Attorney General's Opinion
Attorney General, Richard Blumenthal
October 1, 2007
Dear Commissioner Sullivan:
You have requested an opinion (1) whether “the Insurance Department has the legally required jurisdictional authority to hear and decide an employment status dispute between an insured and its insurer where the dispute solely involves the factual determination of whether a worker should be classified as an employee or an independent contractor under Connecticut law for purposes of determining workers’ compensation insurance premiums;” and (2) whether “the Insurance Commissioner may delegate his authority to the [Connecticut Workers Compensation Classification & Ratings] Appeals Board to hear and decide employment status disputes involving a factual determination of whether a worker should be classified as an employee or an independent contractor under Connecticut law for purposes of determining workers’ compensation insurance premiums.” The Insurance Commissioner has the statutory authority to hear and decide such employment status disputes but has no statutory authority to delegate hearing and deciding such employment status disputes to the Appeals Board.
You have described the background for these employment status disputes, in which an insured disagrees with its insurer’s classification of a worker as an employee, as opposed to an independent contractor, for purposes of determining workers’ compensation insurance premiums. Such disputes typically arise at the end of a workers’ compensation policy period when the insurer conducts a premium audit.1 As part of the audit, the insurer will inquire about the insured’s workers and make determinations about the employment status of the insured’s workers. An insured’s premium is based on the insurer’s filed rate and the number of the insured’s employees and corresponding payroll. Therefore, if a worker that the insured classified as an independent contractor is reclassified by the insurer as an employee, additional premiums will be due.
Insureds that dispute the insurers’ reclassifications of employment status have in the past requested that the Connecticut Workers Compensation Classification & Ratings Appeal Board (“Appeals Board”) review such determinations.2 According to the National Council on Compensation Insurance (“NCCI”)3 proposal submitted to the Insurance Department in January 1992, the Appeals Board, which is not a state agency, was established pursuant to the authority granted under Conn. Gen. Stat. § 38a-678 to provide a mechanism by which aggrieved parties may obtain review of the application of the rules of the workers’ compensation system to their individual workers’ compensation policies relating to experience modification factors, classification assignments and manual rules. Insureds that have received unfavorable decisions from the Appeals Board on determinations of employment status for premium calculation have appealed to the Insurance Department.
In March 2006, NCCI advised the Insurance Department that the number of cases involving employment status disputes had increased over the past three years, and that these disputes cannot be resolved by the application or interpretation of NCCI manual rules. NCCI proposed that the Appeals Board adopt a separate procedure for these disputes and submitted a proposed procedure.4 The proposed procedure states that the Appeals Board’s Objectives and Rules preclude it from resolving employment status disputes involving the classification of workers to determine workers’ compensation insurance premiums.5 The Insurance Department is thus faced with the possibility of having to resolve employment status disputes in the first instance. You inquire whether the Insurance Department has such authority or, alternatively, if it has the authority to delegate such decisions to the Appeals Board.
Because the questions presented turn on the meaning of statutory terms, we are guided by the rules of statutory interpretation. The “fundamental objective” of statutory construction “is to ascertain and give effect to the apparent intent of the legislature.” Manifold v. Ragaglia, 272
Section 38a-678(a) of the General Statutes provides that
[a]ny person aggrieved by any rate charged, rating plan, rating system, or underwriting rule followed or adopted by an insurer or rating organization may request the insurer or rating organization to review the manner in which the rate, plan, system or rule has been applied with respect to insurance afforded him. Such request may be made by his authorized representative, and shall be in writing. If the request is not granted within thirty days after it is made, the requester may treat it as rejected. Any person aggrieved by the action of an insurer or rating organization in refusing the review requested, or in failing or refusing to grant all or part of the relief requested, may file a written complaint and request for hearing with the Insurance Commissioner, specifying the grounds relied upon. If said commissioner has information concerning a similar complaint he may deny the hearing. If he believes that probable cause for the complaint does not exist or that the complaint is not made in good faith he shall deny the hearing. Otherwise, and if he finds that the complaint charges a violation of sections 38a-663 to 38a-681, inclusive, and that the complainant would be aggrieved if the violation is proven, he shall proceed as provided in subsection (b) of this section.
Section 38a-678(a) limits the Insurance Commissioner’s review authority to complaints which he finds charge a violation of §§ 38a-663 to 38a-681 inclusive. These statutes regulate commercial risk insurers, rating organizations,7 and advisory organizations,8 and provide the standards for the making and use of commercial risk insurance rates. For example, § 38a-665 provides that rates shall not be inadequate or excessive, nor shall they be unfairly discriminatory. No rate shall be held to be excessive unless such rate is unreasonably high for the insurance provided or a reasonable degree of competition does not exist in the area with respect to the classification to which such rate is applicable.
