ compensation insurance carrier;
3. The Certificate must address that the subcontractor has complied with General Statute §97-93 (this statute requires, amongst other things, the subcontractor to carry and maintain insurance); and
4. The Certificate must be obtained by the higher tiered contractor at the time that it sublets a contract to the subcontractor and relate to the job at which the claimant was injured.
So long as these four factors are met, the Industrial Commission has consistently found the general contractor has effectuated the purpose of N.C. Gen. Stat. §97-19, and may not be found liable. See Patterson v. Markham & Associates, 123 N.C. App. 448, 474 S.E.2d 400 (1996); See also Noebara N. v. Ricardo M. Castillo d/b/a Castillo Construction, IC #209351 and PH-0676. Indeed, even where an injured worker is left to recover from an uninsured sub-contractor, the Industrial Commission has not held the top tier contractor liable where the four factors have been strictly met. See James E. Alexander v. John Barnes, IC #481297.
Particular notice should be paid to the fourth requirement set out above. The Court of Appeals has affirmed that if the general contractor did not procure a certificate of insurance prior to starting the contract job on which the injury occurred, then the general contractor may also be held liable for any benefits owed. Robertson v. Hagood Homes, Inc., 160 N.C.App. 137, 584 S.E.2d 871 (2003). The Court in Robertson held that the general contractor's action in obtaining a certificate of insurance for the first contract it sublet to the subcontractor was not sufficient to demonstrate compliance with statutory requirement of obtaining a certificate of insurance with respect to each subsequent contract sublet to the subcontractor. Id. at 146-48, 584 S.E.2d at 877-78. The Robertson Court further specified that a general contractor is entitled to rely upon the certificate of insurance’s validity until the earlier of (1) the completion of the contract, or (2) notification that the insurance was cancelled. Id. In sum, a general or higher subcontractor cannot obtain just one COI for the year and rely on it. For every new job, it must obtain a certificate of insurance.
Also, as to the third requirement, suggesting that N.C. Gen. Stat. §97-19 requires the certificate of insurance be received from the insurance company or the Department of Insurance. While plaintiffs often argue that an insurance agent’s certificate of insurance does not satisfy this requirement, the NCRB has stated that a certificate of insurance from an insurance agent is acceptable since the certificate of insurance form document is prepared and signed off by the DOI/NCRB. The Industrial Commission holdings on this issue also reflect that receipt of a certificate of insurance from an agent is sufficient to satisfy this tier of N.C. Gen. Stat. §97-19
In addition to the statutory employment discussed above, a carrier may be estopped from arguing that an injured worker is not an employee for the purposes of coverage under certain circumstances. Specifically, the charge of premium to a higher tiered insured by a carrier for an otherwise uninsured subcontractor or individual causes that subcontractor to become covered under the policy terms whether they otherwise qualify as an employee for another contractor, independent contractor or subcontractor. The law of estoppel applies in such instances, and the insurance company cannot deny coverage on a person or company on which they have retained premium. Thus, before denying a claim for an uninsured subcontractor, review the audit and underwriting materials in order to ascertain whether premium was charged on that individual or company.
A renewal of a policy is exactly the same as the policy that was in force for the year before. None of the terms change unless the insured asks for them to change, and then follows through with paying the premium on the altered terms. For example, if a person wanted to change the designation of excluded to included, the employer would have to notify the carrier at renewal. Renewal and re-application are different things
N.C. Gen. Stat. § 58-36-110 regulates when an insurer may refuse to renew an insured’s workers’ compensation insurance. “An insurer may refuse to renew a policy that has been written for a term of one year or less at the policy’s expiration date by mailing written notice of nonrenewal to the insured not less than 45 days prior to the expiration date of the policy.” N.C. Gen. Stat. § 58-36-110(b). The notice shall be given by mail to the insured and any other person designated in the policy and state the precise reason for non-renewal. N.C. Gen. Stat. § 58-36-110(e).
Of particular interest to the topics covered by this outline is the interplay of ‘automatic renewal’ clauses incorporated within the body of standard workers’ compensation policies. Those clauses typically allow a roll-over of an employer’s workers’ compensation policy and coverage to the following year, absent notice of non-renewal or cancellation. Such clauses assist in both a carrier and employer’s ability to avoid time-gaps in coverage, and help maintain good employer-carrier relationships.
