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Bessinger v. R-N-M Builders & Associates, LLC

Court of Appeals of South Carolina

October 25, 2017

Dallas Paul Bessinger, Claimant,
v.
R-N-M Builders & Associates, LLC, Employer, and FirstComp, a division of Markel, Inc., Carrier, Of whom the South Carolina Uninsured Employers' Fund is the Appellant/Respondent, And FirstComp, a division of Markel, Inc., is the Respondent/Appellant. Appellate Case No. 2015-002092

          Heard February 7, 2017

         Appeal From The Workers' Compensation Commission

          Amy V. Cofield, of Cofield Law Firm, of Lexington, for Appellant/Respondent.

          Richard Daniel Addison and Lee E. Dixon, both of Hedrick Gardner Kincheloe & Garofalo, LLP, of Columbia, for Respondent/Appellant.

          THOMAS, J.

         This is a cross-appeal from a final decision and order of the Appellate Panel of the Workers' Compensation Commission holding the South Carolina Uninsured Employers' Fund (UEF) responsible for Dallas Bessinger's benefits. The Appellate Panel found the workers' compensation policy between J&L Construction, LLC (J&L) and FirstComp, a division of Markel, Inc., (FirstComp) was procured by fraud and void ab initio. This case involves an unusual procedural posture where a Single Commissioner found the policy void ab initio, the Appellate Panel vacated the decision of the Single Commissioner and remanded for a "hearing de novo, " a Single Commissioner once again found the policy void ab initio, and the Appellate Panel affirmed that finding in full. UEF argues (1) the Single Commissioner erred by reconsidering evidence submitted in the first hearing without ensuring a proper foundation was laid in the second hearing; (2) the Single Commissioner erred in denying UEF's motion to exclude several depositions during the second hearing; and (3) the Appellate Panel erred in finding a workers' compensation policy can be void ab initio when statute requires a party to cancel a workers' compensation policy in accordance with the statutory framework. FirstComp appeals the Appellate Panel's initial remand arguing it exceeded and failed to comply with its statutory and regulatory authority. We affirm.

         FACTS

         Dallas Bessinger was employed by J&L, which was operated by Emory Wilkie and John Loughery, to perform certain roofing work. On January 4, 2012, Bessinger fell from a roof sustaining injuries to his left hip, right arm, ribs, and back. Bessinger immediately went to the hospital. While Bessinger was at the hospital, Wilkie and Loughery proceeded to Midlands Insurance Center in Lexington to meet with a workers' compensation representative, TaLisa Miller. Wilkie represented to Miller that J&L had no knowledge of a prior injury or pending litigation resulting from its work. Miller then accepted a cash payment of the premium and issued a policy from FirstComp backdated to 12:01 a.m. on January 4, 2012. Bessinger attempted to file a workers' compensation claim with Miller the following Monday, and Miller immediately informed FirstComp of the potential fraud. FirstComp then informed J&L, Wilkie, and Loughery it was rescinding the policy due to fraud. Bessinger filed his Form 50 on April 19, 2012, alleging injuries to his left hip, right arm, ribs, and back. FirstComp and UEF each denied coverage.

         The parties appeared before the Single Commissioner on July 18, 2012 (First Hearing), and the Single Commissioner adopted the Commission's file as part of the record after none of the participating parties objected. Bessinger testified he was working on a house in Orangeburg on January 4, 2012. Bessinger claimed he was rolling felt on the roof when "the felt came from under [him]" and he fell approximately three stories.

         Following Bessinger's testimony, the Single Commissioner asked FirstComp if they had any witnesses to present other than the depositions submitted. FirstComp stated they had no other evidence to put forth. UEF did not object to the admission of the depositions.

         The Single Commissioner filed a decision and order on December 18, 2012, finding that due to Wilkie and Loughery's fraudulent activity the policy was void ab initio. With respect to UEF's argument the issue was controlled by section 38-75-730, [1] the Single Commissioner found it did not alter the right of a party to rescind a contract induced by fraud. Therefore, the Single Commissioner held that the policy between FirstComp and J&L was void and UEF was liable for benefits under the Workers' Compensation Act (the Act).

         UEF appealed the order to the Appellate Panel and again raised the argument that section 38-75-730 contemplates this factual situation. UEF claimed the Single Commissioner erred in finding the policy was void ab initio due to fraud. In response, FirstComp argued there is a difference between cancellation of a policy, which section 38-75-730 contemplates, and rescission of a policy.

         The Appellate Panel issued its decision and order (Remand Order) on April 17, 2014, vacating the Single Commissioner's decision and finding "good grounds have been shown for the Commission to reconsider the evidence, receive further evidence, and rehear the parties or their representatives pursuant to [section 42-17-50 of the South Carolina Code (2015).]" The Appellate Panel ordered the Single Commissioner to hold a "hearing de novo." The Appellate Panel did not give any further reasoning.

         The Single Commissioner held the hearing de novo (Second Hearing) on August 21, 2014. FirstComp questioned the propriety of the Remand Order because the Appellate Panel did not give any specific instructions or reasoning in the order. UEF argued there is nothing in workers' compensation law allowing a policy to be void ab initio and section 38-75-730 is the only controlling law. UEF then contended the Remand Order wiped the slate totally clean regarding evidence submitted during the First Order. UEF argued there were issues regarding notice for the depositions and they were inadmissible during the Second Hearing. UEF claimed anything the Single Commissioner considered during the First Hearing was improper to consider during the Second Hearing absent independent foundation laid for the readmission of the evidence.

         The Single Commissioner issued its decision and order on March 31, 2015. In the order, the Single Commissioner noted the Appellate Panel remanded the case with instruction to reconsider the evidence, receive further evidence, and rehear the parties or their representatives. The Single Commissioner found the Appellate Panel did not invalidate or exclude any evidence which was part of the record. Therefore, the Single Commissioner stated the Second Hearing was based on the evidence presented during the First Hearing and any new evidence the parties wished to offer. The Single Commissioner then found all of the elements for fraud were met and the policy was procured by fraud and void ab initio. Additionally, the Single Commissioner held section 38-75-730 contemplated cancellation of an insurance policy while the present case concerned rescission due to fraud. Finally, the Single Commissioner dismissed FirstComp from the case and ordered UEF to provide benefits to Bessinger.

         Following the Single Commissioner's decision and order, UEF again appealed to the Appellate Panel, and FirstComp filed a cross-appeal. UEF argued the Single Commissioner erred by considering evidence the parties submitted during the First Hearing without a proper foundation during the Second Hearing. UEF argued the depositions were inadmissible during the Second Hearing because notice was deficient. UEF reiterated its contention that a workers' compensation policy cannot be void ab initio and section 38-75-730 should control this case.

         FirstComp argued this case revolved around the difference between rescission of a policy and cancellation of a policy. FirstComp argued the policy was procured by fraud and it was entitled to rescind the policy rather than cancel the policy pursuant to section 38-75-730. FirstComp argued the Single Commissioner correctly followed the instructions of the Appellate Panel by reconsidering evidence that had already been submitted. However, FirstComp argued the Remand Order was improper because the Appellate Panel did not state any supporting facts or law.

         The Appellate Panel filed its decision and order on September 5, 2015, and adopted the findings, conclusions, and orders of the Single Commissioner verbatim. Therefore, the Appellate Panel found the policy void ab initio, dismissed FirstComp from the case, and ordered UEF to provide Bessinger benefits under the Act. This cross-appeal followed.

         UEF'S ...


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