BP Staff v. Capital City Insurance

• Court: Court of Appeals of South Carolina
• Decided: January 16, 2008
• Docket: 2008-UP-060
• Status: Unpublished

Opinion

THE STATE OF SOUTH CAROLINA

THIS OPINION HAS NO PRECEDENTIAL VALUE.  IT SHOULD NOT BE CITED OR RELIED ON AS PRECEDENT IN ANY PROCEEDING EXCEPT AS PROVIDED BY RULE 239(d)(2), SCACR.

THE STATE OF SOUTH CAROLINA
In The Court of Appeals

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BP Staff, Inc., Appellant,

v.

Capital City Insurance Company, Respondent.

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Appeal From Unknown County
Ralph K. Anderson, III, Administrative Law Court Judge

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Unpublished Opinion No. 2008-UP-060
Heard December 12, 2007 – Filed January 16, 2008

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AFFIRMED

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D. Randle Moody, II, and  Ellison F. McCoy, both of

Greenville, for Appellant.

Mark Aloysius Cullen, of W. Palm Beach, for Respondent.

PER CURIAM: At issue in this appeal is the application of an experience modifier rating to Appellant BP Staff in the workers’ compensation insurance policy issued by Capital City Insurance Company.  The Administrative Law Court upheld the decision by the Department of Insurance to support the application of S.B. Phillips’ experience modifier rating to BP Staff.  BP Staff appeals the Administrative Law Court’s ruling on the ground that S.B. Phillips and BP Staff are separate entities owned respectively by father and son.  We affirm the ruling of the Administrative Law Court.

FACTS

S.B. Phillips is a temporary staffing agency founded in Greenville in 1968 and owned by Sam Phillips. Blanton Phillips, Sam Phillips’ son, worked for S.B. Phillips for several years in numerous positions until he eventually was “running most of the back office operations of the business, accounting and payroll and risk management.” Blanton primarily handled workers compensation for S.B. Phillips. In July of 2002, Blanton formed BP Staff, Inc. which provided “payroll, staffing, risk management, and other related services” to companies. Blanton is the sole owner of BP Staff.

In September 2002, BP Staff and S.B. Phillips entered into an agreement whereby BP Staff would hire the temporary workers of S.B. Phillips, perform payroll functions for those workers, and provide workers’ compensation for those workers. In essence, BP Staff would hire S.B. Phillips temporary employees and perform the same “back office” services for those temporary employees as Blanton himself had performed while working with S.B. Phillips. The temporary workers would still be provided to S.B. Phillips for placement in temporary positions with S.B. Phillips’ clients as the workers had been in the past. After the agreement S.B. Phillips essentially eliminated the in-house performance of “back office” functions such as risk management while still performing the “front office” services of sales, recruiting, and customer service. Some of BP Staff’s permanent employees were previously employed by S.B. Phillips. As late as 2004, permanent employees of BP Staff remained on S.B. Phillips’ payroll but were “assigned to BP Staff.”

In September 2002, S.B. Phillips and BP Staff each applied for workers’ compensation insurance through South Carolina’s Assigned Risk Pool after they were unable to secure coverage in the voluntary insurance market. South Carolina’s Department of Insurance (Department) forwarded the applications to Capital City Insurance Company (Capital City), one of two carriers in the Assigned Risk Pool. After reviewing BP Staff’s application, Capital City issued a policy for BP Staff with a 1.33 experience modifier rating (Modifier).  Experience modifier ratings (Modifier) are factors calculated using a complex formula developed by the National Council on Compensation Insurance (NCCI).[1]  NCCI also produces an experience rating plan manual (Plan Manual) that sets forth the rules governing the application of Modifiers to different entities applying for workers’ compensation insurance. Once approved by the Department of Insurance, the Plan Manual sets forth the rules regarding insurance coverage in the Assigned Risk Pool.

Modifiers are factors which affect the total cost of an entity’s premium. Under the Plan Manual, new companies applying for worker’s compensation insurance receive a neutral Modifier of one. If an insured has a history of above-normal claims for their type of industry, the insured’s Modifier would increase and thus cause an increase in the overall premium. The Modifier system provides an incentive for employers to provide a safe workplace. Insurance carriers traditionally consider temporary staffing agencies to be a high-risk business.

