Auto-Owners Insurance Company v. Raul Ruiz Rosas d/b/a Blue Flame Flooring

IN THE COURT OF APPEALS OF IOWA

No. 20-0020
Filed May 12, 2021

AUTO-OWNERS INSURANCE COMPANY,
Plaintiff-Appellant/Cross-Appellee,

vs.

RAUL RUIZ ROSAS d/b/a BLUE FLAME FLOORING,
Defendant-Appellee/Cross-Appellant.
________________________________________________________________

Appeal from the Iowa District Court for Polk County, Sarah Crane and

Joseph Seidlin (trial), Judges.

A workers’ compensation insurance carrier appeals the dismissal of its

breach of contract claim seeking more premium payments. A claimant cross-

appeals the dismissal of his bad-faith claim. AFFIRMED ON APPEAL;

AFFIRMED ON CROSS-APPEAL.

CeCelia C. Ibson of Ibson Law Firm, Des Moines, for appellant.

Patrick B. White of White Law Office, P.C., Des Moines, for appellee.

Considered by Doyle, P.J., and Mullins and Greer, JJ.
2

DOYLE, Presiding Judge.

A workers’ compensation insurance carrier, Auto-Owners Insurance Co.

(AOIC), filed a breach-of-contract suit against Raul Ruiz Rosas d/b/a Blue Flame

Flooring1 seeking over $50,000 in more premium payments allegedly due under

two workers’ compensation insurance policies issued to Rosas. Rosas counter-

claimed stating that AOIC’s pursuit of additional premiums was in bad faith.

The bone of contention is whether the roofers that worked on jobs with

Rosas were employees of Rosas or independent contractors. If the workers were

employees, additional premium payment obligation was triggered under the

policies, potentially putting Rosas on the hook for over $50,000. If the workers

were not employees, Rosas needed not pay premiums on top of those already

paid. Following a bench trial, the district court found, “All of the reliable evidence

showed that not only was Rosas not an employer, but he was one of a group of

independent contractors working for themselves.” The court held that “AOIC did

not show that Rosas paid remuneration to persons engaged in work that could

make AOIC liable to pay workers compensation. It therefore failed to meet its

burden to prove the premium owed to it by Rosas.” The court dismissed AOIC’s

breach-of-contract action. And finding no basis for a bad-faith claim, the court

dismissed Rosas’s counterclaim.

1 Rosas, a sole proprietor, does business as “Blue Flame Roofing.” Rosas’s
application for workers’ compensation insurance, insurance policy documents,
premium notices, audit reports, notice of cancellation, and correspondence from
insurance carriers to Rosas, all reflect the name of Rosas’s business to be “Blue
Flame Roofing.” The “Blue Flame Flooring” appellation first shows up as Rosas’s
dba in AOIC’s petition at law and has been perpetuated throughout the litigation
since. Not wanting to foul up the system, we left the flawed caption as it came to
us.
3

On appeal, AOIC makes many arguments that the district court erred in

denying its motion for summary judgment and in dismissing its petition. On cross-

appeal, Rosas argues the district court erred in dismissing his bad-faith claim.

After reviewing the record, we agree with the district court’s decisions.

I. Facts and Proceedings.

Raul Rosas immigrated to the United States in 1986 and does not speak,

read, or write English. Spanish is his native tongue. Rosas is a self-employed

roofer and runs his residential roofing business “Blue Flame Roofing” as a sole

proprietorship. Rosas and other self-employed roofers worked on jobs together,

splitting the pay. No one roofer had to obtain the work. Payee for the work was

always Rosas and Blue Flame. Asked why, Rosas responded that it was because

he had “papers” and the other roofers working with him did not. He would receive

the payment for the job and then split it with his fellow roofers. At the end of the

year Rosas issued Form 1099’s to his fellow roofers. He did not withhold any funds

for his fellow roofers’ taxes or benefits.

Someone told Rosas to purchase workers’ compensation insurance for his

business.2 He applied for and obtained the insurance through the “assigned risk”

market. Under Iowa Code section 515A.15, employers who are unable to obtain

workers’ compensation insurance through the traditional market may find

insurance through an “assigned risk” market. See Travelers Indem. Co. v.

