Sergey Chudnovtsev v. BSI Constructors, Inc.; St. Louis Brick & Stone

(Affirming Award and Decision of Administrative Law Judge)

Injury No.: 14-027901

Employee: Sergey Chudnovtsev

Employer: BSI Constructors, Inc.

St. Louis Brick \& Stone

Insurer: National Fire Insurance Company of Hartford

Travelers Property Casualty Company of America

The above-entitled workers' compensation case is submitted to the Labor and Industrial Relations Commission (Commission) for review as provided by § 287.480 RSMo. Having reviewed the evidence and considered the whole record, the Commission finds that the award of the administrative law judge is supported by competent and substantial evidence and was made in accordance with the Missouri Workers' Compensation Law. Pursuant to § 286.090 RSMo, the Commission affirms the award and decision of the administrative law judge dated May 16, 2017. The award and decision of Administrative Law Judge Karla Ogrodnik Boresi, issued May 16, 2017, is attached and incorporated by this reference.

Given at Jefferson City, State of Missouri, this $\qquad 30th \qquad$ day of March 2018.

LABOR AND INDUSTRIAL RELATIONS COMMISSION

John J. Larsen, Jr., Chairman

VACANT

Member

Curtis E. Chick, Jr., Member

Attest:

Secretary

1. Are any benefits awarded herein? See Award
2. Was the injury or occupational disease compensable under Chapter 287? Yes
3. Was there an accident or incident of occupational disease under the Law? Yes
4. Date of accident or onset of occupational disease: April 21, 2014
5. State location where accident occurred or occupational disease was contracted: City of St. Louis
6. Was above employee in employ of above employer at time of alleged accident or occupational disease? See Award
7. Did employer receive proper notice? Yes
8. Did accident or occupational disease arise out of and in the course of the employment? Yes
9. Was claim for compensation filed within time required by Law? Yes
10. Was employer insured by above insurer? See Award
11. Describe work employee was doing and how accident occurred or occupational disease contracted: Not determined for purposes of this Award
12. Did accident or occupational disease cause death? No
13. Part(s) of body injured by accident or occupational disease: Left shoulder, neck, right knee, and left ankle
14. Nature and extent of any permanent disability: 25 % left shoulder, 10 % BAW referable to the neck, 5 % right knee, 2.5 % left ankle
15. Compensation paid to-date for temporary disability: $\ 46,581.37
16. Value necessary medical aid paid to date by employer/insurer? $\ 85,557.48

1. Value necessary medical aid not furnished by employer/insurer? N/A
2. Employee's average weekly wages: Not determined
3. Weekly compensation rate: $\$ 788.53 / \ 446.85
4. Method wages computation: Stipulation

1. Amount of compensation payable (see Award):

$\ 190,117.96

1. Second Injury Fund liability: No

TOTAL:

$\ 190,117.96

1. Future requirements awarded: None

Said payment to be payable and be subject to modification and review as provided by law.

As per Award, each party shall bear its own attorney's fees and expenses.

Employee: Sergey Chudnovtsev (Settled)

Injury No.: 14-027901

Dependents: N/A

Employer: BSI Constructors, Inc.;

St. Louis Brick \& Stone

Additional Party: N/A

Insurer: National Fire Ins. Co. of Hartford;

Travelers Property Casualty Comp. of America

Before the

Division of Workers'

Compensation

Department of Labor and Industrial

Relations of Missouri

Jefferson City, Missouri

Checked by: KOB:jj

On February 3, 2017, the undersigned Administrative Law Judge held a final hearing at the St. Louis office of the Division of Workers' Compensation ("Division") to resolve all outstanding issues in the matter of Sergey Chudnovtsev ("Employee"). Present on that date were attorney Randee E. Schmittdiel, representing the statutory employer, BSI Constructors, Inc. ("BSI") and its insurer National Fire Ins. Co. of Hartford ("National") (collectively referred to herein as "BSI/National"), and attorney Jaudon Godsey, who appeared on behalf of Travelers Property Casualty Comp. of America ("Travelers"), the purported insurer of Employee's direct employer St. Louis Brick \& Stone ("STL Brick"). The Division sent certified notice ${ }^{1}$, but no attorney or representative of any kind appeared on behalf of the employer STL Brick. Ms. Godsey did not represent STL Brick. The record closed March 3, 2017.

