CP# 2002-29546, 2002-24380 Arroyo v. 84 Lumber
NEW JERSEY DEPARTMENT OF LABOR & WORKFORCE DEVELOPMENT
B E F O R E:
HONORABLE COSMO A. GIOVINAZZI, III
A P P E A R A N C E S:
KOTLIKOFF, LITTLEFIELD & FISHMAN, ESQS.,
RONE, HUGHES & KOWALSKI, ESQS.,
WEBER, GALLAGHER, SIMPSON, STAPLETON, FIRES & NEWBY
O’BRIEN, RULIS, BOCHITCHIO & SOSSO, ESQS.
This is my reserved decision in the case of Hector Arroyo v. DiFabrizio Trucking, Claim Petition No. 2002-24380 and Hector Arroyo v. 84 Lumber Company, Claim Petition No. 2002-29546.
Petitioner, Hector Arroyo filed Claim Petition No. 2002-24380 on or about August 1, 2002 against respondent DiFabrizio Trucking alleging that he had been injured on June 7, 2002 while working as a delivery driver. On September 16, 2002, the petitioner filed a second claim petition against 84 Lumber Company alleging the same injury of June 7, 2002 while in the employment of 84 Lumber Company. Respondent, DiFabrizio, through its insurance carrier, The Injured Workers Insurance Fund of Maryland (IWIF) and represented by Weber, Gallagher, Simpson, Stapleton, Fires & Newby LLP filed an answer on April 15, 2003 acknowledging that petitioner suffered an accident on June 7, 2002 which arose out of and in the course of employment, but denying that coverage existed in the State of New Jersey for the claim. Frank DiFabrizio, the sole proprietor of DiFabrizio Trucking was notified of the coverage issue and filed a separate answer on November 9, 2004 through his personal attorneys, Rone, Hughes & Kowalski. The Weber Gallagher Law Firm remained in the case as the attorneys for IWIF. Respondent, 84 Lumber Company, filed an answer to Claim Petition No. 2002-029546 on June 16, 2003 denying that the petitioner was employed by the respondent on June 7, 2002. After substantial investigation and discovery, the cases were pre-tried on March 18, 2005 at which time a formal scheduling order was entered and trial dates were designated for each of the witnesses to be produced by the parties. The trial commenced on April 29, 2005 and was tried over several dates including the recall of two of the witnesses on January 27, 2006. Thereafter, each of the parties submitted briefs setting forth respective positions and their arguments regarding applicable law.
FINDINGS OF FACT
Respondent, 84 Lumber Company, is a retail supplier of lumber and building supplies such as doors, windows and cabinets used in the construction of houses. 84 Lumber has 500 stores in 41 states, including New Jersey, Maryland and Pennsylvania. Initially, 84 Lumber included delivery of lumber and supplies as a part of its business and owned delivery trucks, which were driven by 84 Lumber employees. However, in 1988, the company began entering into delivery contracts with haulers, who were responsible to deliver lumber and construction supplies for each store in its network. This change occurred because the company felt that it was better at selling lumber and construction supplies than at being a trucking company.
The company developed an “Independent Contractor Hauling Agreement” which it utilized for each of its haulers. In this case, respondent DiFabrizio entered into such an agreement with 84 Lumber on February 27, 2002, to be effective on March 4 (RDF-1). Section II of that agreement, entitled “Fees/Payment” sets forth the payments to be made by 84 Lumber to the contractor for the delivery of its products. Section II.E. provides that 84 retains the right to set off amounts which may be owed by 84 to contractor under the agreement against any amounts which may be owed by contractor under the agreement, or pursuant to other agreements. Section III.A. sets forth the times on each day when contractor will be available to make deliveries, and Section III.B. identifies the stores to which the hauling contract applies.
Section V, entitled “Insurance” requires the contractor to workers’ compensation insurance covering its employees, as well as adequate employer’s liability, commercial general liability and automobile liability insurance and to name 84 Lumber as an additional insured under each of its policies by means of an “additional insured” endorsement in a form satisfactory to 84 Lumber. This section also requires the contractor to furnish 84 Lumber with a Certificate of Insurance certifying that the contractor has the required coverages in force at all relevant times (emphasis added) and further certifying that none of the coverages will be cancelled without at least 30 days advance notice to 84. Section V further provides that failure to maintain such insurance shall constitute breach of this agreement by contractor and the immediate and automatic termination by contractor of all rights under the agreement without notice from 84 to contractor. Finally, this Section also allows 84 to deduct from any fees or payments due contractor any unpaid premiums due for contractor’s insurance, and to pay such premiums on contractor’s behalf.
