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Travelers Casualty & Surety Co. v. Titsworth5/18/2005
NOT DESIGNATED FOR PUBLICATION
AFFIRMED IN PART; REVERSED AND REMANDED IN PART
Appellee Alan Titsworth, a logging contractor in Hatfield, Arkansas, purchased workers' compensation insurance for his employees from Aetna Casualty & Surety Company, the predecessor of appellant Travelers Casualty & Surety Company, for a term beginning December 5, 1996, and ending December 5, 1997. After the end of the policy period, appellant audited appellee's payroll records and determined that appellee owed the company $30,343 in premiums. Appellee refused its demand, and on February 15, 2002, appellant filed this action in the Polk County Circuit Court, alleging that appellee owed it $30,343. In his answer, appellee admitted purchasing the insurance policy but denied owing any money to appellant.
The case was tried to the court on August 21, 2002. Velma Armstrong, an account manager for appellant, testified that, after appellee's policy expired, one of appellant's auditors conducted a premium audit of appellee's payroll records at his bookkeeper's office on January 14, 1998. She said that appellant's practice is to conduct such audits when the premium for a workers' compensation policy is paid at the beginning of the policy period, based on an estimated payroll. She testified that appellee paid an initial premium deposit of $9,092, based on an estimated payroll of $18,000. Ms. Armstrong said that the auditor determined that appellee's payroll was actually $79,152 and that he owed appellant $30,343. She admitted that she did not perform this audit but said her practice was to review the insured's payroll records, IRS Form 941s, federal tax returns, state tax returns, and cash disbursements, and that she discusses the audit with the insured. She said that the audit did not reflect any overtime pay or any independent contractors. She also stated that it would be important to know whether overtime was paid, because the excess pay would not be included in the amount on which the premium was based, and that this amount should not include employees living outside the state of Arkansas. She testified that an independent contractor would be covered under an employer's workers' compensation policy if the independent contractor did not carry coverage for himself. She admitted that the IRS Form 941s would not indicate whether payment was made for contract labor and that, to make a distinction between overtime and regular wages, the auditor would need to speak to the bookkeeper or the employer. Ms. Armstrong further admitted that she had no idea how many people were covered under this policy, that she had never discussed this audit with the auditor, and that she had never spoken with appellee or his accountant. She also said that appellant does not issue such policies based on the amount of tonnage of wood cut but only on the employer's total payroll.
Appellee testified that, during the policy period, he employed "three or four" people, one of whom was an independent contractor with his own equipment, and that the premiums for the policy were to be based upon the number of tons of wood cut per week. Appellee testified that the $9000 in premiums that appellant claimed he had paid was not the correct amount; in fact, he said he had paid his agent weekly, based on his business's amount of production. He said that the number of hours worked per week varied from forty to ninety hours, depending on the weather, and that, when someone worked over forty hours in one week, he paid him overtime, which was included with the regular wages. Appellee said that the independent contractors who had worked for him had owned their own trucks and that, on some of the payroll checks, he wrote "contractor labor
Page 1 2 3 4 Arkansas Personal Injury Attorneys
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