Employee and his attorney, Scott Pecher, did not participate in the February 3, 2017, hearing because his underlying claim for workers' compensation benefits had been previously settled on October 28, 2016, when this matter was initially assigned to the Honorable John K. Ottenad. Instead of forcing Employee to participate in a hearing where the only issues in dispute involved which insurance company was liable, Judge Ottenad helped the parties craft a compromise whereby BSI/National paid, as the statutory employer, and Employee accepted $\$ 69,864.83^{2}$ as full and final settlement of any and all claims he has under the Missouri Workers' Compensation Law ("Act"). Following a motion for a change of judge, the matter was transferred to the undersigned for final determination of the remaining issues.

The stipulations in this case, memorialized in Joint Exhibit 1-A ${ }^{3}, are:

1. On 4 / 21 / 14$, all parties were operating under and subject to the provisions of the Act.
2. On or about $4 / 21 / 14$, Employee sustained an accidental injury arising out of and in the course of his employment with STL Brick when he fell down some stairs while carrying a bag of concrete.

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[^0]: ${ }^{1}$ This matter had been set for final hearing in January, but the parties agreed to a continuance in order to assure STL Brick received proper notice of the hearing. The certified mail receipt was submitted as Exhibit B-7.

${ }^{2}$ See Stipulation \#9 below.

${ }^{3}$ The abridged party names have been substituted for the full names used in the Agreed Stipulation.

1. Employee provided statutory notice of his accident to STL Brick.
2. On 4/21/14, STL Brick was a subcontractor of BSI. There is a dispute whether or not STL Brick was duly insured for its workers' compensation liability by Travelers for this accidental injury. As required by the Act, RSMo 287.040, BSI/National has paid all benefits in this matter.
3. Employee timely filed his Claim for Compensation. BSI/National and Travelers timely filed their Answer to Claim for Compensation. STL Brick has not filed an Answer to Claim for Compensation or an appearance in this matter.
4. The weekly compensation rate is $\ 788.53 for temporary benefits and $\ 446.85 for permanent partial disability benefits.
5. BSI/National has paid medical expenses in the amount of $\ 85,557.48.
6. BSI/National has paid temporary total disability for 44 weeks in the amount of $\ 34,695.32.
7. BSI/National agreed to pay employee and employee agreed to accept $\ 69,864.83 representing approximately 25 % of the left shoulder, 10 % of the body as a whole referable to the neck, 5 % of the right knee, 2.5 % of the left ankle, and approximately $151 / 7 weeks of disputed temporary total disability benefits or \ 11,886.05 in full and final settlement of claims, known or unknown, under the Act for injuries allegedly incurred during the course of his employment with STL Brick on or about 4/21/14, and any results, developments or sequelae, fatal or nonfatal, allegedly resulting from the accidental injuries.
8. Employee agreed that this amount fully and finally resolves and releases any and all legal issues and claims which he currently has, may have had in the past or may have in the future against STL Brick, Travelers, and BSI/National. Employee understood that he will receive no further compensation or medical aid by reason of this accident from STL Brick, Travelers, and BSI/National.
9. Employee submits his Affidavit (Exhibit A to Joint Exhibit 1-A), in lieu of his live testimony that these stipulations and agreements are not the result of undue influence or fraud; that he fully understands his rights and benefits; and he voluntarily agrees to the terms of this Stipulation.
10. There is no preexisting disability.
11. There is no Second Injury Fund liability in this matter.

I hereby approve the terms of the settlement, to the extent the above stipulations form the basis for the settlement of Employee's claim under the Act.

The parties agreed the following are the only issues to be addressed in this Award:

1. Was STL Brick duly insured by Travelers for its workers' compensation liability on April 21, 2014, for the accidental injury sustained by Employee?
2. If so, is BSI/National entitled to full recovery and reimbursement by Travelers for all benefits paid and to be paid plus all its attorney's fees, costs and expenses?
3. If not, is BSI/National entitled to reverse judgment against STL Brick pursuant to $\S 287.040(3)$ ?
4. If not, is Travelers entitled to recover attorney's fees and costs pursuant to $\S 287.560$ ?