In its determination to apply the 1.33 Modifier of S.B. Phillips to BP Staff, Capital City reviewed the Plan Manual and information provided by S.B. Phillips and BP Staff before concluding the Modifier should follow the employees that created the experience. BP Staff’s request for reconsideration of the Modifier was granted by Capital City but the decision to apply S.B. Phillips’ modifier to BP Staff was not altered.  BP Staff appealed Capital City’s imposition of a 1.33 Modifier to NCCI and then the South Carolina Department of Insurance.  The Department held an evidentiary hearing on October 14, 2004, after which it ruled in favor of Capital City.

BP Staff subsequently appealed the Department’s findings to the Administrative Law Court (ALC) on August 5, 2005. On August 23, 2006, the ALC upheld the Department’s findings, specifically the interpretation of the Plan Manual, the evidence in support of applying the 1.33 Modifier to BP Staff, the sufficiency of the Department’s findings, and the denial of BP Staff’s request to reopen the record and admit a letter issued by NCCI subsequent to the Department’s hearing. BP Staff filed notice to appeal with this court on September 22, 2006.

STANDARD OF REVIEW

As revised by Act 387 in 2006, South Carolina Code Section 1-23-380 sets forth the standard of review when the court of appeals is sitting in review of a decision by the Administrative Law Court on an appeal from an administrative agency.  Section 1-23-380(A)(5) forbids the court of appeals from substituting “its judgment for the judgment of the agency as to the weight of the evidence on questions of fact.” S.C. Code Ann. § 1-23-380(A)(5) (2006).  The court of appeals may reverse or modify the decision only if substantial rights of the appellant have been prejudiced because the administrative decision is clearly erroneous in light of the reliable and substantial evidence on the whole record, arbitrary or otherwise characterized by an abuse of discretion, or affected by other error of law.  S.C. Code Ann. §§ 1-23-380(A)(5)(d)-(f) (2006).  “The review of the administrative law judge’s order must be confined to the record.”  S.C. Code Ann. § 1-23-610(C) (2006).

The Department’s decision can be set aside if it is unsupported by substantial evidence.  Hamm v. Central States Health & Life Co., 292 S.C. 408, 410, 357 S.E.2d 5, 6 (1987); Lark v. Bi-Lo, Inc., 276 S.C. 130, 136, 276 S.E.2d 304, 307 (1981).  “Substantial evidence” is not a mere scintilla of evidence, nor the evidence viewed blindly from one side of the case, but is evidence which, considering the record as a whole, would allow reasonable minds to reach the conclusion the administrative agency reached.  Taylor v. S.C. Dep’t of Motor Vehicles, 368 S.C. 33, 36, 627 S.E.2d 751, 752 (Ct. App. 2006) cert. granted, Aug. 9, 2007; S.C. Coastal Conservation League v. S.C. Dep’t of Health & Envtl. Control, 363 S.C. 67, 76, 610 S.E.2d 482, 487 (2005).

The party challenging a governmental body’s decision bears the burden of proving the decision is arbitrary.  Pressley v. Lancaster County, 343 S.C. 696, 704, 542 S.E.2d 366, 370 (Ct. App. 2001).  Appellants also shoulder the burden of proving an agency’s decision is unsupported by evidence.  Bursey v. S.C. Dep’t of Health & Envtl. Control, 360 S.C. 135, 142, 600 S.E.2d 80, 84 (Ct. App. 2004), aff’d, 369 S.C. 176, 631 S.E.2d 899 (2006).

LAW/ANALYSIS

I.       The Experience Rating Plan Manual

BP Staff argues the Administrative Law Court improperly considered the Plan Manual.  This argument is not preserved for our review.

BP Staff did not contest either the Department’s or the ALC’s treatment of the Plan Manual as “the applicable governing document concerning the issues in this case.” In fact, BP Staff concedes in numerous briefs that “the terms of the 1984 Plan Manual contain all rules applicable to this dispute.” In their brief to the ALC, BP Staff uses the term “regulation”[2] when referring to the Plan Manual and presses the court to utilize the rules of statutory construction in interpreting the Plan Manual.