Commissioner of Ins., 767 N.W.2d 646, 647 (Iowa 2009). The “assigned risk”

2 With some exceptions, Iowa employers are required to obtain insurance covering
their liability for workers’ compensation benefits. See Iowa Code § 87.1, .14A
(2014).
4

market is a means for insurers to allocate the underwriting risk for a proportionate

share of applicants who are unable to find coverage options in the voluntary

market. Id. Management of “assigned risk” policies is overseen by a rating

organization, in this case, the National Council on Compensation Insurance

(NCCI). Id. When an employer applies for coverage in this market, the NCCI

assigns the employer to a participating insurance carrier. Once assigned, the

insurer cannot refuse to provide coverage. “The annual premium charged by an

assigned carrier for the risk is determined by an algorithm which takes into account

the increased risk of a particular employer based on the employer’s claim history.”

Id.

On a form application for workers’ compensation insurance, Rosas stated

he was a sole proprietor doing business as Blue Flame Roofing and that he wished

to be excluded from coverage. The form shows the nature of the business to be:

“RESIDENTIAL ROOFING, NO EMPLOYEES, NO HELPERS.” The application

asks “Are sub-contractors used?” and Rosas answered no. Rosas paid the

estimated annual premium of $700. NCCI issued a binder effective July 18, 2014,

and assigned AOIC as Rosas’s workers’ compensation insurance carrier. AOIC

then issued a worker’s compensation insurance policy to Rosas showing a policy

period from July 8, 2014 to July 8, 2015 (first policy).

The insurance contract provided the final premium “will be determined after

this policy ends by using the actual, not estimated, premium basis and the proper

classifications and rates that lawfully apply to the business and work covered by

this policy.” Similarly, the contract contained an audit provision, which permitted

AOIC to “conduct audits during regular business hours during the policy period and
5

within three years after the policy ends . . . [and] information developed by audit

will be used to determine final premium.”

About two months after the policy issued, AOIC sent a “Supplementary

Underwriting Information Request” to Rosas asking him to provide information

detailing Blue Flame’s “helpers, day labor, contract labor, subcontractors and

employees.” The letter also asks, “Are any subcontractors used? If so, how

many?” Rosas did not respond. Nearly four weeks later, AOIC sent a second

request. Rosas’s insurance agent responded to the request, stating, “He has no

subcontractors and no helpers and no employees.” An attached list of workers

form shows “None.”

The policy renewed effective July 14, 2015 (second policy). Rosas paid

$800 as an initial annual premium for this second policy.

In August 2015, AOIC sent a “Policyholder Audit Report” to Rosas to audit

the first policy. Rosas did not recall seeing this document or responding to it. In

any event, a response was sent to AOIC. The response to “Tell us about your

business” was: “I’m subcontractor for roofing companies and I sub-contract this

jobs to different people.” Company structure was described as: “Individual.”

Rosas’s 2014 Federal Form 1040 Schedule C was included with the response. It

shows, among other things, $145,997 in gross receipts or sales, $105,435 in

expenses for contract labor, and a net profit of $4648. Based on the response,

AOIC sent Rosas a premium adjustment notice on September 15, 2015 showing

a total earned premium for the July 8, 2014 to July 8, 2015 period (first policy) to

be $32,365 based on an audited payroll result of $105,435. Two days later AOIC

sent Rosas a bill for $31,365 ($32,365 – $700 previously paid). Rosas disputed
6

the bill. After receiving that bill, Rosas cancelled the second policy on September

24, 2015.

In response, AOIC conducted a cancellation audit for the period July 8, 2015

to September 25, 2015 (second policy). This took place in Rosas’s accountant’s

office. The report from that audit states that Rosas was the “person providing

description of duties. The district court summarized the report:

The report states for a ‘Description of Operations’:

The Insured is a roofing contractor working on primarily
residential roofing projects in the Des Moines
metropolitan area. The Insured is contracted by
general contractors to perform re-roofing projects for
residential customers. The Insured hires contract labor
to assist with the roofing work. No other duties
performed by the Insured or their labor force.

