                IN THE COURT OF APPEALS OF TENNESSEE
                           AT KNOXVILLE
                                 April 19, 2010 Session

   HARTFORD UNDERWRITERS INSURANCE CO. v. DALE PENNEY,
               d/b/a DLP CONSTRUCTION CO.

                 Appeal from the Circuit Court for Hamilton County
                    No. 08C220      W. Neil Thomas, III, Judge


               No. E2009-01330-COA-R3-CV - FILED JUNE 17, 2010


Hartford Underwriters Insurance Co. (“Hartford”) filed this suit against Dale Penney, d/b/a
DLP Construction Co. (“Mr. Penney”), seeking compensation for additional workers’
compensation insurance premiums, as well as court costs and service of process fees. The
trial court awarded judgment in favor of Hartford for $12,316 plus costs. Hartford
subsequently filed a motion seeking pre-judgment interest, which was granted after a hearing
resulting in an additional award of $4,823.77. Mr. Penney appeals. We affirm in part, vacate
in part and remand to the trial court for further proceedings consistent with this opinion.


        Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Circuit Court
                 Affirmed in Part; Vacated in Part; Case Remanded

J OHN W. M CC LARTY, J., delivered the opinion of the Court, in which H ERSCHEL P. F RANKS,
P.J. and C HARLES D. S USANO, J R., J., joined.

Douglas M. Cox, Chattanooga, Tennessee, for the appellant, Dale Penney, d/b/a DLP
Construction Co.

Blakeley D. Matthews and Ben M. Rose, Nashville, Tennessee, for the appellee, Hartford
Underwriters Insurance Co.

                                        OPINION

                                   I. BACKGROUND

      The majority of the facts in this retrospective insurance premium audit case are
undisputed and were stipulated to by the parties prior to trial. In May 2004, Mr. Penney, in
the course of his construction business, agreed to build a new home for Dexter White
Construction Company (“Mr. White”) in Hixson, Hamilton County, Tennessee. Pursuant to
the requirements of the construction agreement with Mr. White, Mr. Penney obtained
workers’ compensation insurance coverage for himself, which was secured and provided by
Hartford (“Hartford Policy”). The policy period was from May 8, 2004, to May 8, 2005.1

      Mr. Penney utilized the services of four individuals during the construction of the
home for Mr. White. On May 6, 2004, I-18 “Election of Non-Coverage by Subcontractor”
Forms2 were executed by three of the workers, Chad Yother, Mike Jiles, and Carl Combs
(“Yother, Jiles, and Combs”), in which they swore they did not want to be covered under the
Hartford Policy. However, their employment status as either independent contractors or
employees is at issue here, as, after a post-policy audit, Hartford claims the remaining three
workers were also employees of Mr. Penney on whose behalf is owed additional premium
payment totaling $12,316. The fourth worker has been stipulated to be an employee of Mr.
Penney’s for whom additional insurance premium payment is due Hartford.

       The Hartford Policy at issue contained the following pertinent provisions:

                                            Classifications

                 Item 4 of the Information Page shows the rate and premium
                 basis for certain businesses or work classifications. These
                 classifications were assigned based on an estimate of the
                 exposures you should have during the policy period. If your
                 actual exposures are not properly described by those
                 classifications, we will assign proper classifications, rates and
                 premium basis by endorsement to this policy.




                                            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


       1
           The initial premium charged was $750. No claims were made during the policy period.
       2
         These Forms were filed with the Department of Labor (“DOL”) on May 11, 2004. However, the
record reveals no evidence that the Forms were ever transmitted to Hartford.

                                                   -2-
                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
                this 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 a
                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.

A paragraph entitled “Final Premium”3 provided:

                The premium shown on the Information Page, schedules and
                endorsements is an estimate. The final premium will be
                determined after this policy ends by using the actual, not the
                estimated, premium basis and the proper classifications and rates
                that lawfully apply to the business and work covered by this
                policy. If the final premium is more than the premium you paid
                to us, you must pay us the balance . . . .