In addition to Joint Exhibit 1-A, the following exhibits were admitted:

B-1 Subcontract Agreement between BSI and STL Brick;

B-2 Certificate of Liability Insurance showing Travelers policy issued to STL Brick;

B-3 Certified Records regarding STL Brick from the Missouri Secretary of State;

B-4 Certified Records in St. Louis County Circuit Court, Cause No. 15SL-CC00817;

B-5 Affidavit of Terri Vangen regarding BSI/National's attorney's fees, costs and expenses ${ }^{4} through the date of 1 / 09 / 2017 in the amount of \ 69,149.13;

B-6 Travelers' responses to BSI/National's Subpoena Duces Tecum For Deposition regarding Travelers' policy and underwriting file (only relevant documents are being submitted by agreement of the parties) (pages 1-202);

B-7 Certified copy of the Division's notice and USPS tracking receipt of 2/03/2017 Hearing Notice to STL Brick.

T-1 Division's response to Travelers' Subpoena Duces Tecum For Deposition regarding the National Council on Compensation Insurance's ("NCCI") "Employers' Workers' Compensation Insurance Coverage" On-Line Verification Pages.

T-2 Certified copy of the Division's records for this Claim;

T-3 Travelers' submission of its attorney's fees, costs and expenses incurred in these hearings with BSI/National through the date of 1/09/2017 in the amount of \$5,537.50.

The outcome of this case turns on whether Employee's employer STL Brick had a valid insurance policy in place covering workers' compensation liability on April 21, 2014, the date of his accident. As an employer subject to the Act, STL Brick was obligated under $\S 287.120$ to "furnish compensation under the provisions of this chapter for personal injury or death of the employee by accident or occupational disease arising out of and in the course of the employee's employment." Furthermore, as a subcontractor of BSI, STL Brick was contractually required to obtain workers compensation insurance (Ex. B-1). Accordingly, STL Brick purchased and Travelers issued ${ }^{5}$ a workers' compensation policy for the period from 11/09/2013 to 11/09/2014, numbered UB-8D81927-4-13 ("the Policy"). The Policy was issued 12/11/2013 (Ex. B-6, p. 141), and identified the Insured as: St. Louis Brick \& Stone, Inc., 3026 Delavan Dr. ${ }^{6}$, St. Louis, MO 63121 (Ex. B-6, p. 141-42).

The business relationship between Travelers and STL Brick began in 2011, when Travelers issued a different workers' compensation policy covering a one-year period beginning March 28, 2011. During the course of its relationship with Travelers, STL Brick did not always remit timely premium payments. In the year 2013, Travelers issued STL Brick no fewer than four Notices of Cancellation, in February, April, June and August, identifying a future date of cancellation if the sum indicated on an enclosed payment coupon was not timely received (Ex.

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[^0]: ${ }^{4}$ Both BSI/National and Travelers supplemented their respective documentation regarding attorney's fees and expenses when they submitted their proposed awards.

${ }^{5}$ Travelers had previously issued STL Brick three workers' compensation policies covering various periods from 2011 to 2013.

${ }^{6}$ There is evidence 3028, not 3026, Delavan Drive is STL Brick's address, but because the address listed on the Policy and in the notices at issue were the same, I find this minor discrepancy immaterial.

B-6, pp. 46, 51, 57, and 124). On two occasions, Travelers issued notices of Reinstatement of the existing policy (Ex. B-6, pp. 50 and 56). In June, one of STL Brick's checks was returned for insufficient funds (Ex B-6, pp. 89-91). On July 15, 2013, Travelers generated a letter reminding STL Brick that "your coverage was terminated effective 12:01 A.M., 07-02-2013, but "coverage may be reinstated with a lapse at our option by submitting any outstanding premium due" (Ex. B-6, p.122). Following the July 15, 2013, letter, Travelers issued a new policy effective 7/6/2013 to 11/14/2013 (Ex. B-6, p. 93). On October 15, 2013, Travelers accused STL Brick of being uncooperative with an audit. In 2015, Travelers sued STL Brick for post-audit adjustments in premiums from 2011 to 2012 (Exhibit B-4).

Despite this inconsistent payment history, on or about December 11, 2013, Travelers issued the Policy. ${ }^{7}$ On December 16, 2013, BSI received a Certificate of Liability Insurance certifying the Policy had been issued to STL Brick (Exhibit B-2). STL Brick appears to have made timely premium payments during the first few months of the coverage period because there are no notices of nonpayment for December, January or February. A screen shot of the Travelers' file on STL Brick (Ex. B-6, p. 184), indicates Travelers' employee Laura Allinder generated a comment on March 4, 2014, as follows: "Insured called they are waiting on a payment advised need by $3 / 13 / 14$ before cancellation goes out. She thanked us for the addtl grace period."