An issue not ruled upon by antecedent trial courts is not preserved for appeal. West v. Newberry Electric Coop., 357 S.C. 537, 543, 593 S.E.2d 500, 503 (Ct. App. 2004) (holding an issue neither addressed by the trial judge in the final order nor mentioned in a subsequent motion for reconsideration is not preserved for review); Wilder Corp. v. Wilke, 330 S.C. 71, 76, 497 S.E.2d 731, 733 (1998) (“It is axiomatic that an issue cannot be raised for the first time on appeal, but must have been raised to and ruled upon by the trial judge to be preserved for appellate review.”).  In addition, a party cannot argue one ground at trial and an alternate ground on appeal. State v. Dunbar, 356 S.C. 138, 142, 587 S.E.2d 691, 693-94 (2003).

II.      Part III(B) of the Experience Rating Plan Manual

BP Staff argues the Administrative Law Court erred in holding the list in Part III(B) of the Plan Manual is not a restrictive enumeration of the actions that cause the experience modification rating of one entity to be applied to another entity.  We disagree.

Part III(B) of the Plan Manual involves ownership changes which may affect the Modifier bestowed upon an entity.  Part III(B) explains “when a change occurs, a determination shall be made to exclude or retain an entity’s experience.” Part III(B) further states:

For purposes of this Plan, a change in ownership includes any of the following:

(a) Sale, transfer or conveyance of all or a portion of an entity’s ownership interest.

(b) Sale, transfer or conveyance of an entity’s physical assets to another entity which takes over its operations.

(c) Merger or consolidation of two or more entities.

(d) Formation of a new entity subsequent to the dissolution or non-operative capacity of an entity.

(e) Voluntary or court-mandated establishment of a trustee or receiver, excluding a debtor in possession, a trustee under a revocable trust or a franchisor.

In determining the nature of the list in Part III(B) the ALC first employed rules of statutory construction and dictionary definitions of “include.”  “Where a word is not defined in a statute, our appellate courts have looked to the usual dictionary meaning to supply its meaning.” Lee v. Thermal Engineering Corp., 352 S.C. 81, 91-92, 572 S.E.2d 298, 303 (Ct. App. 2002); State v. Dickinson, 339 S.C. 194, 199, 528 S.E.2d 675, 677 (Ct. App. 2000) (citing Black’s Law Dictionary for the definition of “obtaining” used in a statute for obtaining property in fraudulent manner).  The ALC quoted the third edition of the American Heritage Dictionary of the English Language and Black’s Law Dictionary, the latter of which defines “include” as “to contain as part of something.” Black’s Law Dictionary (8^th ed. 2004 and 6^th ed. 1990).

On appeal, BP Staff makes a conclusory argument that “none of the[se] definitions of the word “includes” provide[s] any guidance as to whether the list contained in Part III(B) of the Plan Manual is exclusive in nature.” Failure to provide arguments or supporting authority for an issue renders it abandoned. First Savings Bank v. McLean, 314 S.C. 361, 363, 444 S.E.2d 513, 514 (1994). 

The ALC also used case law to determine the nature of the list in Part III(B), specifically, how other courts have interpreted the term “include.”  BP Staff argues the ALC incorrectly cited three cases that allegedly utilize the term “include” in a manner to indicate a partial list. In its order the ALC referred to Adkins v. S.C. Dep’t of Corr., 360 S.C. 413, 602 S.E.2d 51 (2004), Douglass ex rel. Louthian v. Boyce, 344 S.C. 5, 542 S.E.2d 715 (2001), and Reliance Ins. Co. v. Smith, 327 S.C. 528, 489 S.E.2d 674 (Ct. App. 1997), as appellate decisions that have employed an expansive interpretation of “include.” Louthian, Adkins, and Reliance respectively involve the South Carolina Probate Code, the state prison system, and state agency rulemaking.  While none of these cases define “include,” they all illustrate courts’ usage of “include” in an expansive manner.  For example, in Louthian the South Carolina Supreme Court found that “other fiduciary property” as used in Section 62-1-109 of the South Carolina Probate Code includes the proceeds of a wrongful death action since such an action is brought by a fiduciary.  Such proceeds were not expressly enumerated in any definition of “other fiduciary property.” 344 S.C. at 10, 542 S.E.2d at 717-18.  The supreme court has also held simply because a matter is not expressly mentioned in a list does not mean that matter is forbidden or restricted from an agency’s reach.  S.C. Coastal Conservation League v. S.C. Dep’t of Health & Envtl. Control, 354 S.C. 585, 588-89, 582 S.E.2d 410, 412 (2003). 

