Plaintiff brings this breach of contract action to recover unpaid premiums in the amount of $9, 642.43 inclusive of a 22% collection charge mandated by the New York State Finance Law. This matter was tried by the court on January 13, 2005 at which time the parties had a full opportunity to present the facts and argue their respective positions. At the close of trial, the parties were directed to submit legal memorandum supporting their arguments by February 14, 2005.

Plaintiff presented as a witness Ms. Attracta Roche, an insurance underwriter. Ms. Roche testified that on February 27, 1997 Michael R. Golden d/b/a Michael R. Golden Design, hereinafter "defendant," submitted an application for workers compensation insurance.^[FN1] After a review of this

application a policy of insurance was issued covering the period March 13, 1997 to March 13, 1998.^[FN2] This policy was renewed automatically on a yearly basis. The premiums were initially estimated but later were computed based on an audit report of defendant's payroll. The policy was in effect from March 1997 to April 23, 2002.

For the entire term of the policy premiums billed total $10,733.23, premiums paid total $2, 829.60 leaving an outstanding balance of $7,903.63. The excess in premiums billed is due to an audit performed for the year 2000-2001. This audit revealed a clerical payroll of $36,711.00 and an additional payroll of $73,493.00 for "Tile Installation," as a result, the premium for that year was $8,888.46.^[FN3]

The audit was done on December 21, 2001 by Charles E. Hock Associates, Inc., on behalf of the State Insurance Fund, at the offices of defendant's accountant. A note in the auditor's work sheet states:"Accountant also supplied 1099 form made out to Ron Emanuel but was not sure what type of work this individual performed. Accountant further advised Mr. Golden was out of town until 1/15/2002, in absence of substantial information on duties auditor assigned entire payment to governing class code."^[FN4]

The auditor was not produced at trial. Ms. Roche does not know the nature of Ron Emanuel's business or if the auditor made an inquiry to ascertain it. She only knows that since it was picked up on the auditor's worksheet he is presumed to be on defendant's payroll unless defendant has a certificate showing that Emanuel is insured, because otherwise the State Insurance Fund would be liable for any claims Mr Emanuel makes. She also doesn't know if Mr. Emanuel is insured or whether he is required to have insurance.

On April 13, 2003, a final bill in the amount of $7, 903.63 was sent to defendant demanding that he pay that amount.^[FN5] This amount is still outstanding and is the subject of this litigation.

Defendant testified that he is a tile and mosaic designer and was self-employed as such from 1997 to 2003 . His business was originally a sole proprietorship but was incorporated in 1999. The State Insurance Fund should have been aware of this incorporation because he paid the insurance premiums with corporate checks. Defendant acknowledged never having sent plaintiff a formal [*2]document requesting that the name of the insured be changed to that of the corporation.

Ron Emanuel has a company named Epic Artisans that produces stones. Defendant would hire him to make tables, panels, borders, Terrazo Inserts, etc., Mr. Emanuel would create the projects and ship them off to the client. During the period in question, Mr. Emanuel did approximately $15,000 - $20,000 worth of installing. ^[FN6] Defendant never served as a general contractor.

After the audit, defendant spoke to an Asian gentleman who came to his office. He showed this gentleman paperwork that proved Mr. Emanuel's work was done outside defendant's premises and that he was not an employee of defendant. Defendant was under the impression that the matter was resolved and after this meeting, defendant's business was closed.

The State Insurance Fund now seeks to collect the outstanding premium of $7,903.63 plus a 22% collection fee for a total of $9,642.43 plus interest, costs, disbursements and attorney's fees. Defendant seeks the dismissal of the action arguing suit should have been brought against the corporation and not against him individually and that Ron Emanuel is an independent contractor, not defendant's employee, and that the true premium due for the year in question, $263.45, was paid.

LEGAL ANALYSIS

Proper Party to be named

The first item to be addressed is whether defendant is the proper party to be named in this lawsuit. Defendant filled out an application with the State Insurance Fund and was issued a policy of insurance naming him individually and d/b/a Michael R. Golden Design as insured. In order to effectuate a change in the insurance policy he needed to notify the State Insurance Fund in writing. The fact he used corporate checks to pay for the insurance premiums does not place the State Insurance Fund on notice of a change in the insured (See G.O.L. §5-1103 McKinney's Consolidated Laws of NY; Zalazny v. Pilgrim Funding Corp., 41 Misc 2d 176, 244 NYS2d 810; Kent v. Dale Factors Corp., 67 AD2d 848, 413 NYS2d 13 (1st Dept. 1979); Kaufman V. Aronson, 28 Misc 2d 812, 212 NYS2d 573). As such, defendant is the proper party to be named in this lawsuit, and not the corporate entity "Michael R. Golden Design, Inc." Accordingly, dismissal under this basis is denied.

Independent Contractor

The second item to determine is whether or not Ron Emanuel is an independent contractor. Mr. Emanuel did not testify at this trial and the only information we have on him is supplied by defendant and the auditor's report. The auditor did not know the nature of Mr. Emanuel's business but included it in defendant's payroll "in the absence of substantial information on his duties."^[FN7] The auditor also informs us that Ron Emanuel was issued a 1099.