On March 13, 2014, Travelers issued a multipage "Notice of Cancellation for Nonpayment of Premiums," with payment coupon just as it had four times previously in 2013. The Notice of Cancellation dated March 13, 2014 (the "March Notice") contained the following relevant information: 1) it prominently stated, EFFECTIVE DATE OF CANCELLATION: April 02, 2014; 2) It stated, in summary, the policy "will be cancelled on the effective date" due to nonpayment, but Travelers "will be pleased to rescind the cancellation" if the minimum amount due is received before the effective date; and 3) a payment coupon with pertinent information was enclosed to facilitate payment (Ex. B-6, p.180). The payment information listed a minimum due amount of $\ 17,963.93 and a total due of $\ 32,823.73, with a notation to "Pay Either Amount" by April 2, 2014.

Further details regarding cancellation were provided on the third page of the March Notice (Ex. B-6, p.182). This part of the March Notice reiterated the Policy "is cancelled...as of the effective date." In order "to prevent cancellation of this policy," the March Notice at page 3 instructed, "the entire past due amount must be received prior to the cancellation date." Furthermore, as had each of the four prior Notices of Cancellation, page 3 contained the statement "notice of cancellation for your policy has been filed with the state insurance department and the Plan Administrator" and failure to pay "may affect your insurability under the state Workers Compensation Insurance Plan" (emphasis added). With respect to the March Notice, the Travelers' file, Exhibit B-6 at pages 198-201, contains evidence Travelers, on or about March 13, 2014, mailed an article numbered 00011 with postage paid of $\ .403 to: St. Louis Brick \& Stone, Inc., 3026 Delavan Dr., St. Louis, MO 63121, which is the address on the Policy.

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[^0]: ${ }^{7}$ To clarify, at all times herein the "Policy" with a capital " P " refers specifically to the workers' compensation policy numbered UB-8D81927-4-13 issued by Travelers to STL Brick.

On April 15, 2014, Travelers generated a Lapse of Workers' Compensation Insurance letter (the "April Letter")(Exhibit B-6, p. 202) nearly identical to the letter it issued on July 15, 2013. The body of the April Letter read:

This letter is to remind you that your coverage was terminated effective 12:01 A.M., 04-02-2014. Any claims arising from accident that occur after the effective date of cancellation will not be covered.

Coverage may be reinstated with a lapse at our option by submitting any outstanding premium due. Please be advised that an additional deposit may be required.

The April Letter was addressed to "ST LOUIS BRICK + STONE INC, 3026 DELAVAN DR, ST LOUIS, MO 63121." The record does not contain any evidence of mailing of the April Letter.

On April 17, 2014, STL Brick generated check \#1931 payable to Travelers in the amount of $\ 2,673.31. Travelers apparently received this check as its records show the last payment of $\ 2,673.31 posted as of $4 / 22 / 2014$ (Ex. B-6, p. 184). But a stop-payment order was issued sometime between April 22 and 24, and Travelers returned check \#1931 on or about April 30, 2014 (Exhibit B-6, pp. 187-88). The reason for the stop-payment order is unknown.

On April 21, 2014, Employee sustained the compensable injury that forms the basis of this dispute. He filed his claim against STL Brick one week later, and amended the claim to add BSI in September. As reflected in a September 5, 2014, email from LeAnn Kinman, Notice of Loss and National Account Coordinator (Ex. B-6, p. 190), Travelers took the position that it "does not have a valid policy for the alleged injury date of 4/21/14." Although Ms. Kinman acknowledged Travelers issued a WC policy for STL Brick per the Certificate of Liability Insurance (see Ex. B-2), she stated the policy was canceled effective April 2,2014. Accordingly, Travelers declined to file an answer in the underlying workers' compensation claim until August 22, 2016, after BSI/National forced the issue (Ex. T-2).

As indicated above, the parties ultimately entered into an agreement which resolved all issues involving Employee, and allowed the insurance companies to litigate the remaining issuewhich party is responsible for payment of the benefits.

The multiple issues raised herein boil down to a single question: Did Travelers effectively cancel the Policy prior to Employee's date of loss? If so, then BSI/National remains liable for the benefits paid under the Act by virtue of BSI's position as general contractor, and under $\S 287.040$. However, if Travelers cannot establish an effective and timely cancellation, it will be liable for the benefits.