The report also states that Rosas is the owner and that his duties
are, ‘oversight of company operations, job site supervision, roofing
labor.’
The report states that a check register and general ledger
were provided by Rosas. It does not state that any other records
were requested or provided.
The report lists 11 individuals, other than Rosas, who were
paid money by Rosas for ‘roofing contract labor.’ It lists Rosas as
having been paid for ‘company management, job supervision,
roofing labor.’ No other information was provided as to where or from
who the list or these descriptions came from. In a separate area of
the report, the same 11 individuals were listed. Here, under a section
titled ‘Notes (Double Click for Note Choices)’, each of the 11 were
described as ‘Roofing contract labor, under the Insured’s direction &
control, works on the Insureds job sites, picked up for WC.’ Here,
Rosas was described as, ‘Company management, oversight of
roofing jobs, roofing labor.’ Again, No other information was provided
as to where or from who the list or these descriptions came from.

After this report, AOIC issued a “Premium Adjusted Notice” on November 18, 2015,

adjusting the premium for second policy to $20,905. The adjusted premium
7

included a $6735 penalty for early cancellation of the policy. AOIC billed Rosas

$20,105 ($20,905 – $800 previously paid). Rosas did not pay.

AOIC sued Rosas for breach of contract seeking $51,770 in unpaid

premiums plus pre- and post-judgment interest. A default judgment was entered

against Rosas, but later set aside upon agreement of the parties. Rosas counter-

claimed asserting AOIC acted in bad faith. AOIC’s motion for summary judgment

was denied and the case was tried to the bench. The district court dismissed both

AOIC’s petition and Rosas’s counterclaim. AOIC now appeals and Rosas cross-

appeals.

II. Standard of Review.

This case was tried to the court as a law action and our review is for the

correction of errors at law. Hendricks v. Great Plains Supply Co., 609 N.W.2d 486,

490 (Iowa 2000). The district court's findings of fact have the effect of a jury verdict

and are binding on us if supported by substantial evidence. Id. Evidence is

substantial when a reasonable mind would accept it as adequate to reach the

same findings. Id. Evidence is not insubstantial just because it would have

supported contrary inferences. Id.

III. Analysis.

A. Motion For Summary Judgment.

AOIC first argues the district court erred in denying its motion for summary

judgment. Rulings denying summary judgment are interlocutory. Estes v.

Progressive Classic Ins., 809 N.W.2d 111, 114 (Iowa 2012) (“An order overruling

a motion for summary judgment issue of material fact is a nonreviewable order

when the district court finds a genuine issue of material fact exists and the case
8

proceeds to final trial.”). “A district court's denial of a party's motion for summary

judgment is no longer appealable or reviewable once the matter has proceeded to

a trial on the merits.” Figley v. W.S. Indus., 801 N.W.2d 602, 607 (Iowa Ct. App.

2011). We decline to review the district court’s denial of AOIC’s motion for

summary judgment. Id.

B. Employees or Independent Contractors?

AOIC contends that Rosas breached his contractual obligation to pay the

final workers’ compensation insurance premiums AOIC claimed were due and

owing on the two policies it issued. AOIC has the burden to prove all of the

following: (1) the existence of a contract, (2) the terms and conditions of the

contract, (3) that the plaintiff has performed all the terms and conditions required

under the contract, (4) that the defendant breached the contract in some particular

way, and (5) that the plaintiff has suffered damages as a result of the defendant’s

breach. Royal Indem. Co. v. Factory Mut. Ins. Co., 786 N.W.2d 839, 846 (Iowa

2010); see also Holliday v. Rain and Hail L.L.C., 690 N.W.2d 59, 64 (Iowa 2004)

(“The burden of proof on the plaintiffs was to prove a breach of contract by a

preponderance of evidence.”).

The district court found that there was an agreement between the parties

and the only fighting issue was over the terms of the contract. The terms of the

contract provides that AOIC will base its claim for the final premiums on the money

paid or payable during the policy period for the services of: (1) all officer and

employees engaged in work covered by this policy; and (2) all other persons

engaged in work that could make us liable under policy. AOIC maintains Rosas

used receipts from roofing jobs to pay employees, not independent contractors.
9

Rosas denies employing his fellow roofers and instead asserts they were

independent contractors.

