{
  "id": 8526008,
  "name": "GARRY L. DOUD, Employee-Plaintiff v. K & G JANITORIAL SERVICES, Employer-Defendant; FIDELITY & CASUALTY COMPANY OF NEW YORK, Carrier-Defendant and/or DANCY CONSTRUCTION COMPANY, Employer-Defendant; AETNA INSURANCE COMPANY, Carrier-Defendant",
  "name_abbreviation": "Doud v. K & G Janitorial Services",
  "decision_date": "1984-06-19",
  "docket_number": "No. 8310IC9",
  "first_page": "205",
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    "judges": [
      "Chief Judge VAUGHN and Judge HILL concur."
    ],
    "parties": [
      "GARRY L. DOUD, Employee-Plaintiff v. K & G JANITORIAL SERVICES, Employer-Defendant; FIDELITY & CASUALTY COMPANY OF NEW YORK, Carrier-Defendant and/or DANCY CONSTRUCTION COMPANY, Employer-Defendant; AETNA INSURANCE COMPANY, Carrier-Defendant"
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    "opinions": [
      {
        "text": "BECTON, Judge.\nI\nPlaintiff, Garry L. Doud, appeals from the North Carolina Industrial Commission\u2019s Order dismissing, on jurisdictional grounds, his claim for workers\u2019 compensation benefits.\nIn April 1980, Doud began a cleaning service business, K & G Janitorial Services. On 16 April 1980 he completed an application for workers\u2019 compensation insurance with the aid of Ms. Meadow Patten, an insurance agent at Woody Clinard Insurance, Inc. Both Patten and Doud testified that Doud intended to insure himself and his employees. Effective 1 July 1979 the General Assembly had amended N.C. Gen. Stat. \u00a7 97-2(2) (1979 & Supp. 1983) to permit \u201c[a]ny sole proprietor or partner of a business whose employees are eligible for benefits under this Article [to] elect to be included as an employee under the workers\u2019 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.\u201d [Emphasis added.] The statute does not specify the method of notification. Prior to the 1979 amendment, sole proprietors could insure their employees but were ineligible for workers\u2019 compensation insurance themselves.\nPatten completed a form entitled \u201cApplication for Workers\u2019 Compensation Insurance,\u201d drafted by the North Carolina Rate Bureau (Bureau) in August 1977. The Bureau\u2019s pre-amendment form did not include any space to elect or designate sole proprietor coverage. Patten named Garry Doud DBA K & G Janitorial Services as the employer. Patten specified that the employer\u2019s legal status was \u201cIndividual.\u201d She included Doud\u2019s salary in the estimated annual payroll. Patten submitted the completed application to the Bureau. The Bureau calculated the premiums based on the estimated annual payroll, then assigned and forwarded Doud\u2019s application to Fidelity & Casualty Company of New York (Fidelity). The policy issued to Doud by defendant, Fidelity, listed Garry Doud DBA K & G Janitorial Services as the insured and his legal status as \u201cIndividual.\u201d The policy did not have a sole proprietor endorsement attached nor did it specify that such an endorsement was a prerequisite for sole proprietor coverage.\nOn 1 June 1980 Doud was slightly injured while at work. He filed an Industrial Commission Form 19, \u201cEmployer\u2019s Report of Injury to Employee,\u201d with Underwriters Adjusting Company (UAC), the claim handling adjusters for Fidelity. UAC paid the claim for $66.49 in medical expenses as a \u201cmedical only\u201d claim without first checking the insurance policy.\nIn August 1980 Doud was hired by defendant Dancy Construction Company (Dancy) to clean the windows of a building under construction. While working on 15 September 1980, Doud fell from a ladder owned by Dancy and broke bones in both ankles. Fidelity denied Doud\u2019s workers\u2019 compensation claim for the 15 September 1980 accident, asserting that Doud\u2019s insurance policy did not cover him as the sole proprietor.\nA Deputy Commissioner, after a hearing, concluded that the North Carolina Industrial Commission (Commission) lacked jurisdiction over Doud\u2019s claim. The Commission adopted as its own the Opinion and Award of the Deputy Commissioner. We refer, therefore, to the Commission\u2019s findings and conclusions.