Insurance policies are contracts. Stickler v. Foremost Signature Ins. Co., 150 S.W.3d 314, 316 (Mo. Ct. App. 2004). To determine whether an insurance policy provides coverage, we look to the insurance contract itself. Farm Bureau Town \& Country Ins. Co. of Missouri v. Am. Alternative Ins. Corp., 347 S.W.3d 525, 529 (Mo. Ct. App. 2011). Because insurance coverage is a matter of contract, absent a statute or public policy that requires coverage, we enforce an insurance policy as written. Id.

Generally, an insurance policy may only be canceled by mutual assent of the parties or pursuant to the terms of the policy. Stone v. Farm Bureau Town \& Country Ins. Co. of Missouri, 203 S.W.3d 736, 744-45 (Mo. Ct. App. 2006), citing MFA Mut. Ins. Co. v. Southwest Baptist College, 381 S.W.2d 797, 801 (Mo.1964); Stickler v. Foremost Signature Ins. Co., 150 S.W.3d 314, 316 (Mo.App.2004). "A unilateral cancellation must strictly comply with the policy." Stone at 45, citing Blair v. Perry County Mut. Ins. Co., 118 S.W.3d 605, 607 (Mo. banc 2003).

Travelers, as insurer, has the burden of showing, as an affirmative defense, the cancellation of the insurance contract before the date of the accident. Nichols v. Mama Stuffeati's, 965 S.W.2d 171, 174 (Mo. Ct. App. 1997) ${ }^{8}$ citing Dyche v. Bostian, 361 Mo. 122, 233 S.W.2d 721 (1950).

The language of the cancellation portion of the Policy is clear. The Missouri Cancellation and Nonrenewal Endorsement (the "Missouri Endorsement") (Ex. B-6, p. 167), which replaces other provisions ${ }^{9}$ of the Policy dealing with cancellation, contains the following relevant sections: ${ }^{10}$

(2) We may cancel this policy. We will mail or deliver to you not less than 60 days advance written notice stating when the cancellation is to take effect and our reason for cancellation. Proof of mailing of this notice to you at your mailing address shown in item 1 of the Informational Page will be sufficient to prove notice.

(3) The 60-day notice requirement does not apply where cancellation is based on one or more of the following reasons:

(a) nonpayment of premium....

(4) The policy period will end on the day and hour stated in the cancellation notice.

"The Missouri courts have held, in an unbroken line of decisions, that strict compliance with all the requirements in regard to notice is a prerequisite to cancellation." Safeco Ins. Co. of Am. v. Stone \& Sons, Inc,, 822 S.W.2d 565, 568 (Mo. Ct. App. 1992) citing Farrar v. Mayabb, 326 S.W.2d 337, 340 (Mo.App.1959). Thus, if Travelers desires to cancel the Policy for nonpayment of premium, the Policy terms require Travelers to mail or deliver advance written notice stating when the cancellation is to take effect and the reasons for the cancellation. Other than the word "advance," there is no language in the applicable portions of the Policy addressing the timing of the written notice of cancellation for nonpayment of premium.

A notice of cancellation in Missouri must be very specific. The requirements were summarized by the court in Blair by Snider v. Perry Cty. Mut. Ins. Co., 118 S.W.3d 605, 607 (Mo. 2003) as follows, with citations and quotation marks removed:

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[^0]: ${ }^{8}$ This is one of several cases cited in this Award in support of other principles of law not affected by the Hampton ruling, which overruled many workers' compensation cases only with respect to the proper standard of review. See Hampton v. Big Boy Steel Erection, 121 S.W.3d 200, 224-32 (Mo. banc 2003). No further note will be made of such Hampton cases.

${ }^{9}$ The main body of the Policy, specifically Section D (2) on page 6 (Ex. B-6 p. 148), contains the following language describing how Travelers can unilaterally cancel the policy: "We may cancel this policy. We must mail or deliver to you not less than ten days advance written notice stating when the cancellation is to take effect. Mailing the notice to you at your mailing address shown in Item 1 of the Information Page will be sufficient to prove notice." However, the Missouri Endorsement, by its own terms, replaces that Cancellation Condition of the Policy.

${ }^{10} The Missouri Endorsement language mirrors the statutory language of \S 379.883$, the statutory provision regarding cancellation that applies to commercial casualty insurance policies, including workers compensation. The Policy requires "advance" written notice, while $\S 379.883$ mandates "prior" written notice.