Under a paragraph entitled “Audit,” the policy provided:

                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 . . . .
                Information developed by audit will be used to determine final
                premium. . . .


        The Hartford Policy also contained the following notice relating to I-18 Forms:


        3
         The reason for this provision, which is a standard feature of workers’ compensation policies, is that
any number of employees may be hired or terminated while the policy is in effect, thus increasing or
decreasing the amount of risk to which the insurer is exposed. CNA v. King, No. M2004-02911-COA-R3-
CV, 2006 WL 2792159, at *7 (Tenn. Ct. App. M.S., Sept. 28, 2006).

                                                     -3-
              If you do not intend for your sole proprietor or partner
              subcontractors to be eligible for benefits under your policy, you
              may affirm your intention by filling an I-18 Form(s) with the
              Division. Please be advised, however, that the I-18 Form is
              simply a statement of your intention not to cover these
              individuals. It is not a form recognized in the Tennessee
              Workers’ Compensation Law and it does not resolve the
              fundamental issue of whether these individuals are working for
              you as sole proprietors/partners or as employees.

              The Tennessee Workers’ Compensation Law sets forth seven
              factors to be considered in determining whether an individual
              is an employee or a subcontractor/independent contractor .
              . . . These are the factors which we will apply at time of audit
              to ultimately determine the employment status of your workers,
              regardless of whether there are I-18 Forms on file. Below
              are the seven factors dictated in the law:

              a.   The right to control the conduct of the work;
              b.   The right of termination;
              c.   The method of payment;
              d.   The freedom to select and hire helpers;
              e.   The furnishing of tools and materials;
              f.   Self-scheduling of working hours;
              g.   The freedom to offer services to other entities.

              Please be prepared to address these factors for each and every
              alleged sole proprietor/partner subcontractor utilized by your
              company and ensure that you maintain your records so that it is
              clear that the individual is truly a subcontractor in accordance
              with the Tennessee Workers’ Compensation Law. Otherwise,
              these individuals will be deemed to be employees of your
              company and premium charges will be assessed.


(Emphasis in original).

      In June 2004, Hartford sent Mr. Penney a “Supplementary Underwriting Information
Request” seeking a variety of items from him to complete its underwriting file, and which
Hartford claimed would expedite the post-policy auditing of Mr. Penney’s business. Hartford

                                              -4-
also requested that Mr. Penney complete a “Contractor’s Questionnaire,” but he neither
responded to Hartford’s initial request for additional information, nor did he return the
questionnaire.

        A year later, following the expiration of the policy period, Hartford conducted an in-
person premium audit of Mr. Penney’s business pursuant to the terms of the Hartford Policy.
The majority of the content of the audit was undisputed at trial. According to the auditor,
Mr. Penney provided the following relevant information to him in the course of the audit: Mr.
Penney was “the job site supervisor – 90% of the time on the job, working with the framing
crew”; either party had the right to terminate the work; Mr. Penney paid the workers on an
hourly wage based on requests they submitted to him; the workers had the right to hire
helpers; the workers provided their own tools but Mr. Penney would make available his air
tools and air compressor and provide staging if needed; the workers worked “normal
construction hours . . . 8–5” and they were “expected to be there” but had “a lot of flexibility
given them”; the workers had the freedom to offer their services to others; and the workers
did not have or provide evidence of Public Liability Insurance, business licenses and/or
profession licenses, business cards, or business listings in the telephone book.” For purposes
of the audit, the auditor used the wages reflected on 1099 tax forms supplied by Mr. Penney.
Based upon this information, the auditor concluded that “[t]he employees submit a bill for
the hours worked on an agreed hourly basis. [Penney] has direct control of the job site. I
believe they must be considered employees.” The auditor did not locate I-18 Forms in the
underwriting files.4 He determined that Mr. Penney owed Hartford an additional $12,316 in
premium payment.

