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Tri-City Construction Council5/24/2005
Chris Westfall is a drywall contractor doing business as Chris Westfall Drywall. He participated in something called a 'retrospective rating plan,' which allowed employers to join together as a group to lower their industrial insurance claims and, if successful, to receive a retrospective premium refund. Former WAC 296-17-90403 (2000).
He was a member of a group sponsored by the Tri-City Construction Council, Inc. (Council). If, however, the members were not successful, and owed an additional assessment, the Council would make one payment to the Department of Labor and Industries (Department) and then collect from its members.
Here, the Council paid the Department a collective additional assessment. Westfall then went bankrupt and did not pay the Council its share of this assessment. The question here is whether the Council may now collect Westfall's share of the assessment from Westfall's bonding company, Colonial American Casualty and Surety. And we hold that the Council can equitably subrogate to the position of the Department and collect from Colonial.
FACTS
Chris Westfall Drywall posted its statutorily required contractor's bond with the state. Colonial American Casualty and Surety provided that bond. Tri-City Construction Council is a sponsor of two Washington Department of Labor and Industries' retrospective rating programs. Westfall was a member of the Council.
Washington's Retrospective Rating Plan
In order to understand this case and the facts of this case, it is necessary to have an understanding of Washington's retrospective rating plan.
The retrospective rating plan is designed to help employers lower industrial insurance premiums. RCW 51.18.005; WAC 296-17-90401. Employers who wish to join the plan may enroll in either an individual plan or a group plan. WAC 296-17-90403. Group plans are managed by organizational sponsors. WAC 296-17-90403. An organization must meet numerous requirements to qualify as a sponsoring organization. RCW 51.18.020; WAC 296-17-90409. Both sponsors and employers must have an industrial insurance account with the Department in good standing. Former WAC 296-17-90406(1) (2000); former WAC 296-17-90409(4) (2000).
The groups include employers in the same industry or business. RCW 51.18.020(7), .040(1); former WAC 296-17-90421(1) (2000). The object is to provide each group with the lowest possible premium based on the degree of risk in their specific industry or business. RCW 51.16.035; WAC 296-17-90402, -90421. Toward that end, each group's performance is evaluated at the end of its coverage period to determine whether it retrospectively qualified for a lower premium or a higher premium. RCW 51.16.035; WAC 296-17-90402; former 296-17-90463 (2000).
Members receive a premium refund for the previous year only through their sponsor, here the Council. WAC 296-17-90463(2). The refund is disbursed by the plan's sponsoring organization. WAC 296-17-90463(2); former WAC 296-17-90466(1) (2000). The Department does not dictate how the refund is disbursed by sponsoring organizations. WAC 296-17-90463(2), -90466(1). The Council may be assessed an additional retrospective premium if the members were not able to reduce their workers' compensation costs. WAC 296-17-90463(1); former WAC 296-17-90469 (2000). And the Department 'hold{s} the {sponsoring} organization responsible for any additional assessment.' WAC 296-17-90469. 'The sponsoring organization must have an industrial insurance account and the account must be in good standing at all times . . . .' WAC 296-17-90409(4) (emphasis added). Additional assessments must be paid within 30 days. WAC 296-17-90472.
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