An Illinois state appeals panel has ruled a suburban roofing company does not have to pay workers' compensation insurance for a subcontractor, which only existed on paper and used the employees of another subcontractor.
The Dec. 16 ruling reversed decisions by the Illinois Department of Insurance (DOI) and a Cook County judge.
The appellate ruling was penned by Justice Sharon Oden Johnson, with concurrence from justices Mary Mikva and Maureen Connors, of the Illinois First District Appellate Court in Chicago. The ruling favored Prate Roofing and Installations, of Wauconda, in its dispute with Liberty Mutual Insurance and the DOI.
Prate Roofing had a workers' compensation coverage policy with the Boston-based Liberty Mutual, effective Oct. 18, 2014, to June 28, 2015. Liberty Mutual told Prate Roofing it had to pay $127,305 in additional workers' compensation premiums, to cover a subcontractor, ARW Roofing. Otherwise, Liberty Mutual said Prate Roofing was exposing it to liability.
Prate Roofing contended ARW had no employees and subcontracted work to Reliable Trade Services (RTS), which was insured for workers' compensation. In Prate Roofing's view, ARW and RTS were one and the same company, consequently there was no exposure to Liberty Mutual.
There was an intertwining relationship between Prate Roofing, ARW and RTS, according to court papers.
Michael Prate has been an agent and officer of Prate Roofing, but at the time of the proceedings in this matter, he was an employee. ARW was organized by the Emmolly Corporation, of which Michael Prate was president. ARW was established to buy RTS, but the purchase never happened and Emmolly signed over ARW to RTS. In 2015, ARW was dissolved.
Further complicating an understanding of these corporate arrangements, RTS was called ARW prior to Aug. 1, 2013.
In addition, Prate Roofing made payments to ARW and RTS, but only had compensation insurance for RTS, documents said.
In June 2016, DOI hearing officer Patrick Riley, determined ARW likely had employees to carry out the contract with Prate Roofing. The DOI decision prompted Prate Roofing to try to overturn the decision in Cook County Circuit Court. Judge Caroline Kate Moreland refused, affirming the DOI decision.
On appeal, Justice Oden Johnson noted affidavits submitted by Michael Prate and the president of RTS, Michael Gurdak, indicated ARW had no employees. Liberty Mutual provided no evidence to show otherwise.
Oden Johnson agreed with Prate Roofing's contention that ARW and RTS were "one and the same company." Oden Johnson said the DOI had misread information that showed the true arrangement.
"After viewing the documentary evidence presented as a whole, we conclude that the DOI’s decision was against the manifest weight of the evidence" and DOI's "finding ignored the uncontradicted evidence provided by Prate [Roofing]" that ARW did not have employees, Oden Johnson said.
Prate Roofing was represented by Chicago lawyer Kevin J. Kuhn.
Liberty Mutual was represented by attorneys James T. Barnes and John C. Schmadeke, of Barnes P.C., of Chicago.
The Department of Insurance was represented by Jane Elinor Notz, of the Illinois Solicitor General's Office, and by Mary C. LaBrec, of the Illinois Attorney General's Office.