       On September 25, 2006, Hartford filed suit in General Sessions Court to recover the
claimed $12,316 due under the Hartford Policy, plus $105.25 in court costs and $35.00 in
service of process fees, for a total of $12,456.25. Mr. Penney counterclaimed, averring the
following: Hartford breached its duty of good faith and fair dealing; its actions constituted
a deceptive act or practice in violation of the Tennessee Consumer Protection Act; and Mr.
Penney had relied upon the representations of the agent who sold him the policy and,
therefore, Hartford should be estopped from making any claim against him. Hartford
thereafter allowed a default judgment to be granted to Mr. Penney on January 23, 2008, and
appealed for a trial de novo in the Circuit Court on February 5, 2008. Subsequently, Mr.
Penney voluntarily dismissed his counterclaims and a non-jury trial was held on April 1,
2009. The only witnesses to testify were the auditor and Mr. Penney.

      At trial, Mr. Penney testified that the workers “pretty much controlled themselves.”
He noted that he “didn’t hold these guys by the hand and dictate to them what they needed

       4
           Requirement on the Forms to send “a copy to the general contractor’s insurance carrier.”

                                                     -5-
to do.” He stressed that he “didn’t tell them what to do or when to do it.” Mr. Penney stated
that contrary to the findings of the auditor, he never let the workers use his tools and he did
not indicate that the construction hours were from 8:00 to 5:00. Mr. Penney admitted that
he paid the workers by the hour.

       In a memorandum and judgment, the trial court held in pertinent part:

       [I]f there is “any doubt as to whether the worker is an employee or an
       independent contractor, the doubt must be resolved in favor of the former.”
       CNA v. King, 2006 WL 2792159 (Tenn. Ct. App.) at page 7. The Court
       believes that the law applicable to claims based upon employee status applies
       to this case, since that law would determine the liability of the workers’
       compensation carrier and, thus, liability for the premiums. Although this case
       is a close one on that issue, the Court believes that the issue must be resolved
       in favor of Hartford Underwriters Insurance Company. . . .

Judgment was entered in favor of Hartford for $12,316. After Hartford filed a Motion to
Alter or Amend seeking pre-judgment interest, the trial court awarded an additional
$4,823.77. The total award to Hartford was $17,139.77. Mr. Penney filed a timely appeal.


                                         II. ISSUES

       Mr. Penney raises the following issues on appeal:

       1. Whether the trial court erred in determining that workers hired by Mr.
       Penney were employees and not independent contractors, despite the workers’
       execution of I-18 Forms to exclude them from coverage under the Hartford
       Policy and to avoid the assessment of additional workers’ compensation
       insurance premiums?

       2. Whether the trial court erred or otherwise abused its discretion in awarding
       pre-judgment interest to Hartford?


                              III. STANDARD OF REVIEW

       The trial court’s findings of fact are reviewed de novo upon the record with a
presumption of correctness. Tenn. R. App. P. 13(d). This court will not disturb the trial
court’s findings of fact unless the evidence preponderates against them. Bogan v. Bogan, 60

                                              -6-
S.W.3d 721, 727 (Tenn. 2001). Regarding legal issues, our review is conducted under a de
novo standard of review without any deference to the trial court’s conclusions of law.
Southern Constructors, Inc. v. Loudon County Bd. of Educ., 58 S.W. 3d 706, 710 (Tenn.
2001). Whether or not the workers were independent contractors is a question of law for the
trial court rather than a question of fact. Stratton v. United Inter-Mountain Tel.Co., 695
S.W.2d 947, 950 (Tenn. 1985).

       The decision to award pre-judgment interest is within the trial court’s discretion, and
accordingly the standard of review is abuse of discretion or a “manifest and palpable abuse
of discretion.” Alexander v. Inman, 974 S.W. 2d 689, 698 (Tenn. 1998).


