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Auto Parts of Bozeman3/24/2000
DECISION AND ORDER ON APPEAL
This is an appeal by Auto Parts of Bozeman, Incorporated (Auto Parts) from FINDINGS OF FACT; CONCLUSIONS OF LAW; AND FINAL ORDER of the Department of Labor and Industry (Department) determining that Auto Parts was an uninsured employer during the period February 1, 1996 to April 22, 1996, and assessing a penalty of $2,675.96. For the reasons set out below, the Department's decision is reversed.
Record on Appeal
The record on appeal consists of the transcript of the hearing and the Department file, including the exhibits admitted at the hearing.
Factual Background
Beginning March 8, 1993, Auto Parts maintained workers' compensation insurance with the State Compensation Insurance Fund (State Fund). (Uninsured Employers' Fund Exhibits, hereafter "UEF Exs.", 2-3.)
On January 8, 1996, State Fund issued a "Cancellation Notice" of the policy for failure to pay an advance premium of $879.34. (Auto Parts Exhibit, hereafter "AP Ex.", 1.) The Notice referenced a "due date" of January 1, 1996, and a "pending cancellation date" of February 1, 1996. (Id.) Printed language on the Notice stated:
We will cancel your policy at 12:01 a.m. on the pending cancellation date(s) shown below unless each item is received by its respective pending cancellation date. We will not accept claims occurring on or after the pending cancellation date(s) unless we receive each item by its pending cancellation date.
Once your coverage is cancelled, we must reveive all delinquent reports, amounts due, a new application, and sufficient advance premium or deposit to initiate new coverage. THERE WILL BE A LAPSE OF COVERAGE FROM THE CANCELLATION DATE TO THE NEW POLICY EFFECTIVE DATE.
The Department of Labor and Industry's Uninsured Employer's Fund receives information concerning all cancellations of coverage. You are subject to fines, penalties and court action if you have not complied with coverage requirements under the Workers' Compensation Act. (Id.)
On February 5,1996, State Fund issued and apparently sent out a "Premium Report" for Auto Parts. The report, as completed by Auto Parts later on, is found at UEF Exhibit 3. The following language appears at the top left of the report just above the insured's name and address: "IMPORTANT NOTICE. Your policy will be cancelled if this report and payment are not received in our office within 30 days of the DUE DATE." Next to the phrase, "DUE DATE," the word "IMMEDIATELY" is printed. However, further down on the form, after the words "POLICY STATUS," the word "CANCELLED" is typed in. Finally, approximately two-thirds of the way down the legal-size page, the following language is printed:
IMPORTANT NOTICE: YOUR POLICY WAS CANCELLED ON 02/01/96. ONCE COVERAGE IS CANCELLED, ALL REPORTS, PREMIUMS AND OTHER AMOUNTS DUE MUST BE SUBMITTED TO CLOSE YOUR ACCOUNT. A NEW APPLICATION MUST BE SUBMITTED TO RE- ENROLL. (UEF Ex. 3 at 1.)
Included with the report was a payroll form for the insured to provide information concerning actual wages paid to employees for the period July 1, 1995, through January 31, 1996. (Id.) A handwritten "authorized signature" indicates the payroll report was completed by Florine Thorson, a bookkeeper for Auto Parts, on April 19, 1996. (Id.) Based on the payroll information, premium calculations were written in on the report form. (Id. at 2.)
Meanwhile, Auto Parts' President, Richard Lewis (Lewis), wrote a check dated January 31, 1996, to State Fund for the $879.34 advance premium as set out in the January 8 Notice. (UEF Ex. 2; Tr. 43.) Lewis testified the check was not ma
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