Industrial Claim Appeals Office of the State of Colorado WC No. 4-850-627-03
Scott A. Meiklejohn, LLC, Scott A. Meiklejohn, Denver, Colorado; Law Office of Worstell & Associates, David Worstell, Denver, Colorado, for Petitioner
No Appearance for Respondents Industrial Claim Appeals Office; Hernan Hernandez; MDR Roofing, Inc.; and Alliance Construction & Restoration, Inc.
Harvey D. Flewelling, Denver, Colorado, for Respondent Pinnacol Assurance
¶ 1 In this workers' compensation insurance coverage dispute, petitioner, Norma Patricia Hoff, seeks review of a final order of the Industrial Claim Appeals Office (Panel) affirming the order of an administrative law judge (ALJ). The ALJ's order awarded claimant, Hernan Hernandez, medical and disability benefits, and held Hoff (a statutory employer), MDR Roofing, Inc. (MDR) (claimant's direct employer), and the general contractor, Alliance Construction (Alliance), jointly liable for claimant's benefits. The Panel held that Hoff lacked standing to challenge the ALJ's ruling that MDR was not covered by an insurance policy issued by Pinnacol Assurance (Pinnacol) to MDR when claimant sustained serious work-related injuries.
¶ 2 We conclude that Hoff has standing. We also conclude as a matter of law that the cancellation provision of the certificate of insurance issued by Pinnacol's agent required that notice of cancellation be given to Alliance, and that no such notice was given. We finally conclude that there are issues of fact that the ALJ must address in applying the law and, thus, a remand is required. In addition, the Panel misconstrued the applicable law concerning estoppel; thus, we correct that interpretation. Accordingly, we set aside the Panel's order as it relates to the liability of Hoff and Pinnacol, and remand for further proceedings.
¶ 3 Hoff owns a house that she uses as a rental property. After sustaining hail damage to the roof, Hoff and her husband engaged Alliance to negotiate with their insurance company to resolve their damage claim. Following a successful resolution, she and her husband contracted with Alliance to repair the roof. Without the Hoffs' knowledge, Alliance verbally subcontracted the roofing job to MDR. Claimant was employed by MDR as a roofer.
¶ 4 While working on the Hoff roof in March 2011, claimant fell approximately twenty-five feet to the ground from the top of a ladder, sustaining serious injuries.
¶ 5 Claimant sought medical and temporary total disability (TTD) benefits for his work-related injuries. However, Pinnacol, MDR's insurer, denied the claim because MDR's policy had lapsed for failure to pay the premiums. Neither Alliance nor Hoff carried workers' compensation insurance.
¶ 6 The following facts are pertinent to the coverage issue. In October 2010, before starting the roofing job on the Hoff property, Alliance obtained a certificate of insurance (certificate) from Pinnacol's agent, Bradley Insurance Agency (Bradley), which verified that MDR had worker's compensation insurance through Pinnacol.
¶ 7 On February 10, 2011, Pinnacol sent a certified letter to MDR advising it that the policy was going to be cancelled if payment of a past due premium was not received by March 2, 2011. A relative of MDR's owner signed for the letter. However, MDR's owner testified he never received the letter and was not informed of its delivery. A copy of the letter was also mailed to and received by Bradley, as evidenced by the entry in Bradley's computerized log of events. Alliance did not receive notice of the pending cancellation of MDR's workers' compensation insurance from Bradley or Pinnacol.
¶ 8 MDR did not pay the outstanding premium. The policy was therefore cancelled effective March 3, 2011. Pinnacol sent letters to MDR and Bradley advising of the policy's cancellation, but not to Alliance.
¶ 9 Claimant was injured on the job on March 10, 2011. On March 11, 2011, MDR's owner went to Bradley's office seeking to reinstate the policy. The agent advised him that the policy could be reinstated if he paid the past due premium, paid a reinstatement fee, and signed a no-loss letter. A no-loss letter is a statement by the insured that no injuries have occurred since the cancellation of the policy. Although the owner knew claimant had been injured since the policy's cancellation, he signed and submitted the no-loss letter. He did not inform Bradley about the accident.