                                     IV. DISCUSSION

              A. EMPLOYMENT STATUS AND PREMIUM LIABILITY

        In Tennessee, any inquiry into an individual’s employment status for workers’
compensation insurance coverage necessarily is guided by overlapping state workers’
compensation law. Tennessee workers’ compensation law is controlled by statute, intended
as a comprehensive scheme to provide “broad coverage for injured workers.” CNA v. King,
No. M2004-02911-COA-R3-CV, 2006 WL 2792159, at *5 (Tenn. Ct. App. M.S., Sept. 28,
2006). Under Tenn. Code Ann. § 50-6-405 (Supp. 2009), employers whose operations fall
within the scope of the law are required to maintain a policy of insurance to secure any
possible workers’ compensation liability or, in the alternative, to meet stringent financial
requirements in order to establish and maintain the status of a self-insured employer. The
statute further provides that “any person engaged in the construction industry, including
principal contractors, intermediate contractors, or subcontractors, shall be required to carry
workers’ compensation insurance.” Tenn. Code Ann. § 50-6-113(f)(1) (2008).

        The “existence of an employer-employee relationship has been said to be a primary
requirement for employer liability under the Workers Compensation Law.” King, 2006 WL
2792159, at *4. Once the existence of an employment relationship is established, the
employer has the burden of proving the worker was an independent contractor rather than an
employee. Galloway v. Memphis Drum Serv., 822 S.W.2d 584, 586 (Tenn. 1991). Any
doubt as to whether the worker is an employee or an independent contractor will be resolved
in favor of the former. Armstrong v. Spears, 393 S.W.2d 729, 731 (Tenn. 1965); King, 2006
WL 2792159, at *8.




                                             -7-
        Tenn. Code Ann. § 50-6-102(11) (2005)5 sets forth seven primary factors to guide
determinations as to whether an individual in a given work relationship is an “employee,” or
a “subcontractor” or “independent contractor”: i) the right to control the conduct of the work;
ii) the right of termination; iii) the method of payment; iv) the freedom to select and hire
helpers; v) the furnishings of tools and equipment; vi) self scheduling of working hours; and
vii) the freedom to offer services to other entities. See Bargery v. Obion Grain Co., 785
S.W.2d 118, 119-20 (Tenn. 1990) (citing Masiers v. Arrow Transfer & Storage Co., 639
S.W.2d 654, 656 (Tenn. 1982)). While no single factor is determinative, the Supreme Court
of Tennessee has “repeatedly emphasized the importance of the right to control, the relevant
inquiry being whether the right existed, not whether it was exercised.”6 Galloway, 822 S.W.
2d at 586 (citing Stratton v. United Inter-Mountain Tel., 695 S.W.2d 947, 950 (Tenn. 1985));
Carver v. Sparta Elec. Sys., 690 S.W.2d 218, 220 (Tenn. 1985)). In this case it is undisputed
that Mr. Penney identified himself as the “job site supervisor – 90% of the time on the job,”
and that he paid the individual workers “based on hourly wage.” Additionally, the workers
were expected to work according to normal construction hours, and were required to provide
a “courtesy call” to Mr. Penney if they were not at work as expected, although he also
testified that they “have a lot of flexibility given them” in setting their work schedule. Thus,
it appears Mr. Penney was exercising a degree of control inconsistent with an independent
contractor relationship, an independent contractor being “one who undertakes to produce a
given result without being in any way controlled as to the methods by which he attains that
result.” Galloway, 822 S.W.2d at 587 (internal citation omitted).

