Mr. Blue (name changed to protect privacy) owned his own business, which performed subcontracting work for a local lumber company, Ace Lumber Co. (the names have been changed to protect privacy). As a subcontractor for Ace, he earned $10.00 a ton, with no reimbursement for the use of his equipment, saws, and mileage. However, the business was not doing well and he began looking for other work, such as surveying.
He was hired by Ace as an employee, on a trial basis, earning $8.00 per hour and working 8:00 a.m. to 4:00 p.m. Claimant was also paid $60.00 per day for use of his skidder, $40.00 per day for the use of his saws, and 25 cents a mile. Blue Cross/Blue Shield benefits would begin in three (3) months. Mr. Blue’s son was also hired. This arrangement allowed Defendant Ace to keep him available for work, as he was a valuable worker. Mr. Blue and his son were paid advance money for wages and equipment rental because the owner’s wife was not available to issue payroll checks, and Claimant needed the money. Mr. Blue was then paid wages a few days after the work injury, as Ace did not have his hours which were recorded on a calendar on Mr. Blue’s home refrigerator.
Mr. Blue sustained a work injury when he was hit on the head by a 15 to 20 foot long dead tree limb, 7 to 10 inches in diameter, which separated from the tree as he was cutting it down. Loggers call these limbs “widow makers”. There was also blood on a nearby, jaggy stump protruding out of the ground. His son was dragging the tree limbs, and when he returned to the site, he found his father on the ground. Mr. Blue was bleeding out of his ears, nose and mouth. The workers’ compensation insurance carrier for Ace was Rockwood Casualty Insurance Company, who denied the claim.
Immediately after the work injury, Claimant was flown to a trauma center a hospital and was not expected to live. He was in a deep coma for four (4) months. He was then transferred to HealthSouth, followed by Thornwald Nursing Home in Carlisle and Perry Village in New Bloomfield. Since the work injury, has severe brain damage, needs a stomach tube and cannot walk. Claimant has been found incapacitated/incompetent by the Perry County Court of Common Pleas. His wife is legal guardian.
A law firm that does a fair amount of workers’ compensation cases for injured workers referred the case to Ron Calhoon and we filed a Claim Petition for workers’ compensation benefits. A Stipulation was then made with Defendant Rockwood, paying Claimant $64,000.00 in cash; a $20,000 attorney fee; a $600 per month annuity for 15 years or for the life of Claimant As part of the Stipulation, Claimant would be able to re-file a Claim Petition for workers’ compensation benefits. The Stipulation was approved by Judge Rehkamp of the Court of Common Pleas of Perry County, Orphan Courts Branch. The Claim Petition was temporarily withdrawn.
Health America, Mrs. Blue health insurance provider, indicated that they would pay Claimant’s medical bills, as they are required when workers’ comp denies medical bills and treatment, for the work injury during the settlement conference with Judge Rehkamp. After the Stipulation was approved, however, HealthSouth sued Claimant and his wife for $254,000.00 in unpaid medical expenses. On August 27, 1997, Judge Hess placed the law suit on hold. We then sued Health America for insurance bad faith for failing to pay medical bills as promised. We hired the notorious insurance bad faith attorney, Richard Ochrock, as co-counsel.
We then re filed the Claim Petition for workers’ compensation benefits. Defendant Ace Lumber admitted that a work injury took place. On June 11, 1997, Claimant also filed a Penalty Petition for Defendant Rockwood’s failure to perform an adequate investigation and failure to pay compensation and medical expenses when due. The Claim Petition was assigned to the Honorable James P. Deeley in Harrisburg, PA.
Defendant Ace Lumber and Rockwood then agreed that Claimant sustained severe injuries, including a brain injury; that he is unable to earn wages; and he has extensive medical expenses. The sole issue before WCJ Deeley was whether Claimant was an employee of Defendant Junk when he was injured.
