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Case No. 20-0020

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


Auto-Owners Insurance Company


Raul Ruiz Rosas d/b/a Blue Flame Flooring

Attorney for the Appellant

CeCelia C. Ibson

Attorney for the Appellee

Patrick B. White

Court of Appeals

Court of Appeals Opinion

Opinion Number:
Date Published:
May 12, 2021

            Appeal from the Iowa District Court for Polk County, Sarah Crane and Joseph Seidlin, Judges.  AFFIRMED ON APPEAL; AFFIRMED ON CROSS-APPEAL.  Considered by Doyle, P.J., and Mullins and Greer, JJ.  Opinion by Doyle, P.J.  Special Concurrence by Greer, J.  (20 pages)

            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 Flooring 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.  OPINION HOLDS: 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 any more premium.  We also conclude AOIC’s claim for more premiums is fairly debatable, so there is no basis for a bad-faith claim.  SPECIAL CONCURRENCE ASSERTS: I specially concur.  I agree with the result of the opinion of the majority but write to address AOIC’s position that the issues raised in this appeal are of first impression in Iowa.  AOIC frames these issues as: (1) 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?  (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?  In answer to the first question, 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.  Second, 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.  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. 

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