       Mr. Penney emphasizes the informal nature of the working conditions to downplay
the controlling role he exercised over the work performed by the workers. Regarding the
actual manner in which work was to be carried out, Mr. Penney notes that they “were
experienced and he gave them a set of plans and they took it from there” and that “he did not
dictate to them what they needed to do.” Notwithstanding the apparent unsophisticated
nature of the employment arrangement or the hands-off approach Mr. Penney attempts to
portray, the evidence nevertheless suggests Mr. Penney had direct control of the job site,
whether or not it was exercised. Such supervisory authority is indicative of the employer-
employee hierarchical relationship, albeit an informal one. This conclusion is supported by
the King court’s holding that found a general contractor liable for additional insurance
premium assessments for workers who the court found to be statutory employees, despite the
contractor-employer “almost never” spending time on the job site while the work was being


       5
           Now Tenn. Code Ann. § 50-6-102(10)(D) (Supp. 2009).
       6
         In addition, the power to terminate has been closely associated with having a “controlling
significance” in employment relationships. Masiers v. Arrow Transfer & Storage Co., 639 S.W.2d 654, 656
(Tenn. 1982). It is undisputed that either party had the right to terminate.

                                                 -8-
performed. King, 2006 WL 2792159, at *3. In the words of the court,

       certainly [the general contractor] claimed a remarkable degree of non-
       involvement with the work for which [he] was getting paid. This court is not
       inclined to give its imprimatur to such a device as a way of avoiding workers
       compensation liability because it would be contrary to the purpose of the
       Workers Compensation Law “to insure as far as possible to all workers
       payment of benefits when they [are] injured in the course of their
       employment.”

Id. at *9.

       Arguably, some of the other statutory employment relationship factors support a
finding of independent contractor status. Mr. Penney did not withhold any taxes and issued
1099 tax forms. Also, the workers were free to hire their own workers or helpers if they
desired, although none did. Additionally, the workers were permitted to offer their services
to others during the project even if it would have conflicted with Mr. Penney’s project.
However, Mr. Penney did not produce invoices demonstrating the alleged independence of
the workers. Also, no documentation was produced that the individual workers performed
services for any individual or entity other than Mr. Penney. Furthermore, Mr. Penney did not
use any workers other than the individuals at issue.

        Mr. Penney asserts that the status of Combs, Yother, and Jiles is a close call under the
above factors. To tip the scales in his favor, he intimates that the trial court did not give
adequate consideration or weight to the DOL’s I-18 “Election of Non-Coverage by
Subcontractor” Forms in evidence for the workers in its conclusion that they were employees
and not independent contractors, at least for insurance premium purposes. While Mr. Penney
acknowledges that the mere execution of I-18 Forms alone is not conclusive as to a worker’s
status, he urges that the timely filing of the Forms at the beginning of the policy period
carries additional weight favoring an independent contractor relationship. When combined
with the other statutory criteria that weigh in favor of a finding of an independent contractor
relationship, Mr. Penney asserts that he has carried his burden of demonstrating that the
workers should be excluded from premium consideration.

       The workers’ compensation law is to be “rationally but liberally construed to promote
and adhere to the Act’s purposes of securing benefits to those workers who fall within its
coverage.” Hodge v. Diamond Container General, Inc., 759 S.W.2d 659, 664 (Tenn. 1988).
Applying the required liberal construction, we find the preponderance of the evidence
establishes that the workers were employees during the policy period.



                                              -9-
        Contrary to Mr. Penney’s assertions regarding the appropriate degree of consideration
to be accorded the I-18 Forms, in the very decisions that he has cited as support for his
reliance on these Forms, this state’s courts have repeatedly limited the evidentiary weight of
them toward proving independent contractor status. As the Supreme Court of Tennessee
stated in Warner v. Potts, although

       the existence of a Form I-18 is not unrelated to the question of whether a
       worker is an employee or an independent contractor . . . [t]he Form I-18 is not
       a contract defining the relationship between the parties, but rather it is a notice
       that an independent contractor has not elected to be covered by workers’
       compensation. The purpose of the form cannot be to declare the status of the
       worker as an independent contractor, as one must already be an independent
       contractor in order to be eligible to use it. Therefore, [an employer] cannot
       meet his burden of proof by relying on the Form I-18 signed by [a worker]. He
       must prove that the characteristics of the employment relationship were in fact
       that of employer and independent contractor . . . To hold otherwise would
       frustrate the purpose of the workers’ compensation system as employers could
       simply require all their workers to sign a Form I-18 and subsequently claim
       they were independent contractors, regardless of the actual nature of their
       relationship to their workers.