Section VI, entitled “Maintenance and Appearance,” has two sub-sections. Subsection A. requires contractor to maintain, repair and service his equipment in a safe and clean condition, and to make maintenance, repair and service records available for inspection by 84. Subsection B. provides that “contractor’s employees will wear clean, neat clothes, which will include crepe-soled work boots, blue denim jeans or khaki pants, and a uniform shirt and/or jacket. Any clothing advocating, depicting or implying drugs, sex, music, alcohol or anything that does not directly relate to the delivery or building materials from 84 will not be worn by contractor’s employees.”
Section VII. C. provides that the parties intend the agreement to create an independent contractor relationship, by which the contractor shall at all times be an independent contractor and not an employee, agent or servant of 84 or of its customers.
In January of 2002, Coastal Transportation was the hauling contractor for the 84 Lumber stores in Pleasantville and Cape May Court House, New Jersey. Petitioner, Hector Arroyo was hired by Coastal Transportation after responding to a newspaper advertisement for a job. He called the phone number in the ad and was advised to go to 84 Lumber in Pleasantville to obtain an application. Petitioner went to 84 Lumber and was given an application by an 84 Lumber employee. He filled out the application, handed it back to the employee and was subsequently contacted by a representative of Coastal Transportation who hired him to work as a delivery driver for Coastal, delivering 84 Lumber construction supplies. He began working for Coastal in January of 2002. He reported to work each morning at the 84 Lumber store in Pleasantville at 7:00 a.m. He was given a route sheet by an 84 Lumber employee, which set forth the deliveries which he was to make, the product to be delivered at each stop, the order of the deliveries, and if necessary, the directions to each delivery. If a helper was needed for any delivery, an 84 Lumber employee accompanied him in the truck. The truck which he operated was owned by Coastal Transportation but had an 84 Lumber logo on it. Petitioner parked the truck at the end of each workday inside the 84 Lumber yard in Pleasantville. 84 Lumber employees loaded the trucks for each delivery made by the petitioner, who exclusively delivered building materials and supplies sold by 84 Lumber to its customers.
For reasons which were not made clear at the trial, Coastal’s contract with 84 Lumber in Pleasantville was terminated at the end of February, 2002. Coastal, however, had another hauling agreement with 84 Lumber involving one or more stores in New Jersey and petitioner thereafter reported to the 84 Lumber store in Florence, New Jersey where he continued to provide delivery services as described above.
At the time that Coastal’s hauling contract with the Pleasantville and Cape May stores was terminated, respondent Frank DiFabrizio, was a resident of White Plains, Maryland and worked as a delivery driver for Morose Trucking. Morose had a similar hauling contract with 84 Lumber in Maryland, which, coincidently, was being terminated at the end of February 2002. The area manager in Maryland put Frank DiFabrizio in touch with Mitch Feldman, the director of delivery services and special purchases for 84 Lumber. Feldman worked in the corporate office for 84 Lumber in 84, Pennsylvania. Upon learning that DiFabrizio was interested in becoming a hauler for 84 Lumber, Feldman put him in touch with Alex Dobosh, the area manager for 12 South Jersey 84 Lumber stores. DiFabrizio met Alex Dobosh on February 27, 2002 and explained his interest in becoming a contract hauler for 84 Lumber in Southern New Jersey where he understood that an opening was becoming available. On the day they met, Dobosh and Feldman negotiated an Independent Contractor Hauling Agreement (RDF-1) which was to become effective on March 4, 2002. After agreeing upon the delivery fees to be paid under the agreement, DiFabrizio signed the agreement as the owner of DiFabrizio Trucking. Dobosh witnessed his signature, and the agreement was subsequently sent to Mitchell Feldman at 84 Lumber Headquarters in Pennsylvania. On February 28, 2002, DiFabrizio entered into an agreement with his former employer, Matt Morose and acquired three trucks, which he intended to use to fulfill the hauling contract with 84 Lumber. On March 1, 2002, he and a friend, John Burke, went to First Insurance Group of Maryland, located in Waldorf Maryland where he presented the hauling contract to an insurance agent to obtain the insurances required by the contract. In completing an insurance application, (RDF-2) respondent Frank DiFabrizio listed both his mailing address and his business address as 9800 Faith Baptist Church Road, White Plains Maryland, 20695. He indicated under rating information that his business would be located in Maryland, that it would have one location, and