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Appellate Division Affirms Denial of Workers’ Comp Benefits to Owner of Business Based on His Misrepresentations Regarding Nature of His Company’s Business and Its Legal Status

By on December 9, 2015 in Compensability with 1 Comment

Samuel Roman formed Treeminator Tree Services, Inc. in 2007.  By 2012 he and his girlfriend, Sandra Flores, were both employees along with two others.  In 2009 Roman sought workers’ compensation coverage with NJM for Treeminator Tree Service, LLC, a company with no employees and engaged in landscaping work but not tree trimming.  He obtained the same type of policy in later years with Technology Insurance Company, part of the Amtrust Group.

On May 4, 2012, Roman was cutting down a tree when he fell and suffered very serious injuries. He filed a workers’ compensation claim against Technology Insurance Company, which denied the claim on the ground that the policy indicated that Treeminator was an LLC with no employees.  Petitioner then filed a Motion for Medical and Temporary Disability Benefits, and a full trial ensued with testimony from petitioner, his girlfriend, and three witnesses associated with the insurance broker.

The Judge of Compensation, the late Honorable Virginia Dietrich, ruled that petitioner made material misrepresentations in procuring his insurance application and was not entitled to coverage. She found that Mr. Roman provided false information in obtaining his policy in that all of his workers’ compensation policies indicated that he had no employees.  The application for the Technology policy described the business as a “one man operation – no employees.”

Further, the Judge of Compensation noted that Roman also misrepresented the nature of the business as one involving landscaping instead of the high risk work of tree removal and tree trimming.  She noted that the premium would have been significantly higher if Roman secured a policy for a business involved in tree removal and tree trimming.

Judge Dietrich also addressed Roman’s rejection of workers’ compensation coverage.  Although Treeminator was originally organized as a corporation, Roman secured coverage for Treeminator as a LLC.  The statute requires a member of an LLC who is seeking coverage within the LLC’s workers’ compensation policy to sign an election form at the inception of the policy.  An election form was provided to Roman.  The form was dated and clearly noted “coverage is rejected.”  This form was kept by the broker.  The Judge of Compensation found the form to meet the minimum requirement of the statute and noted that the premium on the policy would have been substantially more expensive if Roman did not reject coverage.  She concluded that Roman did not intend to cover himself when he procured his workers’ compensation policy.

Roman appealed and contended that his broker erred in not procuring for him a policy listing his company as a corporation.  He argued that he himself should not suffer due to his broker’s error.  The Appellate Court noted that the Judge of Compensation rejected this argument because it was clear from the evidence at trial that false information was provided by Roman’s business manager to the insurance broker in an effort to pay the absolute lowest amount possible for coverage on a landscaping business organized as a Limited Liability Corporation (LLC) with no employees. The Appellate Court also noted that the policy secured by Roman lacked a surcharge for either the Uninsured Employers Fund or the Second Injury Fund.  Both funds include statutorily mandated surcharges based upon the number of employees and the absence of both surcharges further evidenced the lack of employees.    The Court said, “When apprised of the increased costs of insuring a company with employees, Roman chose to ‘take coverage as cheaply as he could find it.  He wanted to pay the least and hoped for the best.’”

 The Appellate Court agreed with the Judge of Compensation that there was sufficient credible evidence in the record to support the finding that petitioner made a material misstatement of fact under N.J.S.A. 34:15-57.4, thereby warranting dismissal.  This matter was handled successfully by Nick Dibble, Esq. of Capehart Scatchard with assistance on the brief from the undersigned.  It can be found at Roman v. Treeminator Tree Service, A-0094-14T2 (App. Div. December 2, 2015).

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About the Author

About the Author:

John H. Geaney, a shareholder and co-chair of Capehart Scatchard's Workers' Compensation department, began an email newsletter entitled Currents in Workers’ Compensation, ADA and FMLA in 2001 in order to keep clients and readers informed on leading developments in these three areas of law. Since that time he has written over 500 newsletter updates.

Mr. Geaney is the author of Geaney’s New Jersey Workers’ Compensation Manual for Practitioners, Adjusters & Employers. The manual is distributed by the New Jersey Institute for Continuing Legal Education (NJICLE). He also authored an ADA and FMLA manual as distributed by NJICLE. If you are interested in purchasing the manual, please contact NJICLE at 732-214-8500 or visit their website at www.njicle.com.

Mr. Geaney represents employers in the defense of workers’ compensation, ADA and FMLA matters. He is a Fellow of the College of Workers’ Compensation Lawyers of the American Bar Association and is certified by the Supreme Court of New Jersey as a workers’ compensation law attorney. He is one of two firm representatives to the National Workers’ Compensation Defense Network. He has served on the Executive Committee of Capehart Scatchard for over ten (10) years.

A graduate of Holy Cross College summa cum laude, Mr. Geaney obtained his law degree from Boston College Law School. He has been named a “Super Lawyer” by his peers and Law and Politics. He serves as Vice President of the Friends of MEND, the fundraising arm of a local charitable organization devoted to promoting affordable housing.

Capehart Scatchard is a full service law firm with offices in Mt. Laurel and Trenton, New Jersey. The firm represents employers and businesses in a wide variety of areas, including workers’ compensation, civil litigation, labor, environmental, business, estates and governmental affairs.

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