A unilateral cancellation must strictly comply with the policy. There would have to be an unequivocal, unmistakable act of cancellation, not dependent upon some future event, and a mere intention to cancel would not suffice to effect a cancellation under the policy provisions. A notice of cancellation to be effective must be a present cancellation as distinguished from an intention to cancel at a future day. The assured must be informed, not that the policy will be canceled, but that it is canceled.

See also, Clark v. Progressive Preferred Ins. Co., 390 S.W.3d 208, 213 (Mo. Ct. App. 2012)(Part of the key to Blair, then, is that, to be effective, a cancellation notice cannot indicate that the policy will be canceled but must indicate that it in fact is canceled). In Clark, the Court held the statement, "your policy will be canceled at (a future date)" quite simply is not a present cancellation under the case law. Id. at 214. At best, this language simply showed an intention to cancel the policy in the future if the insured did not pay the premium by the due date. Id. The contingent nature of the language prevented it from being an effective cancellation notice under Blair. Id.

The Blair decision controlled in two cases with facts similar to the instant case: Stone v. Farm Bureau Town \& Country Ins., 203 S.W.3d 736, 746 (Mo. Ct. App. 2006) and Clark v. Progressive Preferred Ins., 390 S.W.3d 208, 212-14 (Mo. Ct. App. 2012). In Stone and Clark, the insurer sent two letters: (1) A reminder notice to the insured regarding an overdue premium payment; and (2) a second letter to the insured indicating that the insurance policy was canceled because the overdue premium payment was not received. The Missouri Court of Appeals held the insurers' initial reminder letters were not effective notice of cancellation because the language of those letters was contingent and merely expressed an intention to cancel the policy in the future if the overdue premium payment was not made by the identified date. Stone, 203 S.W.3d at 746; Clark, 390 S.W.3d at 213-14. In Clark, the Missouri Court of Appeals particularly noted the insurer's initial letter included a "payment coupon" the insured could return with the overdue premium payment by the identified deadline, and found the "payment coupon" effectively served as a billing invoice to the insured with a contingent warning that the policy might be canceled in the future. Id., at 214 (citing Blair and Stone).

In addition to the Policy language itself and the requirements of Blair and its progeny, Missouri statutes provide guidance regarding the sufficiency of notice of cancellation. Section 379.883.3 RSMo states:

Notice of cancellation or nonrenewal of a commercial casualty insurance policy shall state the insurer's actual reason for proposing the action, the statement of reason to be sufficiently clear and specific so that the recipient can identify the basis of the insurer's decision without further inquiry.

Considering the Policy, the case law and the statute, Travelers must establish it mailed or delivered advance written notice to STL Brick stating the Policy in fact is canceled for sufficiently clear and specific reasons.

Travelers relies on two documents ${ }^{11}$ to establish effective notice of cancellation, the March Notice dated March 13, 2014 and the April Letter dated April 15, 2014. The terms of the

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[^0]: ${ }^{11}$ Travelers' third argument, that a Form WC-75 filed with the Division of Workers' Compensation establishes a cancellation date of April 2, is misplaced. Section 287.090 .3 is ministerial in nature and does not require an insurer to file (a Form 75) notice of cancellation with the Division prior to effectuating the cancellation of a workers'

March Notice, which are more fully set for the above, are incongruous. The effective date is prominent, the reason for the cancellation (nonpayment of premiums) is apparent, and at least once the language "is canceled" as of the effective date appears. Conversely, the March Notice also uses the term "will be canceled," includes a payment coupon, and indicates Travelers "will be pleased to rescind" the cancellation upon receipt of the minimum due. Furthermore, the March Notice, on page 3, states to prevent cancellation, "the entire past due amount must be received," which creates ambiguity because the "minimum due" and the "entire past due amount" are two different sums. ${ }^{12}$

The March Notice is not an effective notice of cancellation. Far from the unequivocal, unmistakable act of cancellation required, the March Notice is internally contradictory (the Policy "is" and "will be" canceled), conditional (subject to rescission), and confusing (will payment of the entire past due amount or minimum payment suffice to maintain coverage). It is nearly identical to the notices found deficient in Stone and Clark. As evidenced by the payment coupon, the cancellation is contingent and prospective, not certain and immediate. Furthermore, due to the ambiguity regarding minimum vs. past due payment, the reasons are not sufficiently clear and specific as required by $\S 379.883 .3$.