Consider, however, the impact on a carrier providing coverage to a sub-contractor who fails to pass audit during the pre-renewal phase of the policy, but who receives improper notice of non-renewal prior to the policy’s natural expiration. Following such attempted non-renewal, while the statutory scheme in place suggests a subsequent general contractor’s policy may step in to provide coverage for the subcontractor absent their receipt of a certificate of insurance issued by the subcontractor’s carrier, the case law provides a very different result. It is more likely that the question of a general contractor’s obligations under N.C.Gen. Stat. §97-19 as discussed above, will not be reached if the underlying subcontractor had a policy in place, either actually or by legal construct. Thus, if the carrier for the general contractor, or the general contractor’s own attorney can establish improper notice of non-renewal, it is the subcontractor’s ‘former’ carrier who will ultimately experience the exposure to a workers’ injury – even where that injury took place outside the original policy period, and as a result of the auto-renewal clause in conjunction with the legal requirements for notice.
Such scenarios are very real, and become even more problematic once issues of policy cancellation come to bear.
Generally, the cancelation of workers’ compensation policies is governed by N.C. Gen. Stat. §58-36-105. Without prior written consent of the insured, that statute specifies a policy may not be cancelled outside certain enumerated exceptions, including:
– Non-payment of premiums
– Material misrepresentation or nondisclosure in obtaining, continuing or presenting a claim under the policy
– Increased hazard or material change in the risk assumed (that was not and could not have been contemplated)
– Breach of contractual duties
– Willful failure to mitigate loss
– Loss of reinsurance
– Conviction of a crime arising out of acts which affect the insurability of risk
– NCRB determination that continued coverage would violate the law
The statute goes on to explain the process by which a policy being cancelled within one of these exceptions may/must effectuate that cancelation. More specifically, cancelation is only effective if notice providing the specific reason for cancellation is provided by registered or certified mail, return receipt requested, 15 days or more before the proposed effective date of cancelation. That notice must be provided to the insured and any other person designated in the policy to receive such notice. The address to which the notice must be sent is either the address identified within the policy, or the last known address of the individual(s) being served. The notice portion of the statute concludes:
Whenever notice of intention to cancel is required to be given by registered or certified mail, no cancellation by the insurer shall be effective unless and until such method is employed and completed.
These requirements, and their associated burdens to carriers arising out of the statutory language, lend themselves to misunderstanding and, sometimes, gaping disparity in a carrier’s analysis of exposure following a post-notification injury. This is especially so when considering the previously discussed and described issues of certification and policy renewal in combination with ineffective notice of cancelation.
While one might assume the plain language of the statute requiring notice by certified mail return receipt requested no less than 15 days prior to the effective cancellation was sufficient to mitigate misunderstanding, this statutory stipulation combines with other aspects of policy coverage to add significant hazard to any failed or incomplete attempt of policy cancelation.
As stated, N.C. Gen. Stat. § 58-36-105 governs an insurer’s ability to cancel a workers’ compensation policy. Policies may only be canceled for an enumerated reason, and only after giving 15 days notice. The notice requires a statement of the precise reason for cancellation and must be sent by registered or certified mail, return receipt requested. Cancellation is not effective without proper notice.
In Duganier, the Full Commission found Travelers liable for almost two years of wages after it failed to properly notify the insured of its intent to cancel the policy. Travelers issued a workers’ compensation policy running from June 5, 2001 to June 5, 2002. On November 15, 2001, it sent a “Notice of Cancellation for Non-Payment of Premium” to the insured. Although the notice was sent by certified mail, it lacked the statutorily required return receipt. Travelers intended to cancel the policy on December 5, 2001. On December 17, 2001, an employee of the insured was injured. Likely due to its sincere intent and attempt to cancel the policy, Travelers never sent a notice of refusal to renew the insured’s policy as required by N.C. Gen. Stat. § 58-36-110. Due to the failure to properly cancel or provide notice of non-renewal, the Full Commission awarded temporary total disability benefits from the day of the accident, December 17, 2001, until the day of the hearing, October, 16, 2003. The Full Commission gave this full award despite the fact that no premiums were paid after December 5, 2001, and the insured admitted that he understood the policy was to be cancelled.