Appellant fails to prove the ALC’s holding regarding the Department of Insurance’s interpretation of Part III(B) of the Plan Manual is arbitrary, characterized by an abuse of discretion, or otherwise affected an error of law.  S.C. Code Ann. §§ 1-23-380(A)(5)(d)-(f) (2006);   First Savings Bank, 314 S.C. at 363, 444 S.E.2d at 514 (“Mere allegations of error are not sufficient to demonstrate an abuse of discretion.”)  Accordingly we find no reason exists to reverse or modify the ALC’s holding.

III.    Substantial Evidence

BP Staff argues the record is devoid of substantial evidence to support the Administrative Law Court’s ruling regarding the application of a 1.33 experience modifier rating to BP Staff.  We disagree.

The record is replete with evidence indicating BP Staff and S.B. Phillips have a unique relationship which justifies the application of S.B. Phillips’ Modifier to BP Staff’s policy of workers’ compensation insurance. 

Neither Sam nor Blanton Phillips has any ownership in the other’s company, but S.B. Phillips and BP Staff have a unique relationship.  S.B. Phillips was BP Staff’s first client. Pursuant to a 2002 contract, BP Staff hired the temporary employees of S.B. Phillips and provides those temporary employees back to S.B. Phillips for S.B. Phillips to place in employment. Under the contract BP Staff provides the payroll and workers’ compensation for those employees as well as risk management for that group of S.B. Phillips’ employees. Approximately 80 employees remained at S.B. Phillips following the institution of the contract. These employees handle the “front office” services of sales, recruitment, and placement of temporary employees.

Although BP Staff has over two thousand employees, only four of those employees are permanent or non-temporary employees. The four permanent employees work in Greenville in the same office building where S.B. Phillips is located. In the first ten months following BP Staff’s inception, S.B. Phillips provided approximately ninety-seven percent of BP Staff’s payroll. BP Staff and S.B. Phillips also applied for workers’ compensation coverage in an assigned risk plan at approximately the same time.

Dwayne Schumpert, an underwriter at Capital City Insurance, reviewed BP Staff’s and S.B. Phillips’ applications for insurance coverage as part of South Carolina’s Assigned Risk Pool.[3]  To Schumpert it “appeared that there had been a new company set up so that they would have the temporary portion and then S.B. had the permanent employees.” From the information both companies supplied, it was clear the payroll of S.B. Phillips had been moved to BP Staff resulting in an initial payroll of 20 million dollars as soon as BP Staff was formed.

Schumpert also believed BP Staff and S.B. Phillips were related due to the similarities in both companies’ applications. Although the applications were in separate envelopes, the envelopes were addressed in the same manner and were received on the same day. The applications requested the same effective date, expiration date, and limits as well as two types of coverage that are rarely requested. Both applications listed the same three insurance companies as proof of rejection from the voluntary market.[4] Identical portions of the applications were blank and both applications listed Kara deBorde as the person responsible for handling claims information. The identical nature of the applications caused Schumpert to believe the same individuals had filled out each company’s application for coverage.

Each application also had notations regarding the coverage they were requesting. The S.B. Phillips’ application explained “we are not seeking coverage for temporary employees” but that coverage was requested only for permanent, administrative staff. Likewise the BP Staff application noted, ‘[t]his application is for coverage for temporary employees only.” The drug policy information BP Staff provided to Capital City was faxed with a cover letter indicating it was a policy for BP Staff but many of the individual, substantive pages explaining the drug policy referred to S.B. Phillips or Phillips Staffing.

Due to these similarities Schumpert applied the 1.33 Modifier of S.B. Phillips to the workers’ compensation insurance policy of BP Staff.  When Schumpert’s decision was further reviewed by Paula Shields at NCCI and Dean Kruger at the South Carolina Department of Insurance, both came to the same conclusion that S.B. Phillips’ Modifier should follow the employees to BP Staff which was operating as in-concert with S.B. Phillips as a successor-type company. BP Staff had “the same operations, the same clients, the same employees” as S.B. Phillips. At the Department of Insurance hearing, Blanton admitted BP Staff and S.B. Phillips operate in-concert and share employees.