Five factors are used to determine an employer-employee relationship:

(1) the right of selection, or to employ at will; (2) responsibility for payment of wages

by the employer; (3) the right to discharge or terminate the relationship; (4) the

right to control the work; and (5) the identity of the employer as the authority in

charge of the work or for whose benefit it is performed. Nelson v. Cities Serv. Oil

Co., 146 N.W.2d 261, 265 (Iowa 1966). AOIC presented no direct evidence to

show the existence of these factors. On the other hand, as the district court found,

Rosas presented evidence that:

• he and other self-employed roofers worked together on jobs,
splitting the pay with no one of them being responsible for obtaining
the work;
• he was the payee for the jobs because he had “papers’ and the
other roofers did not;
• he and the other roofers were paid by the job, not by the hour;
• he had no control over how the other roofers did their work;
• he and the other roofers used their own tools and equipment;
• he did not train the other roofers how to do their work;
• he and the other roofers were free to work with and for other people;
• he did not withhold any taxes from or provide any benefits to the
other roofers.

The court determined “None of the reliable evidence showed Rosas was anybody’s

employer.” We agree.

And the district court concluded Rosas was one of a group of independent

contractors working for themselves. To determine whether the roofers were

independent contractors these eight factors are used:

(1) The existence of a contract for the performance by a person of a
certain piece or kind of work at a fixed price; (2) independent nature
of his business or of his distinct calling; (3) his employment of
assistants with the right to supervise their activities; (4) his obligation
10

to furnish necessary tools, supplies, and materials; (5) his right to
control the progress of the work, except as to final results; (6) the
time for which the workman is employed; (7) the method of payment,
whether by time or by job; (8) whether the work is part of the regular
business of the employer.

Swain v. Monona Cty., 163 N.W.2d 918, 921 (Iowa 1969). In applying these

factors, we find no evidence in the record showing a contract between Rosas and

the other workers. The nature of the business required for the workers to show up

and use their independent skills to engage as roofers. There is no evidence that

Rosas was directing the workers on how to perform their roofing tasks or control

their progress of the work, except as to the final result. The record is also devoid

of evidence that Rosas was furnishing necessary tools, supplies, and materials.

We also do not find any evidence of Rosas employing the workers as assistants

with the right to supervise the workers activities. The evidence establishes the

roofers were independent contractors.

In sum, AOIC failed to provide sufficient evidence for us to find an employer-

employee relationship between Rosas and his fellow roofers. We agree with the

district court that “AOIC did not show that Rosas paid remuneration to persons

engaged in work that could make AOIC liable to pay workers compensation.”

Thus, AOIC failed to meet its burden to prove Rosas owed additional premium.

All other arguments raised by AOIC on appeal not specifically addressed in

this opinion are rejected.

C. Bad-Faith Claim.

On cross- appeal, Rosas seeks damages from AOIC claiming AOIC acted

in bad faith in suing. The elements of bad faith are (1) the insurer lacked a

reasonable basis for their action and (2) it knew or had reason to know it lacked a
11

reasonable basis. See Dolan v. Aid Ins. Co., 431 N.W.2d 790, 794 (Iowa 1988).

A reasonable basis exists if the claim is fairly debatable either on a matter of fact

or law. See Sampson v. Am. Standard Ins. Co., 582 N.W.2d 146, 149 (Iowa 1998).

“A claim is ‘fairly debatable’ when it is open to dispute on any logical basis. Stated

another way, if reasonable minds can differ on the coverage-determining facts or

law, then the claim is fairly debatable. The fact that the insurer's position is

ultimately found to lack merit is not sufficient by itself to establish the first element

of a bad faith claim.” Bellville v. Farm Bureau Mut. Ins. Co., 702 N.W.2d 468, 473

(Iowa 2005) (internal citations omitted). The court does not weigh conflicting

evidence that was before the insurer; the court is to decide whether evidence

existed to justify the insurer’s action. See id. at 474.

The district court found

the actions of both parties[3] can fairly be labeled as lazy. AOIC did
not seek clarification regarding the information it received from
Rosas and made assumptions it shouldn’t have without seeking
more information. Rosas, on the other hand, had it within his power
to nip this dispute in the bud by being forthcoming with information
on his and his fellow roofers’ business practices from the beginning.
His providing self-serving information through counsel in October,
2018, didn’t place any additional responsibilities on AOIC, who had
its own, conflicting, information through its audit reports. The crucible
of trial, such as it was, revealed that Rosas’ evidence proved more
reliable than AOIC’s in the eyes of the court. The evidence was fairly
debatable. There is no basis for a bad faith claim.

