Employee vs. Independent Contractor - Again

When does an employer win suit against its workers' compensation carrier but still lose?

When it argues that employees are independent contractors and a jury doesn't understand the difference.

Senn Freight Lines, in South Carolina, bought three workers' compensation policies from Travelers Property Casualty Co. An audit revealed that the owners and operators of Senn Freight's trucks were statutory employees of Senn Freight.

Citing the audit, Travelers increased the premiums owed and attempted to bill Senn Freight. Senn Freight disputed the higher premiums, contending that its drivers were not employees. The two parties also disputed how many employees each driver had.

Travelers filed a debt collection suit against Senn Freight. Senn Freight filed a countersuit for bad faith cancellation of insurance policy.

At the trial court, the jury ruled for Senn Freight. Travelers filed a motion for judgment notwithstanding the verdict (JNOV), which the trial court denied. Travelers appealed.

At the South Carolina Court of Appeals, Travelers argued that the trial court should have granted its JNOV, and other motions on its debt collection claim. The insurer cited a dispute over how many employees worked for Senn Freight's truck drivers, which was important because it dictated the premium cost.

". . . evidence in the record indicates only that the owner/operators were statutory employees of Senn Freight," the court wrote. "The drivers transported loads for Senn Freight, and that responsibility was an important, integral part of Senn Freight's trade, business, or occupation. Third, evidence in the record indicates only that Senn Freight is liable to Travelers for unpaid final premiums based upon remuneration paid to the owner/operators. Travelers produced evidence the owner/operators were statutory employees of Senn Freight, but no evidence in the record indicates Senn Freight provided Travelers with 'proof' the owner/operators 'lawfully secured their workers' compensation obligations.'"

Senn Freight did not produce any evidence that each of the owner/operators had workers' compensation coverage, and Senn Freight's owner appeared confused about his obligations under the workers' compensation policies.

"As a result, evidence in the record indicates only that Senn Freight is liable to Travelers for final premiums based upon remuneration paid to owner/operators on all three policies," the court wrote. "Because it would be inappropriate to grant a directed verdict on the amount of damages owed to Travelers, we reverse and remand for a new trial as to damages."

This is the old employee versus independent contractor dispute which we in the industry all know what the outcome ultimately will be, but employers remain (and likely will in the future) stubbornly ignorant. I don't need to go into the qualifying elements here.

Brokers and agents out there that read this blog should see this case as a reminder to continually review your client's employment practices and counsel them on the difference between employee and independent contractor status in the workers' compensation world.

They don't like to hear it because it costs money, but employers need to know that if it smells like an employee, looks like an employee and tastes like an employee, then it doesn't matter what the package label says. Education does work, and paying the premium is cheaper than paying lawyers to pursue an untenable legal position.

The case is Travelers Property Casualty Co. v. Senn Freight Lines, No. 2013-UP-015, 1/9/13, unpublished, and yes, the employer also lost on the policy cancellation argument.