In addition, when dealing with the South Carolina Employment Security Commission BP Staff had claimed it was a successor to S.B. Phillips and as a successor, “should have received a successor number and predecessor rate.” BP Staff’s report to the South Carolina Employment Security Commission further states that “exempt wages [are] covered under predecessor’s employers.”

The Department of Insurance’s decision can be set aside if it is unsupported by substantial evidence. Hamm v. Central States Health & Life Co., 292 S.C. 408, 410, 357 S.E.2d 5, 6 (1987).  The possibility of drawing two inconsistent conclusions from the evidence does not prevent an administrative agency’s finding from being supported by substantial evidence.  Bursey v. S.C. Dep’t of Health & Envtl. Control, 369 S.C. 176, 188, 631 S.E.2d 899, 906 (2006). The credibility and weight of a witness’s testimony is for the trier of fact.  Parsons v. Georgetown Steel, 318 S.C. 63, 67, 456 S.E.2d 366, 368 (1995).  In light of the evidence presented in the record, we find substantial evidence supports the ALC’s finding that the Department of Insurance’s determination that S.B. Phillips’ Modifier should apply to BP Staff.

IV.    Supplementation of the Record

BP Staff argues the Administrative Law Court improperly ruled the Department of Insurance did not commit an error of law when the Department refused to allow cumulative supplemental evidence into the record following the conclusion of the evidentiary hearing.  We disagree.

After the Department’s evidentiary hearing concluded, BP Staff sought to admit a November 3, 2004 letter issued by Wendy Steinberg, an employee in NCCI’s Experience Rating Department, that states “S.B. Phillips and BP Staff Inc. are not combinable with each other.” BP Staff was unsuccessful in arguing the Department should admit the letter into the record. The ALC upheld the Department’s decision and found such a decision “to reopen an administrative record for additional evidence is within the Department’s sound discretion and will not be disturbed on appeal absent an abuse of that discretion.” Brenco v. S.C. Dep’t of Transp., 363 S.C. 136, 145, 609 S.E.2d 531, 536 (Ct. App. 2005).

BP Staff argued in their pre-hearing brief to the ALC that S.B. Phillips and BP Staff were not combinable. During the Department’s hearing, evidence was presented that NCCI initially held BP Staff and S.B. Phillips were not combinable. In the post-hearing brief to the Department, BP acknowledges that “during the October 14 hearing, two NCCI officials testified that BP Staff and S.B. Phillips were not combinable.”

Through BP Staff’s own admissions, the letter stating BP Staff and S.B. Phillips are not combinable is cumulative to the evidence already in the record. “Although relevant, evidence may be excluded if its probative value is substantially outweighed by the danger of unfair prejudice, confusion of the issues, or misleading the jury, or by considerations of undue delay, waste of time, or needless presentation of cumulative evidence.” Rule 403, SCRE.  In addition, BP Staff has made no showing that the additional evidence of the November 3 letter would result in a changed outcome. “To warrant reversal based on the admission or exclusion of evidence, the appellant must prove both the error of the ruling and the resulting prejudice.” Wright v. Craft, 372 S.C. 1, 34, 640 S.E.2d 486, 504 (Ct. App. 2006).  Accordingly we find no error of law or abuse of discretion by the ALC in upholding the Department of Insurance’s decision not to reopen the record.

AFFIRMED.

HEARN, C.J., THOMAS, J., and GOOLSBY, A.J., concur.

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[1] NCCI is a rating organization that collects data from carriers and provides statistical and rating information on worker’s compensation and employee injuries to several states, including South Carolina.

[2] Black’s Law Dictionary defines “regulation” to be “1) The act or process of controlling by rule or restriction; 2) Bylaw; 3) A rule or order, having legal force, usually issued by an administrative agency.” (8^th ed. 2004).

[3] When companies cannot obtain insurance coverage in the voluntary market, they may apply for coverage under South Carolina’s Assigned Risk Pool. Applications for coverage under this program are split between Capital City Insurance and Companion Insurance. By chance both BP Staff’s application and SB Phillips’ application were forwarded to Capital City. Schumpert noted that insurance companies traditionally think of temporary staffing as a high risk enterprise so many temporary staffing companies end up seeking coverage in a residual market such as South Carolina’s Assigned Risk Pool.

[4] To gain coverage in the Assigned Risk Pool, companies must demonstrate their applications for coverage have been rejected by at least two insurance carriers in the voluntary market.