Compassionate Care, Inc. v. Travelers Indemnity Co.
83 A.3d 647
Conn. App. Ct.2013Background
- Compassionate Care, an HCP referral agency, places licensed nurses/assistants with third-party clients; HCPs accept assignments, are paid by Compassionate Care (1099s issued), control their work methods, and client facilities supervise day-to-day care.
- Compassionate Care applied for assigned-risk workers’ compensation coverage (estimated premium ≈ $1,031); Travelers was the assigned carrier and policy included audit and final-premium provisions.
- During underwriting/audit Travelers sought proof that listed HCPs carried their own workers’ comp; when none was produced, Travelers audited and reclassified exposure, treating HCPs as potential employees and increased the estimated premium substantially (~$66k–$89k range).
- Compassionate Care refused to pay the increased premium; Travelers cancelled the policy and sued for unpaid premium; Compassionate Care sought declaratory relief (policy should remain at the low estimate) and damages for bad faith.
- Trial court found HCPs were employees and § 31-292 (temporary lending) applied; judged for Travelers on both counts and its counterclaim. Appellate court reversed the employee/§ 31-292 findings but affirmed Travelers’ contractual right to increase the premium based on audit-exposed risk.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether HCPs were employees or independent contractors | HCPs are independent contractors: control, 1099s, right to work elsewhere, no supervision by Compassionate Care | HCPs effectively were employees because Compassionate Care could remove/terminate assignments and had some contractual controls | Reversed: trial court’s finding that HCPs were employees was clearly erroneous; evidence showed no right to control mode/manner of work |
| Whether § 31-292 (temporary loan) made Compassionate Care liable for HCPs’ workers’ comp | § 31-292 does not apply because it presupposes an employer–employee relationship | § 31-292 would render lender-liable for benefits when workers are on loan | Reversed: § 31-292 inapplicable because HCPs were not shown to be employees; statute assumes existing employment relationship |
| Whether Travelers could lawfully increase premium after audit | Plaintiff: only signed assigned-risk application and should not be bound to premium increases based on possible employee determinations | Travelers: policy (and audit/final-premium provisions) permits adjustment for actual remuneration and for ‘‘persons engaged in work that could make us liable’’; duty to defend/indemnify exposes carrier to risk irrespective of eventual classification | Affirmed: Travelers contractually entitled to charge increased premium based on audit-discovered exposure (duty to defend/indemnify and explicit policy clauses) |
| Whether plaintiff waived or was bound by audit/final premium terms despite assigned-risk application | Plaintiff: signed only application to assigned-risk pool, not full policy obligations | Travelers: plaintiff received policy and was on notice of audit/final-premium/remuneration clauses | Held: plaintiff was contractually bound by policy terms (received policy), including final premium/audit provisions |
Key Cases Cited
- Rodriguez v. E.D. Construction, Inc., 126 Conn. App. 717 (review standard for employee v. independent contractor determinations)
- Kaliszewski v. Weathermaster-Alsco Corp., 148 Conn. 624 (control of mode and manner is controlling factor for employment status)
- Latimer v. Administrator, 216 Conn. 237 (factors showing registry workers were employees where reporting/monitoring and right to intervene existed)
- Derrane v. Hartford, 295 Conn. 35 (§ 31-292 applies when an employer–employee relationship exists and worker is temporarily lent)
- National Fire Ins. Co. of Hartford v. Beaulieu Co., LLC, 140 Conn. App. 571 (insurer entitled to premium for exposure to work that could make insurer liable even if workers later found independent contractors)
- Hartford Accident & Indemnity Co. v. Capital Home Improvement Co., Inc., 205 A.2d 192 (policyholder liable for premium where insurer assumed risk of possible compensation claims; duty to defend broader than indemnify)
- Nationwide Mut. Ins. Co. v. Allen, 83 Conn. App. 526 (factors relevant to independent contractor/employee status)