\nII\nDoud argues that the Commission erred in ultimately concluding that it lacked jurisdiction over his claim, after finding and concluding that (1) Fidelity had no notice of Doud\u2019s election; (2) Fidelity was not estopped to deny coverage by its payment of the June 1980 \u201cmedical only\u201d claim; and (3) Doud was not in an employer-employee relationship with either Dancy or Dancy\u2019s subcontractor.\nIll\nOrdinarily, to come within the provisions of the Workers\u2019 Compensation Act, a claimant has the burden of proving that an employer-employee relationship existed at the time of the injury. Lucas v. Li\u2019l General Stores, 289 N.C. 212, 221 S.E. 2d 257 (1976); Durham v. McLamb, 59 N.C. App. 165, 296 S.E. 2d 3 (1982); Lloyd v. Jenkins Context Co., 46 N.C. App. 817, 266 S.E. 2d 35 (1980). Although the Commission\u2019s findings of fact are generally con-elusive on appeal, if supported by competent evidence, the employer-employee relationship is a jurisdictional fact, on which the reviewing court has the duty to make its own finding, after reviewing all the evidence in the record. Lucas; Durham; Lloyd; see McLean v. Roadway Express, Inc., 307 N.C. 99, 296 S.E. 2d 456 (1982).\nAs stated earlier, the revised version of G.S. \u00a7 97-2(2) (1979 & Supp. 1983) enables a sole proprietor to be included as an employee under his business\u2019 workers\u2019 compensation coverage if (1) \u201che is actively engaged in the operation of the business,\u201d and (2) \u201cthe insurer is notified of his election.\u201d Therefore, in the case sub judice, Doud, a sole proprietor, had the burden of proving both (1) and (2) in order to come within the provisions of the Workers\u2019 Compensation Act as an employee. Since the sole proprietor\u2019s employee status is a jurisdictional fact, this Court has the duty to make its own independent finding, after reviewing all the evidence in the record. Lucas; Durham; Lloyd. Only the notice requirement is at issue here.\nIV\nDoud contends that Fidelity is estopped to assert the notice requirement of G.S. \u00a7 97-2(2) to deny Doud coverage, because the application form put Fidelity on inquiry notice of Doud\u2019s election. We agree. We hold that Doud, a sole proprietor, successfully elected coverage as an employee under his workers\u2019 compensation policy and, therefore, the Commission has jurisdiction over his claim.\nThe doctrine of equitable estoppel comes into play when an insured, without knowledge of the true facts, detrimentally relies in good faith on an insurer\u2019s conduct. 16 B J. Appleman and J. Appleman, Insurance Law and Practice \u00a7 9081 (rev. ed. 1981). That is, an insurer is estopped to deny workers\u2019 compensation coverage after a loss has been sustained, if the insurer treated the claimant as an employee in computing the premiums and accepted the resulting premiums based on the claimant\u2019s salary. Pearson v. Pearson, 222 N.C. 69, 21 S.E. 2d 879 (1942); Aldridge v. Foil Motor Co., 262 N.C. 248, 136 S.E. 2d 591 (1964); see also Garrett v. Garrett & Garrett Farms, 39 N.C. App. 210, 249 S.E. 2d 808, disc. rev. denied, 296 N.C. 736, 254 S.E. 2d 178 (1979). And all the law requires is that the insurer have actual or constructive knowledge of the true facts before the doctrine is applicable. 28 Am. Jur. 2d Estoppel and Waiver \u00a7 35, at 640 (1966); Appleman, supra, \u00a7 9081, at 496; \u00a7 9088, at 571-72. In Aldridge, Pearson and Garrett, the insurer\u2019s agent\u2019s actual knowledge was imputed to the insurer.\nIn the case sub judice, there is no dispute that Fidelity lacked actual knowledge of Doud\u2019s election. The absence of a sole proprietor endorsement with the issued policy supports Fidelity\u2019s ignorance. We need not decide whether Patten and Woody Clinard Insurance, Inc. acted as Fidelity\u2019s agents, since either Fidelity\u2019s membership in the Bureau or the Bureau\u2019s agency relationship with Fidelity put Fidelity on inquiry notice of Doud\u2019s election.