The Full Commission’s opinion was approved by the Court of Appeals in Duganier v. Carolina Mtn. Bakery, 179 N.C.App. 184, 633 S.E.2d 696 (2006); see also Oxendine v. TWL, Inc., 184 N.C. App. 162, 645 S.E.2d 864 (2007)(wherein service of cancelation notice sent by regular mail without return receipt requested provided ineffective cancellation even with actual notice).
The effect of this case and the above statutes suggest that failure to ‘employ’ proper notice when cancelling a policy not only renders the cancellation void, but exposes a carrier to the policy’s automatic renewal clauses – thereby extending exposure beyond even the initial dates of coverage, and despite good faith efforts to cancel the policy months before the policy would otherwise have naturally expired.
“GIVEN vs. COMPLETED”
The Duganier and Oxendine cases identified above are amongst sparse legal precedent interpreting cancellation issues for workers’ compensation policies. In both cases, the carrier failed to send the notice by certified mail return receipt requested, but neither case definitively addressed questions beyond the method by which one must provide the required notice. As a result, the Courts’ response for what constitutes ‘completing’ the notification remains, to a degree, uncertain. While not dispositive, past rulings at the Industrial Commission level are instructive on that issue, but suggest two very different responses to this inquiry. Those approaches revolve around the statutory terms ‘given’ and ‘completed.’
Green Card Required
The majority of decisions discussing a carrier’s retention of a signed green card (establishing the insured received the cancellation notification) suggest that a carrier must produce the green card as evidence at hearing to establish the notification process was completed. If no green card is provided, cancellation will be found ineffective, and the carrier may face ongoing exposure under the policy as further described in the Court of Appeals matters Duganier and Oxendine
The Industrial Commission has arrived at this result even in those instances where multiple attempts to cancel the policy for non-payment of any premium were made by certified mail return receipt requested to the proper address at which the insured resided, but where no signed green card was returned to establish service was completed. Williams v. Ray Masonry, (IC Nos: 404247 & PH-1266). Perhaps even more disturbing when considering the inequities of this result, is the fact that the statute provides for no other method of service when and if these valid attempts continue to fail.
In the face of such decisions, which essentially hold a carrier captive to the willingness of the insured to accept/acknowledge service of a mailing, one argument, in particular, has succeeded on occasion. That argument hinges on how the Industrial Commission and courts might interpret whether notice was ‘given.’
Green Card Not Required
The statute is specific in that it requires that “notice be given by registered or certified mail, return receipt requested to the insured . . . to the address shown in the policy or last known address. N.C. Gen. Stat. § 58-36-105(b). The statute specifically states the notice be “given”, not “received”. N.C. Gen. Stat. § 58-36-105(b). The definition of “given” is: “issued on a specified date”, and “issued” means “to cause to flow out; emit, to circulate or distribute, to publish.” The Am. Heritage Coll. Dictionary of the English Language (4th ed. 2006). The plain meaning of the word “given” does not equate to “received”. Furthermore, the statute has no requirement that the notice be received by the insured. N.C. Gen. Stat. § 58-36-105. The efficacy of this relaxed interpretation is underscored by the fact that the statute also only requires that the notice be sent to the last known address, not the insured’s correct address. N.C. Gen. Stat. § 58-36-105(b).
By nature of the fact that the legislative history on this statute does not address the requirement of a green card being returned to the carrier to effectuate cancellation, and in consideration of the absence of any case law interpreting the specific issue, perhaps issuance of the cancellation notice by registered mail return receipt requested should be considered sufficient. This outcome was specifically supported in the matter of Oxendine v. Marshall Dees (I.C. No: 352379) (2005). In that North Carolina Industrial Commission case, there was no dispute that the carrier sent a cancellation notice by certified mail, return receipt requested in line with its policy and the statute governing cancellation. Within her Opinion and Award, Deputy Commissioner Phillips specified:
The statute and the policy do not require actual receipt by the insured. The statute merely provides that notice is to be “given” by mail. N.C. Gen. Stat. §58-36-105(b). The word “given” is used multiple times in connection with the requirement that mailing be effective by certified or registered mail. The Legislature intended only that notice be “given” by mail. The Legislature did not require notice to be received by the insured. Couch on Ins. 3d Ed. §32:7 provides:
“In general though, it is proof that the insurer mailed the cancellation notice in accordance with the statutory procedure for mailing, to insured’s correct address, rather than proof of receipt, which is the determinative factor in the effective cancellation of a policy….” See also, Smith v. Allstate Ins. Co., 573 F.Supp. 707, 709 (N.D.GA. 1983); Hill v. Allstate Ins. Co., 151 Ga. App. 542, 260 S.E.2d 370 (1979).