Section 38a-676 provides for the review of classifications, rules, rates and forms of commercial risk insurance contracts. Each admitted insurer is required to file with the Insurance Commissioner each manual of classifications, rules and rates, and each minimum, class rate, rating plan, rating schedule and rating system which it uses. Such submission by a licensed rating organization of which an insurer is a member or subscriber shall be sufficient compliance with this section for any insurer maintaining membership or subscribership in such organization, to the extent that the insurer uses the manuals, minimums, class rates, rating plans, rating schedules, rating systems, policy or bond forms of such organization. A filing shall be deemed to meet the requirements of sections 38a-663 to 38a-696, inclusive, unless disapproved by the commissioner within the 30-day waiting period or any extension thereof.
While Conn. Gen. Stat. § 38a-678 states that an aggrieved person may request that the insurer or rating organization review the manner in which the rate, plan, system or rule has been applied, further action on a complaint made in good faith and for which the Insurance Commissioner believes probable cause exists, requires a finding by the Insurance Commissioner that the complaint charges a violation of Conn. Gen. Stat. §§ 38a-663 to 38a-681, inclusive. According to your past practice, when an employer requested a review because the premium had been determined by including workers it had classified as independent contractors, the Department took the position that the employer was alleging a violation of § 38a-665 in that the additional premiums were excessive and unnecessary because the workers were independent contractors. See Seymour’s Sand and Stone, Inc. v. Cogswell, et al., (2002 Conn. Super. LEXIS 3892, Superior Court,
Alternatively, an employer that contests an insurer’s audit that results in additional premium because independent contractors are reclassified as employees could also claim that
If the Insurance Commissioner finds that a complaint has alleged in good faith a violation of Conn. Gen. Stat. §§ 38a-663 to 38a-681, inclusive, then Conn. Gen. Stat. § 38a-678 does authorize the Insurance Commissioner to hear and decide disputes where the sole issue involves the factual determination of whether a worker should be classified as an employee or an independent contractor under Connecticut law for purposes of determining workers’ compensation insurance premiums.
No statute provides, however, that the Insurance Commissioner may delegate his authority. “An enumeration of powers in a statute is uniformly held to forbid things not enumerated.” State v. White, 204
For the forgoing reasons, we conclude that (1) the Insurance Commissioner has the statutory authority to hear and decide an employment status dispute between an insured and its insurer, where the dispute solely involves the factual determination of whether a worker should be classified as an employee or an independent contractor under Connecticut law for purposes of determining workers’ compensation premiums, and the Insurance Commissioner finds that a violation of Conn. Gen. Stat. §§ 38a-663 to 38a-681, inclusive, is charged, and (2) that the Insurance Commissioner cannot delegate such duty to the Appeals Board.
Very truly yours,
1 Workers’ compensation insurance policies usually include a provision that the premium shown on the policy is an estimate and that a final premium will be determined at the end of the policy period. The policy also provides that the insurer is allowed to examine and audit all of the insured’s records relating to the policy during the policy period and for a certain amount of time after the policy period. This information is used to determine the final premium due.
2 The Appeals Board consists of five voting members, which include a Connecticut Insurance Department employee and a National Council on Compensation Insurance employee, and one non-voting member.
3 NCCI is licensed as a rating organization, which is defined as “an individual, partnership, corporation, unincorporated association, other than an admitted insurer, whether located within or outside this state, who or which has as a primary object or purpose the making of rates, rating plans or rating systems.”
4 Under the proposed procedure, NCCI will not provide any analysis of applicable
5 The Appeals Board’s Objectives and Rules state the scope of the grievances to be heard by the Appeals Board shall be those relating to experience modification factors, classification assignments and manual rules. The manual rules pertain to the classification system, premium basis and payroll application, rating definitions, and workers’ compensation insurance plan rules. Rule 2, Premium Basis and Payroll Allocation of the NCCI Basic Manual 2001 Edition, provides that “[p]remium is calculated on the basis of the total payroll paid or payable by the insured for services of individuals who could receive workers compensation benefits for work-related injuries as provided by the policy.” Although employment status disputes relate to this rule, NCCI states that the determination of employment status requires the application of
6 Subsection (b) of § 38a-678 provides for an examination of the insurer or rating organization, notice to the insurer or rating organization of any noncompliance, and reasonable time to correct the noncompliance.
7 Rating organizations, such as NCCI, also collect loss experience data as part of their primary purpose to make rates, rating plans or systems.
8 Advisory organizations, which are a group, association or organization of insurers, collect and furnish loss experience data to assist rating organizations and insurers in rate making. Conn. Gen. Stat. § 38a-663(b).