\nFidelity argues that it did not attach the necessary endorsement to Doud\u2019s policy because his application did not notify Fidelity of his election; however, Doud\u2019s evidence reveals that the Bureau drafted the application form Doud completed in August 1977, several years before the July 1979 amendment. Consequently, the 1977 form did not contain a space to elect sole proprietor coverage. Doud\u2019s evidence further reveals that (1) the Bureau had not revised the 1977 form, as of April 1980, to reflect the 1979 amendment, and (2) the 1977 form was the standard form required by the Bureau for assigned risk workers\u2019 compensation insurance. Any attempt to notify the insurer had to be on an ad hoc basis. Fidelity\u2019s evidence, testimony by Thomas Haas, a commercial casualty underwriting manager with Fidelity, reinforces the haphazard notification methods bred of the outdated form.\nQ. What\u2019s usually done to include [the] intent [to cover the sole proprietor]?\nA. Well, the legal status sometimes shows individual and there it would show, include sole proprietor and coverage sometimes. Where they show the payroll, they will include sole proprietor to be included and indicate such payroll. [Emphasis added.]\nDoud\u2019s application form put Fidelity on actual notice that Doud was a sole proprietor. Recognizing that\n[bjefore an insurer can be charged with knowledge of facts available by investigation so as to constitute an equitable estoppel, there must be a reason or cause for further investigation, and the insurer must be put upon inquiry [notice] by some fact or information in the insurer\u2019s possession[,] (Emphasis added.)\n16B J. Appleman, supra p. 4, \u00a7 9088, at 572 & n. 42, we conclude that Fidelity was put on inquiry notice that Doud, as a sole proprietor, had elected sole proprietor coverage, because (a) pursuant to N.C. Gen. Stat. \u00a7 58-124.18 (1982), Fidelity was a member of the Bureau and actively involved in its administration; (b) pursuant to N.C. Gen. Stat. \u00a7 58-124.17(5) (1982), the Bureau was Fidelity\u2019s agent; and (c) the Bureau, created by N.C. Gen. Stat. \u00a7 58-124.17 (1982), drafted the controverted application form in August 1977. Fidelity\u2019s membership and representation in the Bureau charged Fidelity with constructive knowledge by putting it in possession of the inquiry-triggering information.\nMoreover, Fidelity had constructive knowledge of Doud\u2019s election, by virtue of its principal-agent relationship with the Bureau. \u201c \u2018Agency\u2019 exists when one person is authorized to represent and act for another in dealings with third persons.\u201d Lancaster\u2019s Stock Yards, Inc. v. Williams, 37 N.C. App. 698, 703, 246 S.E. 2d 823, 827, disc. rev. denied, 295 N.C. 738, 248 S.E. 2d 863 (1978). The Bureau acts as Fidelity\u2019s exclusive agent for assigned risk workers\u2019 compensation insurance carriers in North Carolina.\nAs a prerequisite to the transaction of workers\u2019 compensation insurance in this State, every member of the Bureau that writes such insurance must file written authority permitting the Bureau to act in its behalf, as provided in this section, and an agreement to accept risks that are assigned to the member by the Bureau. . . .\nN.C. Gen. Stat. \u00a7 58-124.17(5) (1982). As stated earlier, an agent\u2019s actual knowledge is imputed to the insurer. Aldridge; Pearson; Garrett. Significantly, the agent\u2019s constructive knowledge is also imputed to the insurer. 3 G. Couch, Couch on Insurance 2d \u00a7 26-145, at 688 (1980). Therefore, the Bureau and Fidelity, as its principal, had constructive knowledge of Doud\u2019s election.\nWe hold that Fidelity is estopped to deny Doud coverage as an employee, after treating Doud as an employee and accepting the benefits of that status, with constructive knowledge. See Aldridge; Pearson; Garrett; Couch, supra. We, therefore, need not consider whether Fidelity\u2019s payment of the June 1980 \u201cmedical only\u201d claim constitutes a separate ground for estoppel. It is certainly further evidence of Doud\u2019s detrimental reliance. The policy itself, Fidelity\u2019s acceptance of the premiums and payment of the June claim lulled Doud into a false sense of security. Since we have validated Doud\u2019s election of coverage as an employee, we further hold that the Commission has jurisdiction over his workers\u2019 compensation claim.