The statute and policy provide that cancellation is not effective until the method specified is “employed and completed.” An “unclaimed” letter is nevertheless a delivered letter. The letter has been placed in a spot for the recipient to sign for it. The letter was not “misdelivered.” The letter was not sent to the wrong address. The letter was not returned because Deese was no longer at the address. The only way a letter goes “unclaimed” is if the insured affirmatively elects to not sign for the letter.
In this case, mailing was proper and done pursuant to the policy and statute. By requiring notice to be sent by certified mail, return receipt requested, the insurer is able to show that it did send a notice of cancellation and that the address it was sent to, was the one specified in the policy. An insurer can do no more to comply with the statute and policy. Simply, an insurer “employs and completes” the procedure in the statute and policy when it “gives” notice by using certified or registered mail.
In the most recent session of the North Carolina Legislature there was a change called the Workers’ Compensation Cancellation/Electronic Communications. Within that section of the Bill, N.C. Gen. Stat. § 97-19 and N.C. Gen. Stat. § 58-36-105 were both amended. The changes to 97-19 have been outlined previously. The changes to 58-36-105 are slight and are detailed below.
There was no change to subsections (a), (c), (d), or (e) of the statute. The only change came to subsection (b). Formerly, under subsection (b), in order to cancel, terminate, or send notice of non-renewal an insurance company was required to send notice through registered or certified mail, return receipt requested. However, under the new statute, that requirement is no longer mandatory, but is now permissive. In addition to registered or certified mail, the insurance company may now send notice by any method permitted for service of process pursuant to Rule 4 of the North Carolina Rules of Civil Procedure. Of note, the term “completed” was not amended in the statute, and therefore, still requires the green card in order for the cancellation or non-renewal to be valid.
Under Rule 4 of the North Carolina Rules of Civil Procedure, there are three additional ways notice may be served: (1) by delivering a copy of the notice to an officer, director, managing agent or member of the governing body of the corporation, unincorporated association, organization or society, or by leaving copies thereof in the office of such officer, director, managing agent or member of the governing body with the person who is apparently in charge of the office; (2) by delivering a copy of the notice to an agent authorized by appointment or by law to be served or to accept service of process or by serving process upon such agent or the party in a manner specified by any statute; (3) by depositing with a designated delivery service authorized pursuant to 26 U.S.C. § 7502(f)(2) a copy of the notice, addressed to the officer, director, agent, or member of the governing body, delivering to the addressee, and obtaining a delivery receipt. As used in this sub-subdivision, “delivery receipt” includes an electronic or facsimile receipt.
If none of these options are available, notice may be served by publication. In such a case, the serving party shall file an affidavit with the court showing the circumstances warranting the use of service by publication, information, if any, regarding the location of the party served which was used in determining the area in which service by publication was printed and proof of service in accordance with G.S. 1-75.10(a)(2).
This statute is forward looking and applies as of the date it was enacted and applies to insurance policies and certificates of insurance in effect on or after that date. This provision was enacted on August 23, 2013.
The findings and general application derived from the Court of Appeals matters of Duganier and Oxendine v TWL, strongly suggest carriers should continue to timely serve and complete notice of cancellation – to include retention of an executed green slip establishing receipt by the insured. Anything short of this risks unexpected, yet sometimes unavoidable, exposure to post-notice injury claims. It appears from the recent legislative changes that, while recommended, the possession of the registered return receipt, or ‘green card’, may not be the linchpin to establish effective cancellation.