that the nature of the business was “Long Haul Trucking”. On page two of the application, under General Information, respondent indicated (No. 14) that his employees would travel out of state. Policy No. 3934918RT, (RDF-3) issued by IWIF on or about May 1, 2002 lists the insured as DiFabrizio Trucking, 9800 Faith Baptist Church Road, White Plains Maryland, 20695-2854. The policy, issued for a period of one year, indicates under Item 3 “Coverage” that workers’ compensation coverage is applicable for the State of Maryland. Item 3.C. reads “Other States Insurance: Part Three of the policy applies to states, if any, listed here: NONE”. The business activity covered by the policy is “Trucking Long Distance Hauling-All Employees.” The last page of the policy “Important Notice” states: “We will not provide coverage for a claim filed in any state other than Maryland if you have operations in any other state other than Maryland, hire employees outside of Maryland employees in operations outside of Maryland on other than a temporary, occasional or a casual basis. We can assist you in obtaining coverage in states other than Maryland. This endorsement does not satisfy the requirement of any other state’s workers’ compensation law.”
The Certificate of Insurance required by Paragraph V of the hauling contract between respondents DiFabrizio and 84 Lumber, which confirmed that petitioner had workers’ compensation coverage, was not issued to 84 Lumber until on or about August 4, 2002. Notwithstanding this delay, however, respondent DiFabrizio began providing hauling services to 84 Lumber stores in Pleasantville and Cape May Court House, according to the contract, on March 4, 2002.
In May of 2002, either Frank DiFabrizio or his co-employee, Mike McKenna found an application which petitioner, Hector Arroyo had completed for Coastal Transportation at the 84 Lumber store in Pleasantville. Using that application, DiFabrizio contacted petitioner, negotiated a salary with him, and hired him to work as a delivery driver for DiFabrizio Trucking at the 84 Lumber stores in Pleasantville and Cape May Court House. Petitioner thus left Coastal Transportation, which was servicing the 84 Lumber store in Florence, New Jersey and began servicing the stores covered by DiFabrizio’s contract. Pursuant to the arrangement, petitioner reported for work each morning at the Pleasantville store at approximately 7:00 a.m. The truck was loaded by 84 Lumber employees for deliveries to be made each morning, and petitioner was given an invoice of the construction materials which he was to deliver to customers of 84 Lumber by Donald Springsteadah, the co manager in charge of deliveries and special orders. If more than one delivery was loaded onto a truck Springsteadah would indicate which order was to be delivered first, which second based on the importance of the customer. If petitioner was uncertain how to locate a particular customer, Springsteadah or an 84 Lumber employee would provide petitioner with directions. If expensive or delicate supplies were being delivered such as windows or cabinets, 84 Lumber would assign one of its employees to accompany petitioner on the delivery to assist in unloading the supplies. Springsteadah testified that 90 percent of the 84 Lumber customers at the Pleasantville store were commercial customers (e.g. contractors, builders) and that these customers were not charged a delivery fee for the service of delivering construction materials and supplies hauled by DiFabrizio. About 5 percent of its lesser customers (presumably individual homeowners) were charged a delivery fee in excess of the delivery charge set forth in the hauling contract so that 84 Lumber earned a profit on those deliveries. During the period relevant to this case, DiFabrizio worked exclusively for 84 Lumber Company. Even though he technically had the right to provide transportation services for noncompetitors of 84 Lumber during the term of the contract, which began on March 4, 2002, DiFabrizio entered into no other hauling contracts. In fact, up to the time he testified in June of 2005, DiFabrizio had only provided hauling services on one other occasion for a company other than 84 Lumber.
On the afternoon of June 7, 2002, the petitioner was assigned to make deliveries out of the Cape May Court House store. He was accompanied by a driver in training, Raheem. Petitioner was assigned to make a final delivery from the Cape May Court House store to Wildwood. When he and Raheem arrived at the delivery site, petitioner was un-strapping the belts which held the load when a wooden beam fell from the load and struck him in the head. Petitioner fell to the ground. Raheem than called DiFabrizio to notify him of the accident. Petitioner was subsequently taken to the Atlantic City Medical Center where he was treated for an open wound of the scalp and released. At the hospital, petitioner indicated that he was covered by insurance issued through 84 Lumber Company.