\nV\nWe go on to address Doud\u2019s third argument, that the Commission erred in finding and concluding that \u201cDoud was not an employee of either Dancy or Dancy\u2019s subcontractor, K & G Janitorial Services, and therefore not covered under Dancy\u2019s workers\u2019 compensation policy.\u201d We conclude that the Commission did not err in dismissing Doud\u2019s claim for coverage under Dancy\u2019s policy, on jurisdictional grounds.\nAs discussed in III, supra, an employer-employee relationship at the time of the injury is a jurisdictional fact, for which the claimant has the burden of proof. Lucas; Durham; Lloyd. This Court has the duty to make its own findings on jurisdictional facts, after reviewing all the evidence in the record. Lucas.\nG.S. \u00a7 97-2(2) defines an employee as \u201cevery person engaged in an employment under any appointment or contract of hire or apprenticeship, express or implied, oral or written. . . .\u201d An employer-employee relationship does not exist if one party is an independent contractor, since an independent contractor is not an employee within the meaning of the Act. Morse v. Curtis, 276 N.C. 371, 172 S.E. 2d 495 (1970).\nSome of the factors considered are whether: \u201c[t]he person employed (a) is engaged in an independent business, calling, or occupation; (b) is to have the independent use of his special skill, knowledge, or training in the execution of the work; (c) is doing a specified piece of work at a fixed price or for a lump sum or upon a quantitative basis; (d) is not subject to discharge because he adopts one method of doing the work rather than another; (e) is not in the regular employ of the other contracting party; (f) is free to use such assistants as he may think proper; (g) has full control over such assistants; and (h) selects his own time.\u201d Hayes v. Bd. of Trustees of Elon College, 224 N.C. 11, 16, 29 S.E. 2d 137, 140 (1944).\nReviewing Doud\u2019s evidence, we find that (1) Doud was the sole proprietor of K & G Janitorial Services, an independent business; (2) Doud testified that he contacted Dancy in August 1980 \u201cto contract out, to contract for cleaning up when the construction was finished\u201d; (3) Doud orally contracted to clean the windows for a lump sum; (4) Doud worked no set hours. There is no evidence that Dancy had the right to control the methods used. We conclude that Doud was an independent contractor at the time of his injury.\nDoud argues further that Dancy\u2019s failure, as a contractor, to obtain a certificate from the Industrial Commission showing that Doud, the subcontractor, was insured, created liability for Doud\u2019s workers\u2019 compensation benefits pursuant to N.C. Gen. Stat. \u00a7 97-19 (1979). This statute is designed to protect the employees of a subcontractor, not the subcontractor himself. Richards v. Nationwide Homes, 263 N.C. 295, 139 S.E. 2d 645 (1965). The sole proprietor of a business cannot normally wear two hats \u2014 owner and employee. G.S. \u00a7 97-2(2) (1979 & Supp. 1983), as discussed supra, provides the sole exception. Dancy is not liable for Doud\u2019s benefits.\nVI\nIn summary, we hold that the Commission has jurisdiction over Doud\u2019s workers\u2019 compensation claim based on Doud\u2019s election to be included as an employee under his own policy, pursuant to G.S. \u00a7 97-2(2) (1979 & Supp. 1983). For the reasons discussed above, Fidelity is estopped from asserting the statutory notice requirement to deny coverage. Doud, an independent contractor, is ineligible for coverage under Dancy\u2019s policy and, therefore, the Commission did lack jurisdiction over his claim on this theory.\nReversed in part and affirmed in part.\nChief Judge VAUGHN and Judge HILL concur.",
        "type": "majority",
        "author": "BECTON, Judge."
