The threshold issue in this case is whether the claimant, Richard Henson, was a covered employee working under the provisions of the Missouri Workers' Compensation Act. During the mid 1990s, Mr. Henson was a sole proprietor with two or three employees. His business was known as Henson Construction or Henson Construction Company, and was primarily involved in carpentry work.
On November 7, 1994, Mr. Henson went to Shelter Insurance Agent, Mark Malone, to purchase a workers' compensation insurance policy. Mr. Malone was a "captive" Shelter agent, but since Shelter did not issue workers' compensation policies, Mr. Malone was allowed to sell workers' compensation insurance policies through other companies. In Mr. Henson's case, Mr. Malone decided to submit an application through NCCI (National Council on Compensation Insurance), as part of the assigned risk section. Both the testimony of Mr. Malone and Mr. Henson indicate that it was Mr. Henson's intent to purchase a workers' compensation policy that covered both Mr. Henson and his other employees.
To avoid confusion about whether partners and sole proprietors who purchase workers' compensation insurance for their businesses are also requesting coverage for themselves, as owners, Section 287.035.1 provides as follows:
The benefits provided by this chapter resulting from work-related injuries shall apply to partners or sole proprietors only when such partners or sole proprietors have individually elected to procure insurance policy protection for themselves against injuries sustained while in the pursuit of their vocation, profession or business.
The statutory requirement of Section 287.035.1 is also reflected in the NCCI information and procedures manual for Missouri Workers' Compensation Plans. On page X-1 under the heading, "Section III Appendix," the manual provides "sole proprietors and partners are not automatically covered under the compensation law, but they may elect coverage." The manual further provides "if a sole proprietor or partners elect to come under the law at the time of application, a letter clearly stating the intent to elect must accompany the application. That question must be answered 'yes,' and each electing party's payroll included in the premium." (Insurer's Exhibit 1). A sample of the application referred to in this rule is included in the NCCI manual as part of "Section II Procedures." This application includes a specific question under paragraph IV about
whether there are any partners or sole proprietors seeking coverage, and if the answer is "yes," requires a separate letter stating "clear intent to elect" be attached to the application (Insurer's Exhibit 1). The manual indicates these applications were available through the NCCI mid-western office.
Although Mr. Malone acknowledged that he did have a copy of the NCCI manual, and was aware of the provisions that required sole proprietors to be treated differently, the application prepared for Mr. Henson by Mr. Malone did not satisfy the requirements of Section 287.035.1 or the NCCI policy manual. The application submitted by Mr. Malone were labeled "Acord 133" (Employee's Exhibit V and Insurer's Exhibit 7B), and "Acord 130" (Insurer's Exhibit 7A and Employee's Exhibit Q and P). Although Mr. Malone believed these forms were furnished by NCCI, Acord 130 and Acord 133 were different than the sample application in the NCCI manual. The applications submitted by Mr. Malone did not address the issue of whether there were any sole proprietors electing coverage. Mr. Malone also failed to attach a letter stating that Mr. Henson was electing to be covered as a sole proprietor.
It should be noted that the original Acord 130 was admitted as Insurer's Exhibit 7A. While this form did not address sole proprietors, it did ask whether there were any partners, officers or relatives to be included or excluded. Mr. Malone wrote, "none," in this section in black ink. At some point after the application was submitted, someone at NCCI or Liberty Mutual Insurance used blue ink to add Mr. Henson's name as "owner," and indicated that he was excluded. There is no evidence, however, indicating that these "blue ink" additions were communicated to either Mr. Henson or Mr. Malone prior to Mr. Henson's accident. These additions, therefore, will not be considered as part of the original application.
After the Acord 130 and 133 forms were submitted to NCCI, NCCI processed the forms and issued a workers' compensation and employer's liability policy binder on November 9, 1994. The binder identified "Henson Construction" as the employer, and coverage was assigned under the assigned risk pool to Liberty Mutual Insurance Company (Employee's Exhibit S). After receiving the assignment, Liberty Mutual Insurance Company issued a "Workers' Compensation and Employer's Liability" policy that was effective on November 9, 1994. Under the category, "name of insured," the policy listed "Richard Henson, d/b/a Henson Construction." The employer's status was listed as "individual." There was no endorsement or other provision in the policy indicating that Mr. Henson had elected coverage as a sole proprietor.
Approximately one year after purchasing the workers' compensation policy, Mr. Henson fell on October 8, 1995, while working on a roof, and suffered injuries to his right knee and back. Although Liberty Mutual Insurance initially paid for Mr. Henson's medical treatment and temporary total disability benefits, in June of 1996, a case manager for Liberty Mutual Insurance reviewed the claim and denied further payments. Liberty Mutual's denial was based on their conclusion that Mr. Henson was a sole proprietor, and was not entitled to benefits because he had not "elected coverage as a sole proprietor" (Employee's Exhibit V and Insurer's Exhibits 7C and 7D).
Mr. Henson is seeking an award for permanent partial disability against Liberty Mutual Insurance Company. He has also filed a claim against the Second Injury Fund for permanent partial disability benefits based on a combination of his last injuries with alleged preexisting disabilities.