3 Not their respective attorneys.
12

We agree both parties could have done more. Even so, after a review of the

evidence, we also conclude AOIC’s claim for more premiums is fairly debatable.

So we agree with the district court there is no basis for a bad-faith claim.

AFFIRMED ON APPEAL; AFFIRMED ON CROSS-APPEAL.

Mullins, J., concurs; Greer, J., concurs specially.
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GREER, Judge (specially concurring).
I concur with the majority’s decision that Auto-Owners Insurance Co. (AOIC)

did not act in bad faith because the issue related to the premium increases was

fairly debatable and, under the contract of insurance, the insurer could pursue

answers to questions affecting the workers’ compensation coverage. See Bellville

v. Farm Bureau Mut. Ins. Co., 702 N.W.2d 468, 473 (Iowa 2005). But I specially

concur to address AOIC’s position that the issues raised in this appeal are of first

impression in Iowa. Consistent through the summary judgment, at trial, and now

on appeal, AOIC frames these issues as:

(1) May an insured submit evidence of independence of its
workers after the audit period (policy period plus three (3) years) has
closed and is the insurance carrier required, by contract or by law, to
consider said evidence?
(2) Do the contracts or the law impose any burden of
production or investigation on the insurance carrier during the audit
process or does that burden rest solely with the insured?

“When the district court denies a party’s motion for summary judgment and the

party appeals the final verdict, we review the issues raised in the unsuccessful

motion for summary judgment based on the record made during trial . . . to

determine if the district court committed error.” Estes v. Progressive Classic Ins.

Co., 809 N.W.2d 111, 114 (Iowa 2012).

I, like the majority, view the issues raised in the context of a contract claim.

I begin with the insurance contract between AOIC and Rosas. “The construction

of an insurance contract and the interpretation of its language are matters of law

for the court.” Ill. Nat-’l Ins. Co. v. Farm Bureau Mut. Ins. Co., 578 N.W.2d 670,

671 (Iowa 1998). I think it is important to address these questions because as

noted in the majority opinion, AOIC is mandated to provide coverage, is bound,
14

and then the premium is calculated. Unlike traditional workers’ compensation

insurance where underwriting is involved first and a decision to reject or accept the

risk can then be made, here the coverage is bound and the insurers serving the

assigned risk market must agree to provide coverage among the various carriers

involved. See Travelers Indem. Co. v. Comm’r of Ins. of State, 767 N.W.2d 646,

647 (Iowa 2009). So the AOIC assigned risk policy contains requirements to

address the unknown risks the employer brings to the relationship.

Rosas noted on the application for coverage that his company was covering

no employees, no helpers, and did not use any subcontractors. And he specifically

asked to be excluded from coverage under the policy. That application caught the

attention of underwriting since it meant the policy would only cover anyone that

was working for him—doing jobs for him. As a part of the calculation of final

premium, AOIC needed to identify for whom coverage was sought. At the trial, as

the underwriter testified, the goal of workers’ compensation insurance is to “provide

work comp coverage for any claim that could occur during the policy term for the

benefit of the insured and their employees, the workers.” And from one vantage

point in this record, one could view Rosas’ claim “someone” told him to get workers’

compensation insurance as a possible requirement by the general contractor who

was arranging and contracting with the residential owners for the roofing jobs.4

See Lechuga v. O & J Enter., LLC, No. 18-1455, 2019 WL 2524099, at *4 (Iowa

4 Rosas testified a different contractor arranged for the job, got paid for the job,
paid Rosas to do the work, and provided all of the materials. Rosas then paid
individuals, many of whom lived with him. Without more, one could speculate the
contractor arranging the jobs had more knowledge about the Rosas operation and
how Rosas managed the workers than AOIC.
15

Ct. App., June 19, 2019) (speculating that evidence could suggest employer

created the fiction there was a subcontractor agreement to insulate himself and

the company from liability).

Likewise, Rosas was less than forthcoming when describing his operation

to AOIC and its auditors.5 So I would answer the questions AOIC identifies as

follows.

Do the contracts or the law impose any burden of production or investigation
on the insurance carrier during the audit process or does that burden rest solely
with the insured?