      }
    ],
    "attorneys": [
      "Jenkins, Lucas, Babb & Rabil, by S. Mark Rabil, for plaintiff appellant.",
      "Hedrick, Feerick, Eatman, Gardner & Kincheloe, by Mel J. Garofalo, for defendant appellees, K & G Janitorial Services and Fidelity & Casualty Company of New York and Underwriters Adjusting Company.",
      "Teague, Campbell, Conely & Dennis, by C. Woodrow Teague and Henry W. Gorham, for defendant appellees Dancy Construction Company and Aetna Insurance Company."
    ],
    "corrections": "",
    "head_matter": "GARRY L. DOUD, Employee-Plaintiff v. K & G JANITORIAL SERVICES, Employer-Defendant; FIDELITY & CASUALTY COMPANY OF NEW YORK, Carrier-Defendant and/or DANCY CONSTRUCTION COMPANY, Employer-Defendant; AETNA INSURANCE COMPANY, Carrier-Defendant\nNo. 8310IC9\n(Filed 19 June 1984)\n1. Insurance \u00a7 67; Master and Servant \u00a7 49.1\u2014 sole proprietor\u2019s employee status \u2014insurance company estopped to assert notice requirement\nWhere defendant insurance company issued to plaintiff an insurance policy after an insurance agent completed a form entitled \u201cApplication For Workers\u2019 Compensation Insurance,\u201d drafted by the North Carolina Rate Bureau, the insurance company was estopped to assert the notice requirement of G.S. \u00a7 97-2(2), applicable to sole proprietors, to deny plaintiff coverage since the insurance company was put on inquiry notice that plaintiff, as a sole proprietor, had elected sole proprietor coverage, because (a) pursuant to G.S. \u00a7 58-124.18, the insurance company was a member of the Bureau and actively involved in its administration; (b) pursuant to G.S. \u00a7 58-124.17 (5), the Bureau was the insurance company\u2019s agent; and (c) the Bureau, created by G.S. \u00a7 58-124.17, drafted the controverted application form, and the insurance company\u2019s membership and representation in the Bureau charged the insurance company with constructive knowledge by putting it in possession of inquiry-triggering information.\n2. Master and Servant \u00a7 50.1\u2014 plaintiff independent contractor at time of injury\nThe Industrial Commission properly found that plaintiff was not an employee of defendant contractor, and properly concluded that plaintiff was an independent contractor at the time of his injury where the evidence tended to show that (1) plaintiff was the sole proprietor of K & G Janitorial Services, an independent business; (2) plaintiff testified that he contacted the construction company in August 1980 \u201cto contract out, to contract for cleaning up when the construction was finished\u201d; (3) plaintiff orally contracted to clean the windows for a lump sum; and (4) plaintiff worked no set hours. G.S. \u00a7 97-2(2).\nAPPEAL by plaintiff from the Opinion and Award of the North Carolina Industrial Commission filed 20 September 1982. Heard in the Court of Appeals 30 November 1983.\nJenkins, Lucas, Babb & Rabil, by S. Mark Rabil, for plaintiff appellant.\nHedrick, Feerick, Eatman, Gardner & Kincheloe, by Mel J. Garofalo, for defendant appellees, K & G Janitorial Services and Fidelity & Casualty Company of New York and Underwriters Adjusting Company.\nTeague, Campbell, Conely & Dennis, by C. Woodrow Teague and Henry W. Gorham, for defendant appellees Dancy Construction Company and Aetna Insurance Company."
  },
  "file_name": "0205-01",
  "first_page_order": 233,
  "last_page_order": 240
}