Petitioner returned to work the Monday following the accident and continued working as a delivery driver until sometime in July of 2002. His employment ended when a salesman from 84 Lumber requested that he pick up windows from a house in Beasley’s Point, which had been previously delivered. The reason why the windows were being returned was never explained. The petitioner went to the Beasley’s Point House to pick up the windows on two or three occasions. The windows had been stored in the house, but there were no stairs which could be utilized to enter the premises. Petitioner explained that he was unable to retrieve the windows because of a lack of stairs. The 84 Lumber salesman who had requested that the windows be picked up, John Priestly, became angry even though petitioner explained why he was unable to retrieve the windows. Thereafter the salesman called DiFabrizio complaining that the windows had not been picked up. DiFabrizio thereupon called petitioner and terminated his employment.
Upon reporting petitioner’s injury to IWIF, DiFabrizio was advised that the claim was not covered since petitioner had been injured in New Jersey and
This case was bifurcated for purposes of trial so that the issues of employment and coverage could be addressed. The specific issues presented by this case are: A.) whether IWIF is obligated to provide workers’ compensation benefits to petitioner, Hector Arroyo as a result of the policy of insurance issued to respondent, DiFabrizio Trucking on or about March 1, 2002, B.) if not, whether the Hauling Contract entered into between DiFabrizio Trucking and 84 Lumber, effective March 4, 2002 insulates 84 Lumber from providing workers’ compensation benefits to petitioner on the theory that DiFabrizio Trucking is an independent contractor.
LEGAL ANALYSIS AND CONCLUSIONS
With regard to the first issue, whether IWIF is obligated to provide workers’ compensation benefits to petitioner through the insurance policy issued to DiFabrizio Trucking, respondent DiFabrizio argues that DiFabrizio Trucking was a Maryland business when it applied for workers’ compensation insurance through First Insurance Group of Maryland. He further argues that it is undisputed that he advised the insurance broker who took his application that he intended to operate his trucking business in the State of New Jersey as a hauler for 84 Lumber Company, using New Jersey employees, and that the policy of insurance issued by IWIF should therefore be held to cover petitioner’s injury of June 7, 2002. IWIF, which has agreed to be bound by this court’s decision on the issue of coverage, argues that the carrier was never advised of the respondent’s intention to operate in the State of New Jersey, that the policy of insurance was issued solely to provide coverage in the State of Maryland, that IWIF is only authorized to issue insurance in the State of Maryland, and that the policy therefore does not cover petitioner’s injury of June 7, 2002. In the alternative, IWIF argues that if the policy of insurance issued to DiFabrizio is effective, than it is obligated to pay only those benefits which it would have paid under the Workers’ Compensation Act of the State of Maryland, citing Toebe vs. Employers Mutual of Wausau, 114 N.J. Super 39 (App. Div. 1971), cert. granted, 58 N.J. 599 (1971), reversed 63 N.J. 198 (1973).