In contrast, the April Letter is written notice to STL Brick stating the Policy in fact is canceled for sufficiently clear and specific reasons. Coverage, according to the April 15 Letter, has been terminated (as of April 2, 2014), and claims arising "after the effective date of cancellation" will not be covered. Reasons are sufficiently clear and specific and the act of cancellation is unequivocal and unmistakable.

Although the April Letter is substantively a proper notice of cancellation, there remains an issue of the effective date of cancellation. On its face, the April $15^{\text {th }}$ Letter announces an effective date of April 02, 2014. While the Policy does not require a specific number of days notice for cancellation due to nonpayment (as in Blair, et al) it does require "advance" notice (or "prior" notice as per §379.883). The word "advance" mandates notice "before something happens." ${ }^{13}$ As do most courts, Missouri agrees that a notice, otherwise sufficient in form and content, which purports to cancel an insurance... contact at a time earlier than permitted under...the contract is not wholly ineffective but serves to cancel the contract and the coverage afforded by it at the expiration of the permitted time. Stone, 203 S.W.3d at 748, citing 96 A.L.R.2d $286 \S 3$ (1964). Retroactive notice is not permitted pursuant to the Policy, and the April 2, 2014 date does not control. However, the April 15 Letter is not a wholly ineffective means to cancel the Policy.

As the proponent of cancellation, Travelers must establish it mailed or delivered the April 15 Letter, being otherwise sufficient in form and content, to STL Brick. When an insurer seeks

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[^0]: compensation insurance policy. Simpson v. Saunchegrow Const., 965 S.W.2d 899, 905 (Mo. Ct. App. 1998). Furthermore, the information placed by the insurer in the Form 75 is self-reported, self-serving and, in this case, inaccurate. Although I overruled BSI/National's objection to the admission of Ex. T-1 purporting to be an electronic version of Travelers' Form 75, the contents of Ex. T-1 do not impact the issues herein decided.

${ }^{12} The March Notice indicates the MINIMUM DUE of \ 17,963.92 includes " $\ 14,971.96 WAS due on 03/02/14; $\ 2,981.96 that is due on $) 4 / 02 / 14, \ 10.00 for PAST DUE installment charges; $\ 10.00 for current installment charge." Thus, the minimum due contains both past due and current charges, which is different from the "entire past due amount."

${ }^{13}$ The plain meaning of "in advance," according to Cambridge Academic Content Dictionary, Cambridge University Press, online, is "before something happens."

to cancel an insurance policy pursuant to a specific provision for cancellation, the insurer must prove that it mailed a notice of cancellation to the insured at the address shown on the insurer's records. ${ }^{14}$ See Gambill v. Cedar Fork Mut. Aid Soc., 967 S.W.2d 310, 312 (Mo. Ct. App. 1998) (Defendant is required to prove it mailed a notice of cancellation). The burden of proving cancellation is on the party asserting it. Id. citing O'Connor, 831 S.W.2d at 751[3]; Farrar v. Mayabb, 326 S.W.2d 337, 341[4] (Mo.App.1959). In Gambill, the insurer's secretary testified to her general practice and circumstantial reasons she felt the notice was properly mailed, but such evidence was insufficient to establish the notice was mailed. Other than producing a copy of the April 15 Letter with an address that matches the address on the Information Page, ${ }^{15}$ Travelers has provided no evidence to support a finding it complied with the "mailed or delivered" requirements of the Policy.

With the April 15 Letter, Travelers has produced a cancellation notice that strictly complies with the Policy and communicates a current, unequivocal, and unmistakable act of cancellation for sufficiently clear and specific reasons. However, there is no proof it was mailed or delivered to STL Brick as required by the terms of the Policy. Therefore, Travelers has not met its burden of proving the Policy was effectively canceled prior to Employee's date of injury.

Each party shall bear its own fees and costs. Under § 287.260.1, RSMo..., attorney's fees in connection with workers' compensation matters are "subject to regulation by the division or the commission and shall be limited to such charges as are fair and reasonable and the division or the commission shall have jurisdiction to hear and determine all disputes concerning the same." Page v. Green, 758 S.W.2d 173, 174 (Mo. Ct. App. 1988). I find it fair and reasonable to deny both motions requesting fees and costs.