I answer this second question first. Under this contract of insurance, I would

find both parties have a duty during the audit process to fairly and fully investigate

the risk and how that risk translates to a premium cost. First the purpose of Iowa

Code chapter 515A (2014), regulating the assigned-risk policies, is to “promote the

public welfare by regulating insurance rates to the end that they shall not be

excessive, inadequate or unfairly discriminator.” Iowa Code § 515A.1 (2014); see

Thomas v. Progressive Cas. Ins. Co., 749 N.W.2d 678, 682 (Iowa 2008) (noting

that when a statute authorizes a contract of insurance, the statute forms a basic

5 Under details provided by Rosas in the application, no one was covered under
the policy, including Rosas. Next, when asked to detail “all helpers, day labor,
contract labor, subcontractors and employees,” Rosas offered a handwritten note
signed by his “agent” saying “[h]e has no subcontractors and no helpers and no
employees.” But on the required worksheet that followed, the form noted “I’m a
sub-contractor for roofing companies and I sub-contract this job to different
people.” (Emphasis added.) To dispute the increased premium, Rosas sent a
note saying:
I Raul Rosas Ruiz did not take any taxes of any kind form the sub-
contractors. I hired 4 sub-contractors last year when I need help on
different jobs, none of the people where full time these 4 sub-
contractors worked for many different contractors like me, as a result
I always thought they were sub-contractors I did not know they need
their own policy like I have.
16

part of the policy). Charging more than the premium necessary to cover risks

related to a certain group of employees would defeat the stated statutory goal of

avoiding excessive premiums. See Travelers Indem. Co., 767 N.W.2d at 652

(finding question of excessive premium charged was resolved in insurer’s favor

where finding was unsupported that the insured had other insurance to cover

workers’ compensation claims for its interstate transportation services). Thus, the

statute mandates that AOIC not overcharge its insured. Still, the terms of the policy

also require Rosas to “keep records of information needed to compute premium”

and “provide [AOIC] with copies of those records when we ask for them.” I would

find it is reasonable that an audit requirement presupposes that the exchange of

information be mutual with AOIC requesting information and Rosas responding. I

would find that AOIC completed its audit and met its duty under the contract of

insurance and that Rosas did not. But the inquiry does not end there.

May an insured submit evidence of independence of its workers after the
audit period (policy period plus three years) has closed and is the insurance carrier
required, by contract or by law, to consider said evidence?

Next, I examine the first question, which AOIC raised to resolve the

premium dispute. Arguing the time for Rosas to prove no liability under the policy

for the additional premiums was only during the three-year term of the audit, AOIC

points to the policy language. Because after the three-year audit period ended,

Rosas finally offered an affidavit addressing the independent contractor status of

the roofing workers he paid, AOIC contends, as a matter of law and contract, it is

too late to dispute the additional premiums. AOIC fashions a good point. Because

the premium is calculated after the insurer is bound, is it not fair to provide all

information to assess the risk? By ignoring the responsibilities of the insured under
17

the policy of insurance to comply with the audit, an insurer could discover liability

under the policy only after the fact when a qualifying employee is injured. Through

the letters sent by AOIC, Rosas was aware of the audit, the stakes, and that he

alone possessed the information that would contest the higher premium

established.

Still, I believe we must turn to the policy language. In the summary

judgment ruling, the district court best summarized the process under the contract

to calculate the final premium.

Under the terms of the insurance contract, AOIC reserved the
right to modify the premium paid by Rosas and to audit his business
to determine the final proper premium value. Under the
Remuneration provision of the contract, AOIC determines the
premium in the following way: . . . .
The insurance contract provided the final premium “will be
determined after this policy ends by using the actual, not estimated,
premium basis and the proper classifications and rates that lawfully
apply to the business and work covered by this policy.” Similarly, the
contract contained an audit provision, which permitted AOIC to
“conduct audits during regular business hours during the policy
period and within three years after the policy ends . . . [and]
information developed by audit will be used to determine final
premium.”[6]

6The actual contract language under the heading “Audit” is:
You will let us examine and audit all your records that relate
to this policy. These records include ledgers, journals, registers,
vouchers, contracts, tax reports, payroll and disbursement records,
and programs for storing and retrieving data. We may conduct the
audits during regular business hours during the policy period and
within three years after the policy period ends. Information
developed by audit will be used to determine final premium.
Insurance rate service organizations have the same rights we have
under this provision.
The policy also required Rosas to “keep records of information needed to compute
premium. You will provide us with copies of those records when we ask for them.”
18

(Alteration in original) (emphasis added). Thus, AOIC correctly reads this policy

language as the means to resolve the final premium dispute, but we must read the

policy in its entirety, rather than reading provisions in isolation. See Thomas, 749

N.W.2d at 681. In doing so, I would find another provision of the policy goes to the

heart of this dispute. The final premium is only fair if it covers risks that are real.