It should be noted that just because the testimony of a witness is undisputed, that does not necessarily make it credible or truthful. In the instant case, although Frank DiFabrizio testified that he fully informed the broker at First Insurance Group of Maryland that he would be conducting his trucking transportation business in the State of New Jersey, using New Jersey employees, there is nothing in the application of insurance to support this testimony. At the time he applied for insurance, respondent had only a Maryland address, which he gave as the location of the business. The application indicates that respondent would be conducting a long haul trucking operation in the State of Maryland, which was untrue and a misrepresentation of the business which petitioner actually intended to operate. This is confirmed by the fact that respondent indicated in the application that employees would be traveling out of state. Although at the time the application was submitted, both he and Mike McKenna, his only employee were residents of Maryland who would be traveling to the State of New Jersey to work, the application gives the impression that respondent would be operating a Maryland trucking company, which would operate within Maryland, but which would travel outside of Maryland for the purpose of making deliveries. The hauling contract which respondent entered into with 84 Lumber Company on February 27 contemplated that he would provide hauling services to two 84 Lumber stores in Southern New Jersey, and that all hauling would be conducted within New Jersey, none of which would originate in the State of Maryland. Furthermore, the application indicates that respondent would be providing “long haul trucking” when in fact the hauling contract contemplated short delivery services. This is clear from the mileage radius set forth in Section II of the contract, which sets forth the fees to be paid for transportation from zero to five miles, six to ten miles, and so forth. While there is a provision in the contract for fifty plus miles, even this would not normally be considered long haul trucking. The actual transportation business conducted by DiFabrizio consisted of traveling only a few miles from either the Pleasantville or Cape May Court House stores to make deliveries to customers in the immediate areas serviced by those stores. The fact that 84 Lumber had stores throughout New Jersey, including Vineland in Cumberland County and Florence in Burlington County make it abundantly clear that respondent DiFabrizio would seldom, if ever be traveling more than thirty miles from the stores listed in the contract. It is also convenient that the stores listed, 1101 and 1113 are not identified as being in New Jersey so that the insurance broker would have no way of knowing that the stores listed were in the State of New Jersey unless she was specifically told. Petitioner’s witness, John Burke did not have a very specific memory of the details of the meeting, which occurred at First Insurance Group of Maryland when he introduced Frank DiFabrizio to an agent on March 1st. Although he claims to have recalled DiFabrizio telling the agent that he would be operating in the State of New Jersey, he did not seem to remember any other details of the meeting and admitted that he left the meeting on one or two occasions to go out for a smoke. It is also noteworthy that Mr. Burke identified himself as a good friend of respondent Frank DiFabrizio who had known him for approximately eight years.
The policy of insurance, specifically including the declaration page was sent to respondent DiFabrizio Trucking on or about May 1, 2002, approximately five weeks prior to petitioner’s accident. That document states, clearly and unequivocally, that it provides workers’ compensation coverage only for the State of Maryland, and that no other states are included. The declaration page also lists long distance hauling as the classification for the policy which, as noted above, was clearly not the nature of respondent’s business. Although respondent DiFabrizio testified that he did not receive the entire policy, the fact that he received the declaration page prior to petitioner’s accident should have made it abundantly clear that he had no coverage in the State of New Jersey. It is noteworthy that respondent was contacted after petitioner’s accident by First Insurance Group of Maryland to advise that the policy which he had purchased did not provide coverage in New Jersey. It is also noteworthy that when petitioner was called back to the witness stand on January 27, 2006, he testified on cross-examination that he could not answer whether he specifically advised Donna Pond of First Insurance Group that Hector Arroyo was a New Jersey employee. He also admitted at that time that he was never told by First Union that he had New Jersey workers’ compensation insurance. His testimony was that he knew he had coverage, but he did not know the difference between New Jersey and Maryland coverage and simply assumed that the coverage extended into New Jersey. This assumption was apparently based upon the fact that he was advised by the agent for First Union Insurance of Maryland that there would be a three hundred mile radius from Maryland within in which he would have workers’ compensation coverage. It is clear from the application and from the declaration page of the policy that this information was provided to him upon the assumption that he would be operating a long haul trucking business within the State of Maryland and that transportation services would extend outside the State. I therefore conclude that petitioner used the three hundred mile radius to convince himself that he did in fact have coverage in New Jersey notwithstanding the policy language.
In the case of Hornet Express v. Zurich American Insurance Group, 382 N.J. Super. 408, 413 (App. Div. 2006), the Appellate Division stated that when construing a policy of insurance, it is the Court’s responsibility, as with any other contract, “to search broadly for the probable common intent of the parties in an effort to find a reasonable meaning in keeping with the express general purposes of the policy…. It cannot be emphasized too strongly that when an insurance policy is clear and unambiguous… the Court is bound to enforce the policy as it is written.” In that case, the Court was reviewing a workers’ compensation policy issued by the New Jersey Workers’ Compensation Insurance Plan (NJWCIP), which provides involuntary assigned risk coverage to New Jersey employers who cannot obtain coverage in the voluntary market. The Court noted that the policy in question clearly indicated that it only applied to the Workers’ Compensation Law of New Jersey, and that it clearly excluded all other states from coverage. It therefore reversed the decision of the trial court, which had granted summary judgment to Garden State Brokers Inc., in reliance upon Toebe v. Employers Mutual of Wausau, Supra. In arriving at its decision, the Court noted that the Supreme Court had expressly reversed the judgment of the Appellate Division in Toebe and concluded that the Appellate Division decision in Toebe was not entitled to precedential weight.