In support of the Claim Petition, we entered into evidence a calendar kept by his wife, which contained daily entries of the hours worked by Mr. Blue when he was hired by Defendant Ace. No hour entries were made on the calendar prior to being hired by Ace, as Claimant was an independent contractor and it was not necessary. A document expert, Mr. John Gencavage, examined this calendar and felt that it was not altered and that the entries were made before Claimant’s work injury. Ink analysis showed that the entries entered at the top of each day (the sons) were made by a different black ink pen than the entries made at the bottom of each day (Dads), also in black pen,
Other evidence supporting the employment relationship included an invoice from a Hershey job saying “status change after September 13, paid hourly, paid for use of equipment by day, truck by month.” An audit performed by Defendant Rockwood of Defendant Ace also indicated that Claimant is an employee. Defendant’s insurance premiums were assessed based on both Claimant and his son being employees. However, as a result of this workers’ compensation claim, Defendant’s workers’ compensation insurance was dropped by Defendant Rockwood, and his premiums doubled with the new insurance carrier, State Workers’ Insurance Fund (SWIF).
Other evidence that established an employment relationship is that after Claimant’s work injury, Claimant’s son did not want to perform logging work, so Defendant Ace hired two other employees. Ace also provided instruction to Claimant and his son on where to report to work, what to do, and when to be there, which supports an employment relationship. The advanced checks issued to Claimant by Ace when the employment relationship began initially said “logs” in the memo section, like checks did when Claimant was an independent contractor. However, Ace corrected this later in the month when the checks were returned from the bank, and indicated “logs, skidder, etc.”, as he had made a mistake. Mrs. Ace also verified the employment relationship, explained the payroll and employment documents, and provided information showing that taxes were paid on Claimant’s behalf. She indicated that there was no intent to deceive Defendant Rockwood. Finally, Claimant and his son were both issued a W-2 for 1993 wages earned as employees of Defendant Ace.
Mr. Peter A. Smerick, previously employed by the FBI, analyzes documents and hand writing. He is Vice-President of the Academy Group. Mr. Smerick felt that the documentation and payroll records provided by the Mr. Junk were inconsistent, altered, and indicated fraud. After a lengthy cross examination, Judge Deeley did not believe this witness.
After Claimant’s work injury, representatives of Defendant Rockwood interviewed Defendant Ace on numerous occasions, who provided all the documentation showing Claimant’s employment status. These representatives were Mr. Ronald Igou, assistant Vice-President of Claims; Mr. Kevin Curley, an independent adjuster with Vincent Insurance Adjusters; Mr. Joe Kelly, a fraud investigator with Defendant Rockwood; and Mr. David Hay, a certified public accountant and Vice-President. However, Rockwood did question the employment relationship and had frequent “surprise” visits with Defendant Ace after the work injury, including taking payroll records and other documentation. Defendant Rockwood also spoke with Claimant’s wife. Defendant Rockwood accused Ace of fraud and felt they were being deceived about the employment relationship. Ace always cooperated with Defendant Rockwood.
Judge Deeley decided the following:
- Claimant met the three (3) year statute of limitations for the filing of a Claim Petition
- Claimant was an employee of Defendant Ace
- Mr. Ace was believable that Claimant was an employee
- That there was an employment contract
- That the equipment rental helped support an employment relationship, along with the hiring of two more employees after Claimant’s work injury
- Mr. Ace did not commit fraud, as if would have been better for him if Claimant was found to be an independent contractor due to increased insurance premiums and threats of fraud
- That Defendant Ace’s documents were made in the normal course of business and were not made up or altered
- Claimant’s wife and Mr. and Mrs. Ace were believable
- That there was no scheme to defraud Defendant Rockwood
Judge Deeley awarded total disability benefits; payment of medical bills, costs of litigation, a 20% attorney fee, and a credit for any wage loss benefits previously paid by the Stipulation. The case soon settled for a lump sum of over 1 million dollars and a life time annuity to Mrs. Blue.