No. M2003-02494-SC-WCM-CV, 2005 WL 995236, at *4 (Tenn. Workers Comp. Panel,
Apr. 29, 2005).

        Similarly, Mr. Penney’s reliance on King and Royal Insurance Co. v. R&R Drywall,
Inc., No. M2002-00791-COA-R3-CV, 2003 WL 21302983 (Tenn. Ct. App. M.S., June 6,
2003), is also misplaced in light of the factual posture and central holdings of those cases
relative to the case at bar. The Royal Insurance court held that post-policy documentation,
including late-executed and filed I-18 Forms, could not be used to avoid retrospective
premiums assessed based on an expired policy for “a risk that has now closed.” 2003 WL
21302983, at *4. However, the decision was silent on whether and to what extent timely-
filed I-18 Forms would be sufficient to avoid such premium liability. See id. Moreover, the
decision addresses the inadequacy of late-filed devices as a whole, which included I-18
Forms and hand-written partnership agreements, for attempting after-the-fact to avoid
liability for risk that had been assumed by the insurer, and gives little indication as to the
weight timely executed I-18 Forms alone or the lack thereof would carry towards establishing
the employment relationship. See id. However, the Royal Insurance court did point out the
relevant policy concerns reflected in Tenn. Code Ann. § 50-6-114(a), which provides “[n]o
contract or agreement, written or implied, or rule, regulation or other device shall in any
manner operate to relieve any employer in whole or in part of any obligation created by this

                                              -10-
chapter, except as herein provided.” Id. Other decisions have applied this language to I-18
Forms themselves, even when timely-filed, to limit their bearing on employment status
determinations, both in workers’ compensation injury and insurance premium contexts. See,
e.g., King, 2006 WL 2792159, at *9; Warner, 2005 WL 995236, at *4; Stief v. Madaris
Exteriors, Inc., No. M2006-01703-WC-R3-WC, 2008 WL 902969, at *3 (Tenn. Workers
Comp. Panel, Apr. 2, 2008).

       In King, a general contractor was assessed additional premiums for roofing
subcontractors’ helpers who had not executed I-18’s. The court in dicta suggested that there
were several methods the general contractor could have used to reduce the size of the
retrospective premium assessed, such as requiring the workers to obtain their own workers’
compensation insurance. 2006 WL 2792159, at *10. The court then mentioned that having
all the workers execute I-18’s would “strengthen[] the argument that no workers
compensation insurance was required of them,” which Mr. Penney cites in support of his
claim that the trial court failed to accord the I-18s proper consideration in its employment
analysis. Id. However, based upon the central holding of the King decision, even if Mr.
Penney’s workers had properly executed I-18 Forms, it appears unlikely that they would have
been found excluded from the protections of the Hartford Policy. Indeed, the King court
affirmed the contractor’s liability for the additional premium assessments despite the trial
court’s conclusion that the workers were either independent contractors or statutory
employees. Id. at *4, 9.

        The reason for this apparent contradiction with the workers’ compensation liability
scheme in which employers are liable only for the injuries of employees and not independent
contractors can be explained by the purely contractual principles underlying insurance law
that informed the basis of the King holding. As the insurance company argued in that case,
and the court concluded, if one of the workers had filed a claim after an injury on the job, the
insurance company would have been required to defend against the claim and to bear the risk
that the worker would be found to be a statutory employee under Tenn. Code Ann. § 50-6-
113, and to pay whatever benefits to which the worker was entitled. 2006 WL 2792159, at
*7. Specifically, Tenn. Code Ann. § 50-6-113(a) provides “an employer may be held liable
for injuries sustained by employees of his subcontractors, even when those subcontractors
are deemed to be independent contractors.” Id. at *4. Thus, the insurance company
“assumed the risk to defend any claim brought by an injured worker, even if that defense was
to prove the injured worker was an independent contractor.” Id. at *7. Accordingly, the
workers’ compensation insurance contract itself and neither the workers’ employment
relationship nor the execution of an I-18 Form is determinative as to the extent of a
contractors’ liability for premium assessments by the insurance company.