¶ 10 Pinnacol reinstated the policy on March 11, 2011. Shortly thereafter, MDR's owner returned to Bradley's offices to report claimant's injuries. Bradley contacted a Pinnacol underwriter to advise her of the claim. Pinnacol contested the claim on coverage grounds, and subsequently cancelled the policy.
¶ 11 After conducting a hearing on the matter, the ALJ determined that the owner's failure to disclose claimant's injuries when he signed the no-loss letter to reinstate the policy was a material misrepresentation. He further found that the reinstated policy was void because of MDR's misrepresentation. Finding claimant was temporarily and totally disabled and concluding that no workers' compensation insurance policy was in effect insuring any of them, the ALJ held MDR, Alliance, and Hoff jointly liable for claimant's medical and TTD benefits. The Panel agreed and affirmed.
¶ 12 Hoff now appeals.  She contends that Pinnacol is estopped from denying benefits to claimant because
• Bradley, acting as Pinnacol's agent, issued the certificate to Alliance;
• the issuance of the certificate obligated Pinnacol or Bradley to notify Alliance that MDR's policy was being cancelled; and,
• she and Alliance relied on the certificate; and
• neither Bradley nor Pinnacol sent notice of cancellation to Alliance.
¶ 13 Pinnacol contends that we need not reach this issue because Hoff has no standing to challenge the cancellation of MDR's policy. Addressing, first, the issue of standing, we reject Pinnacol's argument. Addressing Hoff's contention, we agree in part, and remand the matter to the ALJ for further consideration.
¶ 14 As Pinnacol points out, we lack jurisdiction to decide an issue unless the party seeking review has standing to assert it. See Ainscough v. Owens, 90 P.3d 851, 855 (Colo. 2004) ("In order for a court to have jurisdiction over a dispute, the plaintiff must have standing to bring the case. Standing is a threshold issue that must be satisfied in order to decide a case on the merits."). If Hoff lacks standing to challenge Pinnacol's cancellation procedures then her "case must be dismissed." First Comp Ins. v. Indus. Claim Appeals Office, 252 P.3d 1221, 1222 (Colo.App. 2011).
¶ 15 To establish standing, a plaintiff must demonstrate (1) that she has sustained an injury in fact, and (2) that the injury is to a legally protected interest. Id. at 1223; see also City of Greenwood Village v. Petitioners for Proposed City of Centennial, 3 P.3d 427, 437 (Colo. 2000). "Whether the plaintiff's alleged injury was to a legally protected interest 'is a question of whether the plaintiff has a claim for relief under the constitution, the common law, a statute, or a rule or regulation.'" Barber v. Ritter, 196 P.3d 238, 246 (Colo. 2008) (quoting Ainscough, 90 P.3d at 856). The question of "[w]hether a plaintiff has standing to sue is a question of law that we review de novo." Id. at 245.
¶ 16 The first prong of the standing test is met in this case. The liability imposed on Hoff by the ALJ and the Panel exceeds $300, 000. Neither Alliance nor MDR has appeared in this court, and it is unclear from the record whether either is able to compensate claimant for his medical expenses and lost wages. But even if MDR and Alliance are able to contribute, unless Pinnacol is held liable for claimant's benefits, a substantial liability must be borne by Hoff. Therefore, Hoff has demonstrated sufficient injury in fact to satisfy this requirement. See O'Bryant v. Pub. Utils. Comm'n, 778 P.2d 648, 653 (Colo. 1989) ("[T]he injury-in-fact element of standing does not require that a party undergo actual injury, as long as the party can demonstrate that the administrative action 'threatens to cause' an injury-in-fact.").
