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Cat Express, Inc. v. Muriel

Court of Appeals of Illinois, First District, First Division

December 16, 2019

CAT EXPRESS, INC., Plaintiff-Appellant,
ROBERT H. MURIEL, in His Official Capacity as Director of Insurance; LIBERTY MUTUAL INSURANCE COMPANY; and THE DEPARTMENT OF INSURANCE, Defendants-Appellees.

          Appeal from the Circuit Court of Cook County No. 17 CH 13404 The Honorable Raymond W. Mitchell, Judge Presiding.

          Matthew P. Barrette and Ryan A. Mahoney, of Blitch Westley Barrette, S.C., of Oak Brook, for appellant.

          James T. Barnes and John C. Schmadeke, of Barnes, P.C., of Chicago, for appellee Liberty Mutual Insurance Company. Kwame Raoul, Attorney General, of Chicago (Mary C. Labrec, Assistant Attorney General, of counsel), for other appellees.

          JUSTICE PIERCE delivered the judgment of the court, with opinion. Justices Hyman and Walker concurred in the judgment and opinion.



         ¶ 1 This case involves an employment status dispute between plaintiff, CAT Express, Inc. (CAT), a trucking company, and defendant, Liberty Mutual Insurance Company (Liberty). CAT applied to the Illinois Assigned Risk Plan (Plan) for workers' compensation insurance coverage, and coverage was randomly assigned to Liberty. CAT disclosed six clerical workers subject to workers' compensation coverage. After a premiums audit, Liberty determined that CAT employed a substantial number of owner-operators that CAT did not disclose as employees and, consequently, CAT owed $356, 592 in additional premiums to cover the exposure related to the owner-operators. CAT disagreed, contending that its contracts with the owner-operators established an independent contractor relationship and not an employer-employee relationship. As a result, CAT requested that the National Council on Compensation Insurance (NCCI) resolve the question of whether the owner-operators were independent contractors or employees who were covered under the policy. The NCCI determined that it had no jurisdiction over the dispute and advised CAT to appeal to the Department of Insurance (Department). After a hearing, defendant Robert H. Muriel, [1] in his capacity as the Director of Insurance (Director), adopted the hearing officer's findings of fact, conclusions, and recommendation that Liberty correctly determined that CAT's "owner-operators" were employees rather than independent contractors and found CAT liable for the additional premiums. CAT's motion for reconsideration was denied, and on administrative review, the circuit court of Cook County affirmed the Department's order. CAT timely filed this appeal.

         ¶ 2 After the parties submitted their appellate briefs, we ordered supplemental briefing on the issue of whether the Department and the Director had authority to resolve the parties' dispute. We find that the Department did not have express or implied statutory authority to resolve this employment status dispute. The determination of whether the owner-operators were employees or independent contractors of CAT for purposes of calculating workers' compensation insurance premiums does not directly or indirectly involve the Department's or the Director's authority to administer the insurance laws of this state. Therefore, the Department acted beyond its authority in conducting the hearing and issuing the final order. We therefore vacate the circuit court's judgment affirming the Director's final order and vacate the Director's final order.

         ¶ 3 I. BACKGROUND

         ¶ 4 CAT is a trucking company that matches freight with truck drivers available to transport the freight. In 2015, CAT applied for workers' compensation insurance through the Plan administered by the NCCI. CAT's insurance application identified six clerical employees and did not disclose any truck drivers or any other employees to be insured under the policy. The Plan bound coverage and randomly assigned Liberty as CAT's workers' compensation carrier. Liberty issued an insurance policy effective November 7, 2015, with an estimated annual premium- which was subject to a final premium calculation-of $1284. In February 2016, Liberty conducted a premiums audit and determined that CAT contracted with numerous owner-operators, creating a policy exposure because they were employees of CAT. Liberty issued an endorsement demanding an additional annual premium of $356, 592 to cover the owner-operators. CAT cancelled the policy, and Liberty adjusted the premium owed to $150, 000.

         ¶ 5 CAT sought a determination from the NCCI as to the employment status of the owner-operators. The NCCI refused to resolve the dispute and sent a letter to CAT stating,

"The types of grievances that are under the jurisdiction of the NCCI/the [Illinois Workers' Compensation Appeals Board] are limited to those relating to the interpretation or application of the following NCCI rules:
1) Experience Rating Plan,
2) Classification system, and
3) Manual Rules.
Coverage or employment status disputes require an interpretation of the state or federal law and cannot be resolved by interpretation or application of NCCI rules."

         In its letter, the NCCI also informed CAT that it could appeal the NCCI's determination to the Department under section 462 of the Illinois Insurance Code (215 ILCS 5/462 (West 2016)).

         ¶ 6 As directed, CAT requested a hearing before the Director. The Director assigned a hearing officer who heard testimony from three witness and accepted numerous exhibits into evidence. The hearing officer issued written findings of fact, conclusions, and recommendations, finding that the owner-operators were CAT's employees, not independent contractors, for purposes of workers' compensation insurance coverage and that CAT was liable to Liberty for additional premiums.

         ¶ 7 The Director adopted the hearing officer's findings of fact, conclusions, and recommendations. The Director ordered that Liberty was entitled to the disputed premium charges. CAT exhausted its administrative remedies and filed a petition for administrative review in the circuit court. The ...

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