       In the present case, Mr. Penney entered into the Hartford Policy to provide coverage

                                              -11-
over the project period, which, similar to the insurance policy at issue in King, provided in
part that the “premium basis includes payroll and all other remuneration paid or payable
during the policy period for the services of . . . [workers]; and . . . [a]ll other persons engaged
in work that could make us liable under . . . this policy.” (Emphasis added); see King, 2006
WL 2792159, at *1. The document further explains that in the absence of payroll records,
the contract price for the services and materials furnished by such “other persons” can be
used as the premium basis. Id. However, this section “will not apply if you give us proof
that the employers of these persons lawfully secured their workers’ compensation
obligations.” Id. Moreover, the policy contained a notice which specifically provides that
an I-18 Form(s) may be filed with the insurance company affirming an insured’s intention
to exclude subcontractors from the benefits of the policy. However, the notice expressly
states that “the insured is to be advised . . . that the I-18 Form is simply a statement of your
intention not to cover these individuals. It is not a Form recognized by the Tennessee
Workers’ Compensation Law and it does not resolve the fundamental issue of whether these
individuals are working for you as sole proprietors/partners or as employees.”

         Applying King’s reasoning, regardless of the appropriate evidentiary weight the I-18
Forms merit for employment status purposes, or even of the actual status determination itself,
Hartford’s potential liability for any injuries during the policy period sustained by Yother,
Combs, and Jiles, provides a sufficient basis for enforcing Hartford’s additional premium
assessments. If any of these workers had been injured on the job, they could have submitted
a claim for workers’ compensation that Mr. Penney would have had to answer as the arguable
employer, irrespective of the executed I-18 Forms. As his insurer, Hartford undertook this
risk during the policy period, including the risk that it would have to defend Mr. Penney as
the insured in a suit to establish a definitive determination as to the employment relationship
between Mr. Penney with the injured worker. The policy language expressly addressing the
role of the I-18 Forms only reinforces this conclusion, to the extent Mr. Penney was on notice
that filing the I-18s would have limited if any legal effect towards establishing independent
contractor status for the workers.

       Moreover, while not determinative of the matter, the I-18 Forms subsequent
discontinuation7 during Mr. Penney’s policy period with Hartford certainly supports
Hartford’s position that it had assumed the risk of any injuries suffered by all of Mr.
Penney’s workers during the policy period. Although the I-18 Form was still in use when
Mr. Penney filed the Forms prior to the policy period in May 2004, the fact that in September


       7
         On September 7, 2004, the use of I-18 Forms was discontinued by the DOL. In a Notice issued
regarding the Form’s discontinuance, a variety of reasons were given for the discontinuation, including
inaccurate reporting abuses specifically designed to avoid larger insurance premiums.


                                                 -12-
that same year the DOL stopped accepting filings of the I-18 Form due to inaccurate
reporting abuses by employers specifically designed to avoid larger insurance premiums,
severely limits any legal significance the filing of the I-18s had regarding his premium
liability to Hartford.

       As Hartford points out, Mr. Penney potentially could have reduced his premium
obligation by cooperating with the insurance company, including returning several
documents requested by Hartford from him pursuant to the policy that would have expedited
the audit where the disputed workers’ status and resulting premium assessment was originally
made. Instead he failed to provide not only these documents to Hartford, but the I-18 Forms
themselves, which was also contrary to policy provisions to which Mr. Penney had agreed
when obtaining the coverage. Furthermore, as the King court mentioned, Mr. Penney could
have reduced the size of the premium or avoided paying a premium for the workers by
providing proof that the workers’ compensation obligations had already been otherwise
lawfully secured either by him or by the workers themselves. See 2006 WL 2792159, at *10.