And under the policy, AOIC is at risk if, as AOIC notes in its brief, “the insured’s

operation could make AOIC liable for workers’ compensation benefits under the

policies it issued to [Rosas].” The summary judgment court so noted, stating, “The

Court can determine that, as a matter of law, at the time of the audits and up

through October 10, 2018,[7] AOIC had information that suggested it ‘could’ be

made liable for those workers.” (Emphasis added.) AOIC asserts this language

seals the deal and the additional premiums are due. That language used by the

summary judgment court tracks a provision in the premium section of the policy:

C. Remuneration
Premium for each work classification is determined by
multiplying a rate times a premium basis. Remuneration is the most
common premium basis. This premium basis includes payroll and
all other remuneration paid or payable during the policy period for the
services of:
1. All your officers and employees engaged in work covered
by his policy; and
2. All other persons engaged in work that could make us liable
under Part One (Workers Compensation Insurance) of this policy. If
you do not have payroll records for these persons, the contract price
for their services and materials may be used as the premium basis.
This paragraph 2 will not apply if you give us proof that the employers
of these persons lawfully secured their workers compensation
obligations.

7 This was the date of the affidavit of Rosas addressing the elements of the
independent contractor status of the roofers. The affidavit also included Form
1099’s to establish the roofers were paid by Rosas as independent contractors.
19

(Emphasis added.) So returning to question one: is Rosas allowed to contest and

offer additional information about the independence of the other roofers after the

audit period ends? I believe the policy language does not prohibit Rosas from

contesting the application of “the proper classifications and rates that lawfully apply

to the business and work covered by this policy” as a matter of contract law. After

all, as the majority correctly points out, Rosas cannot be liable for workers’

compensation coverage for any independent roofing contractors. Generally, “an

employer of an independent contractor is not vicariously liable for injuries arising

out of the contractor’s negligence.” Downs v. A & H Constr., Ltd., 481 N.W.2d 520,

523–24 (Iowa 1992). If the final premium is calculated using an improper

classification, rate, or employment status, the question of “could make us liable”

must be answered. AOIC submits that question was answered in its favor, arguing

a worker is an “employee” unless proven otherwise. See Daggett v. Nebraska-E.

Exp., Inc., 107 N.W.2d 102, 105 (Iowa 1961). AOIC asserts the limited information

provided did not rebut this presumption. AOIC concedes Rosas answered the

relevant questions in the test for determining independence of the workers. See

Swain v. Monona Cty., 163 N.W.2d 918, 921 (Iowa 1969). Yet, AOIC failed to

rebut any of the Rosas’ answers with evidence to the contrary, instead relying upon

the argument the proof was inconclusive.

Finally, even in the cases cited by AOIC for guidance on the issues of first

impression, decisions addressed and answered the underlying qualifying question

of the appropriateness of applying the requested premium. See Gridiron Mgmt.

Grp. LLC v. Travelers Indem. Co., 839 N.W.2d 324, 328–29 (Neb. 2013) (affirming

the agency decision to apply the modifier used to calculate the premium due from
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the successor company, where the district court considered the evidence and

argument presented on the agency review); Travelers Indem. Co. v. Int’l Nutrition,

Inc., 734 N.W.2d 719 (Neb. 2007) (determining the adjustment of the classification

code was correct after considering the evidence and arguments). Had the

qualifying question been answered in AOIC’s favor, under the policy, the

calculation of premium would have stood. But, the policy terms provide that a

premium is not owed unless the evidence showed the roofers were either

employees or “persons engaged in work that could make us liable,” and I agree

with the majority’s conclusion the evidence we were provided did not make that

necessary connection for coverage.