In the instant case, the policy issued by IWIF has the very same exclusions as the policy issued by Zurich in the Hornet case. Additionally, the IWIF was created by the Legislature of the State of Maryland as an insurer of last resort, to provide insurance coverage to Maryland businesses who were otherwise unable to obtain workers’ compensation insurance. Additionally, IWIF is not licensed to issue workers’ compensation policies in any other state. Given these facts, and the clear language of the policy issued by IWIF, I conclude that it was the clear intent of IWIF to issue a workers’ compensation policy to respondent DiFabrizio Trucking as an employer within the State of Maryland, and not an employer within the State of New Jersey. When looking at the intent of the parties, one must look at the intent of both parties in construing the contract of insurance. In this case, considering the circumstances surrounding the application for insurance made by Frank DiFabrizio, the language of the policy and the nature of IWIF, I conclude that the policy of insurance was intended to be applicable only in the State of Maryland. I further conclude that the policy is not applicable to provide workers’ compensation coverage to an employer operating in the State of New Jersey, and that it does not provide coverage in the instant case.
The second issue to be addressed is whether, for workers’ compensation purposes, petitioner Hector Arroyo should be considered an employee of 84 Lumber. The petitioner argues that he should be, on grounds that 84 Lumber substantially controlled petitioner’s work notwithstanding the fact that he was technically an employee of DiFabrizio Trucking, and on further grounds that there was a functional integration of the operation of 84 Lumber with DiFabrizio Trucking. Respondent 84 Lumber disagrees, arguing that, having divested itself of it’s delivery trucks and drivers, 84 Lumber entered into a valid agreement with an independent contractor to provide hauling services for it’s stores, so that it did not control the operations of delivery, and that the work performed by petitioner was not an integral part of the regular business of selling lumber and construction supplies operated by 84 Lumber. Respondent notes that while DiFabrizio did not make deliveries for other customers, he was free to acquire enough trucks and employees to do so, so as not to be financially dependent upon 84 Lumber’s business.
NJSA 34:15-36 defines the term employer and employee as follows:
“Employer is declared to be synonymous with master, and includes natural persons, and partnerships and corporations; employee is synonymous with servant and includes all natural persons, including officers of corporations, who perform service for an employer for financial consideration….”
An independent contractor has been defined by our Courts as one who, carrying on an independent business, contracts to do a piece of work according to his own methods, and without being subject to the control of his employer as to the means by which the result is to be accomplished, but only as to the result of the work. Lesniewski v. W.B. Furze Corporation, 308 N.J. Super. 270 (App. Div. 1998). In that case, the Court set forth two tests to be utilized in determining whether an individual is an employee or an independent contractor. Under the control test, a master servant relationship exists whenever the employer retains the right to determine not only what shall be done, but how it shall be done. The right of control is more determinative than the actual exercise of control. Factors to be considered in applying the “Control Test” include: A.) the right of control; B.) the right of termination; C.) the furnishing of equipment; D.) the method of payment. Under the “Relative Nature of the Work Test” an employer-employee relationship will be found to exist if there is a functional integration of the operations of the two companies, or where the work performed by the petitioner is an integral part of the regular business of the defendant. The test is frequently applied where petitioner demonstrates substantial economic dependence upon the employer. Lesniewki v. W.B. Furze Corporation, Supra; Tofani v. LoBiondo Brothers Motor Express Inc., 83 N.J. Super. 480 (App. Div. 1964).
One of the earliest cases to apply the relative nature of the work test was Hannigan v. David Goldfarb, T/A Twentieth Century Cab, 53 N.J. Super. 190 (App. Div. 1958). In that case, the Appellate Division reversed the decision of the County Court, and reinstated the decision of the Division of Workers’ Compensation, which awarded dependency benefits to a mother for the death of her son, a cab driver who was killed while driving one of respondent’s taxicabs. After extensively reviewing the decision of the Judge of Compensation as well as a discussion of the relative nature of the work test as set forth in 1 Larson, Workers’ Compensation Law, Section 46 et seq., the Court concluded that “The relative nature of the work test has the advantages of logic, clarity and forthrightness”. On the facts of Hannigan, the Court concluded that, “One cannot call these drivers ‘Independent Contractors’ or entrepreneurs without embarrassment” because, as far as the public is concerned, taxi drivers lose their identity except as drivers for the United Cab Company.