       Similarly, Mr. Penney also could have required that the workers carry their own
workers’ compensation insurance, just as the general contractor over him had required. See
id. Without Hartford’s obligation under the policy to defend at its own expense any claim
against Mr. Penney resulting from on the job worker injuries having been sufficiently
waived, the Hartford Policy remained exposed to risk related to these individuals for the
policy period. Since Mr. Penney failed to comply with the terms of the policy into which he
had entered that could have enabled him to avoid or reduce the assessments in the first place,
or adequately establish that no workers’ compensation insurance was required of the workers
during the Hartford Policy period, he remains liable for the premium assessed.


                             B. PRE-JUDGMENT INTEREST

         Mr. Penney contends that the trial court abused its discretion in awarding Hartford
pre-judgment interest. Tenn. Code Ann. § 47-14-123 provides that “[p]re-judgment interest
. . . may be awarded by courts or juries in accordance with the principles of equity at any rate
not in excess of a maximum effective rate of ten percent (10%) per annum . . . .” In addition,
it has been determined that “an award of pre-judgment interest is within the sound discretion
of the trial court and the decision will not be disturbed by an appellate court unless the record
reveals a manifest and palpable abuse of discretion.” Myint v. Allstate Ins. Co., 970 S.W.2d
920, 927 (Tenn. 1998)(citations omitted); Alexander v. Inman, 974 S.W.2d 689, 698 (Tenn.
1998).

       The purpose of pre-judgment interest is not to penalize a defendant for wrongdoing,

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but to fully compensate a plaintiff for the loss of the use of funds to which he or she was
legally entitled. Hunter v. Ura, 163 S.W.3d 686, 706 (Tenn. 2005). “The trial court must
consider whether the amount of the obligation was certain or ascertainable and whether the
existence of the obligation was disputed on reasonable grounds.” Hunter, 163 S.W.3d at
706. These are only two of the factors to be considered when deciding whether prejudgment
interest is, as a matter of law, equitable under the circumstances. Id. “The uncertainty of
either the existence or amount of an obligation does not mandate a denial of prejudgment
interest[.]” In re Estate of Ladd, 247 S.W.3d 628, 645 (Tenn. Ct. App. 2007) (citing Tenn.
Code Ann. § 47-14-123). Essentially, the trial court must decide whether awarding
prejudgment interest is fair, given the circumstances of the case. Id.

        However, as Mr. Penney argues, under Collins v CMH Mfg., remand is appropriate
“when the record is silent as to the reasons the trial judge awarded pre-judgment interest,”
because “the appellate court is unable to determine if the award is justified or whether the
trial judge abused its discretion.” No. E1999-01225-WC-R3-CV, 2000 WL 1887534 at *4
(Tenn. Workers Comp. Panel, Dec. 28, 2000). As the trial court stated, this was a “close
case” on the issue of liability, just as the issue of liability in Collins had been “strongly and
legitimately questioned.” Id. Furthermore, as in Collins where the trial judge had taken the
case under advisement for a period of seventeen months before entering a judgment on the
workers’ compensation claim, id., in the case at bar the trial judge in the initial action in
General Sessions Court took around sixteen months to render a default judgment after the
initial filing of the suit. In addition, the plaintiff’s appeal in the circuit court took nearly
another 15 months to reach judgment. Accordingly, since the record is silent on the reasons
for the award, we are unable to say whether the award is justified and therefore remand the
issue of the award of pre-judgment interest to the trial court for a statement of fact.


                                     V. CONCLUSION

       We affirm the judgment of the trial court on the finding of the amount of
compensation for the retrospective premium assessment by Hartford and remand on the issue
of prejudgment interest. Costs on appeal are taxed to the appellant, Dale Penney, d/b/a DLP
Construction Company.




                                                     _________________________________
                                                     JOHN W. McCLARTY, JUDGE




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