BSI/National's request for fees and costs relies on $\S 287.040 .3$, dealing with the primary and secondary liability of contractors, to demand attorney's fees and expenses of the suit. In relevant part and with emphasis added, $\S 287.040 .3$ provides the liability of the immediate employer is primary, and that of general contractors is secondary, but:

any compensation paid by those secondarily liable may be recovered from those primarily liable, with attorney's fees and expenses of the suit. Such recovery may be had on motion in the original proceedings. No such employer shall be liable as in this section provided, if the employee was insured by his immediate ... employer.

Having determined Travelers insured the immediate employer, STL Brick, BSI/National as a secondarily liable employer cannot be liable for benefits due Employee. Such a finding is mandatory given the legislature's use of the word "shall." The use of "shall" in a statute is indicative of a mandate to act. Welch v. Eastwind Care Ctr., 890 S.W.2d 395, 397 (Mo. Ct. App. 1995)(The general rule is that use of "shall" is mandatory and not permissive). Because of the final sentence of $\S 287.040 .3$, BSI/National cannot be liable for compensation paid as the secondarily liable employer due to the immediate employer's insured status. Therefore, it shall recover the compensation it paid. However, the word "may" still modifies the phrase "with attorney's fees and expenses of the suit," making the additional award of fees and expenses

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[^0]: ${ }^{14} The Policy, which mirrors the statutory requirements of \S 379.885$, states, "[p]roof of mailing of this notice to you at your mailing address shown in item 1 of the Information Page will be sufficient to prove notice."

${ }^{15}$ See footnotes 6 and 14 above. The address complies with the terms of the Policy.

discretionary. The use of the word "may" in a statute implies alternate possibilities and that the conferee of the power, in this case the court, has discretion in the exercise of the power. State v. Patterson, 729 S.W.2d 226, 228 (Mo. Ct. App. 1987). I decline to exercise my discretion to award BSI/National its fees and expenses.

In advancing its vital argument that Travelers' cancellation notice was untimely, BSI/National asserted to the court at hearing and in its proposed award ${ }^{16} that the mandatory 10day notice of \S 375.003$, "applies to all insurance policies except life insurance policies." This is demonstrably inaccurate ${ }^{17} because the definition of "policy" in \S 375.001$ is limited "fire and extended coverage insurance... on owner-occupied habitational property," and does not include workers' compensation policies. ${ }^{18}$ By relying on an inapplicable statute to make its case, BSI/National potentially undermined possible settlement, incurred unreasonable and unnecessary fees and expenses, caused its opponents to do the same, and misdirected the court. Despite this error, it prevailed, because the final element of proof to establish cancellation was not submitted at hearing. The motions of both parties ${ }^{19}$ for attorney's fees and costs or expenses are denied.

As the party asserting cancellation, Travelers had the burden of proving strict compliance with all the contractual and statutory requirements in regard to notice of cancellation. Having failed to meet this burden, Travelers is found to have a valid contract of insurance covering STL Brick ${ }^{20}$ for the date of Employee's accident. Therefore, Travelers shall reimburse BSI/National pursuant to the terms of the parties' stipulation and this Award. Each party shall bear its own attorney's fees and costs.

Made by: $\qquad$

Karla Ogrodnik Boresi

Administrative Law Judge

Division of Workers' Compensation

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[^0]: ${ }^{16} The parties post-hearing filings will be included with the record.

{ }^{17}$ In Kelley v. Shelter Mut. Ins. Co., 748 S.W.2d 54, 56 (Mo. Ct. App. 1988), involving the loss of a mobile home, the court noted $\S 375.003 .1$ provides when "notice of cancellation of a policy ... shall be effective", but the word "policy" does not include ... an insurance contract insuring a mobile home". § 375.001(4). The defendant's reliance on the section was an "obvious fallacy." Kelly at 56; see also Bank of Poplar Bluff v. Metro. Life Ins. Co., 723 S.W.2d 514, 517 (Mo. Ct. App. 1986)(the statutes relied on by respondents ( $\S \S 375.002$ and 375.003 ) do not apply to the policy in issue here based on the definition of "policy")

${ }^{18}$ Section 375 of the Missouri Revised Statutes is captioned, with emphasis added, "Provisions Applicable to All Insurance Companies" not "Provisions Applicable to All Insurance Policies."

${ }^{19}$ Due to the outcome, I will not address whether BSI/National's conduct rises to the level where $\S 287.560 fees and expenses could be awarded as requested by Travelers.

{ }^{20}$ STL Brick, as an insured employer, has no liability to BSI/National pursuant to §287.040.3. The Motion for Reverse Judgment is moot.