In support of its decision, the Court also pointed to the discussion in Larson, section 43.51, 45.10 in which he stated, “Here the theory of compensation legislation is that the cost of all industrial accidents should be born by the consumer as a part of the cost of the product. It follows that any worker whose services form a regular and continuing part of the cost of that product, and whose method of operation is not such an independent business that it forms in itself a separate root through which his own cost of industrial accident can be channeled, is within the presumptive area of the intended protection.........with the advent of social and labor legislation……drawing a distinction between independent contractors and employees, there has been an increasing effort on the part of employers to avoid both the financial cost and the bookkeeping and reporting inconvenience that goes with workmen’s compensation, unemployment compensation, social security and the like….these arrangements are often carefully drawn with an eye to the control test, and since employers are in fact sometimes willing actually to relinquish a considerable degree of control, it becomes very difficult to deal with these contracting-out cases with the old test; there is therefore beginning to be evinced in the decisions a sort of unexpressed conviction that if the proper scope of workmen’s compensation and other remedial enactments is not to be defeated, a different criteria based on the realistic nature of the work must be given more weight”. Hannigan v. Goldfarb, Supra. at 206.
The same principles were applied by the Appellate Division in Tofani v. LoBiondo Brothers Motor Express Inc., Supra. In that case, the Court held that a truck driver who was killed in an accident was an employee and not an independent contractor where the decedent who owned his own tractor, leased it to his employer and drove it while hauling a trailer owned by the employer in the course of operation of the employers business. In that case, the Court applied the relative nature of the work test in concluding that the truck driver was an employee for workers compensation purposes, notwithstanding the agreement between the parties, which stated that he was an independent contractor. The Court, in reaching its conclusion, stated:
“Whether a worker furnishes an independent business is determined by judging how independent, separate and public his businesses is not merely by looking at the artisan or job alone. Such employments cover services generally. When all items such as simultaneous carrying on of other contracts, absence of necessity for the contractor to personally do any physical work, and advertising and holding himself out to the public as furnishing this business service, point toward independent contractor-ship, they can be offset by showing the employer has taken over this otherwise independent contractor and so to speak, by making him one of the cogs in his production machine, converted him to the status of employee for purposes of that particular employment. (See Larson Section 45.31b).”
The Court provided the following rationale for its conclusion:
“For the period of time he placed himself under engagement to LoBiondo, Tofani was economically dependent on LoBiondo; he was not conducting a separate and independent business, at least during that period; and his work constituted an integral part of the regular and continuous functioning of the LoBiondo Trucking Enterprise. The “relative nature of the work test” for determination of the employment relationship for purposes of workers compensation is therefore here met, ….” Tofani, Supra, 83 N.J. Super. @ 493.
Applying the principles of the above cases, I conclude that petitioner, Hector Arroyo, was an employee of 84 Lumber Company at the time of his injury, as was his immediate employer, Frank DiFabrizio. Reviewing the circumstances upon which 84 Lumber entered into the hauling agreement with Frank DiFabrizio on February 27, 2002, it is apparent that 84 Lumber was not looking for a company that was truly independent of 84 Lumber. Frank DiFabrizio was an employee of Matt Morose in 2002 when Morose lost his hauling contract with 84 Lumber at some of its Maryland stores. Upon speaking with Mitchell Feldman, DiFabrizio learned of an opening in Southern Jersey where the contract of Coastal Transportation was being terminated. He met with Alex Dobosh on February 27 and, on the same date, entered into the hauling agreement, which was to take effect on March 4, 2002. At that time, he had no trucks or employees. He then acquired the three trucks which Morose had been utilizing in performing the Maryland contract with 84 Lumber, attempted to obtain insurance and began performing the contract for the Pleasantville and Cape May Court House stores. To say that he was totally dependent on 84 Lumber is an understatement. He had no other source of income which could be used to pay his employees or his insurance other than the 84 Lumber Hauling Contract.