¶ 17 The second prong of the standing test asks whether the plaintiff's alleged injury is to a legally protected interest. In concluding that Hoff did not have standing, the Panel relied on First Comp, 252 P.3d at 1224. There, the court held the insurer of a statutory employer liable for the decedent's funeral expenses. The insurer for the decedent's direct employer, Pinnacol, had cancelled the direct employer's policy for nonpayment of premium. Relying on Chevron Oil Co. v. Industrial Commission, 169 Colo. 336, 456 P.2d 735 (1969), a division of this court held that the statutory employer's insurer, First Comp, could not challenge Pinnacol's cancellation procedures because it was "outside the class of entities and persons the cancellation requirements are arguably intended to protect." First Comp, 252 P.3d at 1224.
¶ 18 In Chevron, the supreme court had held that workers' compensation insurance cancellation procedures are "for the protection of the claimant entitled to compensation." Chevron, 169 Colo. at 342, 456 P.2d at 738. Thus, another insurer or party, who could become liable for workers' compensation if the policy of the direct employer lapsed for nonpayment of premium, "is . . . not a proper party to complain of non-compliance" with the statutory cancellation procedures. Id. at 342-43, 456 P.2d at 738.
¶ 19 Both First Comp and Chevron are distinguishable from this case. Hoff does not contend that she has standing to claim that Pinnacol breached the cancellation provisions of the policy that it issued to MDR, or that Pinnacol violated the statutory cancellation mandates set forth in section 8-44-110, C.R.S. 2014. If she had so claimed, both First Comp and Chevron would be dispositive of the standing issue. Instead, Hoff contends that she is a beneficiary of specific promises (external to the Pinnacol policy) made by Pinnacol or Bradley, its agent, to Alliance (and thus indirectly to her) that there was a workers' compensation policy issued to MDR that was in force on the dates stated in the certificate. Thus, the source of Hoff's claim for relief is neither the Pinnacol policy, nor the Workers' Compensation Act (Act) itself, but promises allegedly made by Pinnacol or its agent to Alliance. This claim arises independently of any provisions of the Pinnacol policy or of the requirements of the Act, and thus this case is distinguishable from the claims adjudicated in both First Comp and Chevron.
¶ 20 Additionally, First Comp and Chevron are distinguishable because, unlike the parties in those cases, Hoff is not an insurer. First Comp sued Pinnacol directly in the former case, and in Chevron, "[t]he sole question at issue [was]: Which of the insurers [was] liable for the payment of benefits." Chevron, 169 Colo. at 339, 456 P.2d at 736. Here, the Act anticipates that Hoff, as a statutory employer, is a party who must carry insurance. Indeed, it anticipates her inclusion within the group protected by workers' compensation insurance by requiring persons who contract for the performance of construction work to either have workers' compensation insurance or require proof of such insurance by obtaining a certificate of insurance from their contractor. See § 8-41-404(1)(a), C.R.S. 2014; see also § 8-40-102(1), C.R.S. 2014 (stating the intent of the General Assembly that the Act be interpreted so as to assure benefits to injured workers "at a reasonable cost to employers").
¶ 21 Because the legislature intended that the Act not only protect and compensate workers but also protect remote employers, Hoff falls within the scope of persons or entities the Act covers, whereas the insurance companies in First Comp and Chevron did not. Accordingly, the question whether Hoff has standing to assert the claim that Pinnacol is estopped from denying coverage is not governed by the principles set forth in First Comp and Chevron.
¶ 22 The substantive claim asserted by Hoff is promissory estoppel. In Vigoda v. Denver Urban Renewal Authority, 646 P.2d 900, 905 (Colo. 1982), the supreme court adopted the principles articulated in section 90(1) of the Restatement (Second) of Contracts, and thus recognized the quasi-contractual claim of promissory estoppel. The doctrine of promissory estoppel "encourages fair dealing in business relationships and discourages conduct which unreasonably causes foreseeable economic loss because of action or inaction induced by a specific promise." Kiely v. St. Germain, 670 P.2d 764, 767 (Colo. 1983). Section 90(1) of the Restatement provides:
A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise. ...