Furthermore, the hauling services which he provided to 84 Lumber are an integral part of 84 Lumber’s business of selling lumber and construction supplies. At the Pleasantville store, ninety percent of 84 Lumber’s business is with contractors, none of whom are charged for the delivery of lumber and construction supplies. Obviously, these large contractors who are the heart of 84 Lumber’s business at the Pleasantville store expect to have the construction supplies which they purchase delivered to them as part of the purchase price. This is clearly an extension of the retail business operated by 84 Lumber. It is quite apparent that when 84 Lumber divested itself of its trucks and delivery drivers in 1988, it sought to do away with the costs attributable to the trucking part of its operation. While in theory an “Independent” hauler had the right to contract with other non-competing companies to provide hauling services, the instant contract with DiFabrizio Trucking was not independent in any sense of the word. During the three year period in which DiFabrizio contracted with 84 Lumber in Southern Jersey he only performed one job on one occasion for another company. Thus, DiFabrizio Trucking was completely dependent upon 84 Lumber for all of its business. The hauling service which DiFabrizio performed was an integral part of the business operated by 84 Lumber since it was the means by which 84 Lumber delivered construction supplies to its customers.
In addition, the hauling agreement between 84 Lumber and DiFabrizio Trucking makes it clear that the hauling business is really an extension of 84 Lumber’s retail business. The contract clearly and unequivocally indicates how drivers of the hauler must dress (“Will wear clean, neat clothes, which will include crepe soled work boots, blue denim jeans or khaki pants, and a uniformed shirt and/or jacket. Any clothing… that does not directly relate to the delivery of building material from 84 Lumber will not be worn by contractor’s employees”.) As indicated by Mitchell Feldman, these drivers are the last individuals that customers of 84 Lumber see when they deliver the product of the company, and it is important to 84 that they make a good appearance and a favorable impression. These drivers drive trucks with the 84 Lumber logo on the side of the truck, and are encouraged to wear shirts bearing the name of 84 Lumber, with or without the words “Independent Contractor” set forth on the shirt. Additionally, while 84 Lumber expects its hauling contractors to supply its own insurance, the company had reserved to itself the right to pay insurance premiums if 84 Lumber received notice of nonpayment from the insurance carrier. In the instant case, the accident in question occurred prior to 84 Lumber receiving a certificate of insurance verifying that DiFabrizio had in fact secured appropriate insurance. The hauling contract had been in effect for five months before the certificate of insurance was supplied to 84 Lumber. It would therefore appear that 84 Lumber was not really concerned about whether DiFabrizio secured insurance when he began making deliveries. Additionally, with the protection of the contract, 84 Lumber could have paid the premiums had they not been paid, or terminated the contract without notice had it chosen to do so.
Furthermore, even under the control test described in Lesniewski, Supra., it would appear that respondent DiFabrizio was not an independent contractor. Not only did 84 Lumber reserve to itself the manner in which the drivers of the hauling contractor should dress but it reserved to itself the right to designate the materials which would be delivered, the contractors or customers who would be given preference and the time of delivery. It even provided employees to assist in the delivery of more delicate construction supplies, such as windows, to assure they were delivered safely. Finally, knowing that it was paying by the mile for delivery service, the contract also gave to 84 Lumber the right to verify that the route being taken by a driver was the shortest route so it’s not to overpay under the contract. This conclusion is confirmed upon a review of Section II. D. of the contract, together with the testimony of Donald Springsteadah.
Thus, considering the language of the hauling agreement, the manner in which the agreement was entered into, the importance of the hauling service to the sale of lumber and building supplies, the dependence which DiFabrizio had upon the 84 Lumber hauling contract, and the control which 84 Lumber retained over the delivery of construction supplies to its customers, I conclude that, for workers compensation purposes, Hector Arroyo was an employee of 84 Lumber under both the relative nature of the work test and under the control test. I find that Hector Arroyo’s injury of June 7, 2002 is compensable under the Workers Compensation Act, and that 84 Lumber is liable to provide workers compensation benefits to Hector Arroyo.
I further conclude, based upon the language of the insurance contract issued by IWIF and the concessions made by its attorney in its trial brief, that IWIF is responsible to provide a defense of this workers compensation case to respondent DiFabrizio Trucking, not withstanding the fact that IWIF is not liable for the payment of workers compensation benefits to Hector Arroyo. In light of this responsibility, I order that a stenographic fee payable to Jersey Shore Reporting LLC in the amount of $900.00 be assessed $450.00 against 84 Lumber Company, and $450.00 against IWIF in connection with its defense of DiFabrizio Trucking in this case.
Petitioner’s attorney, Allen Littlefield, shall submit a judgment consistent with this decision.
Cosmo A. Giovinazzi, III
Date: August 15, 2006