Defendant, on the other hand, had extensive dealings with Ron Emanuel and his company Epic Artisans. He testified credibly that Mr. Emanuel's company produces stones and makes tables, panels, borders and Terrazo inserts among other things. Mr. Emanuel would create projects at his [*3]shop, with his tools and ship them off to the client. From time to time, Mr. Emmanuel would be retained to install tiles that he had created. Defendant would pay him for this work with a check and did not deduct any taxes or make any other withholdings. Ron Emanuel or his company were not in defendant's payroll.

In determining whether an employer-employee relationship exists, for workers compensation purposes, it is appropriate to consider the right to control the work, the method of payment, the right to discharge and the relative nature of the work (Chaloff v. Project One, 12 AD3d 872, 784 NYS2d 738). Where a worker furnished his own tools, worked when time and work schedule permitted, no payment was due until the repairs were completed, there was no withholding for any purpose, the worker was not listed as an employee, and the work performed was of a specialized nature the court held the worker to be an independent contractor (Estate of W. Scott V. R.M. Steveson Motors, Inc., 127 AD2d 953, 512 NYS2d 557). Where the worker is to provide his own tools and the project owner does not direct or control the manner in which the work is done, the worker is held to be an independent contractor (Stamoulis v. Anorad Corporation, 292 AD2d 657, 738 NYS2d 754). Where the worker has been issued a 1099 coupled with other factors such as, the supply of his tools and materials; the independent nature of the contractor's business; the method of payment, the worker has been held to be an independent contractor (State Insurance Fund v. Circus Man Ice Cream Corp., 186 Misc 2d 907, 721 NYS2d 717).

Independent contractors are not employees covered by the workers compensation law (Commissioners of State Insurance Fund v. Fox Run Farms, Inc., 195 AD2d 372, 600 NYS2d 239;

Matter of Renouf v. New York Cent. R.R. Co., 254 NY 349, 173 NE 218), and in the absence of conclusive evidence of hiring as an employee, there is no basis for a presumption that continual utilization of a professional's services destroys an original independent contractor status (Mailepors v. Dutchess County Dept. Of Mental Hygiene, 85 AD2d 884, 466 NYS2d 476). Accordingly, Ron Emanuel and Epic Arisans are independent contractors not subject to the workers compensation law.

Workers Compensation Law §56

Plaintiff avers that since defendant has failed to provide proof of Ron Emanuel's and Epic Artisans' workers compensation insurance, defendant is still liable under Workers Compensation Law §56. This section makes a contractor responsible for the payment of workers compensation to an employee of a subcontractor if the subcontractor failed to carry the required worker's compensation

insurance. Worker Compensation Law §56 is inapplicable here. Defendant testified credibly that he was never a general contractor. Furthermore, Ron Emanuel is a self-employed person without

employees, as nothing was elicited to the contrary. The Workers Compensation Law exempts from liability for coverage self-employed persons without employees (See State Insurance Fund v. Wiz Const. Co., 289 AD2d 943, 734 NYS2d 769 (4th Dept. 2001); and the contractor's burden would only arise when the subcontractor has failed to provide compensation to his injured employee (Johnson v. Briggs, 34 AD2d 1068, 312 NYS2d 637; Casey v. Shane, 221 AD 660, 225 NYS 126). Accordingly, Workers Compensation Law §56 does not apply.

Prima Facie Case

To make out a prima facie case, the plaintiff must produce the insurance application, audit worksheets, resulting invoices and statement of accounts for a balance due. If these are un-rebutted [*4]plaintiff will be entitled to judgment as a matter of law (Commissioners of State Insurance Fund v. Country Carting Corp., 265 AD2d 158, 696 NYS2d 129); however, plaintiff's business records in this instance have been rebutted by defendant. The audit work sheet specifically states that Ron Emanuel was issued a 1099 and the auditor included in defendant's payroll payments to Mr. Emanuel on the presumption that he was an employee , in the absence of more concrete information and because defendant was out of town until January 15, 2002. Had the auditor done further inquiry, he would have realized that Ron Emanuel/Epic Artisans is an independent contractor, and not defendant's employee. The auditor took the route that most benefitted him and the State Insurance Fund. By including payments to Ron Emanuel in defendant's payroll he completes his audit and gives the State Insurance Fund an opportunity to inflate the premium for the policy. This is another instance where the State Insurance Fund has demonstrated that less is more, by inquiring less they get more in premiums. We reject these methods as they can lead to an unfair result (See State Insurance Fund v . Branicki, 2 Misc 3d 972, 775 NYS 2d 443). Accordingly, plaintiff is not entitled to judgment automatically upon

producing an application, audit sheets and invoice of balance due when these have been rebutted by the defendant, as has been done here. What plaintiff has avoided by presenting proof is a trial order of dismissal at the completion of the plaintiff's case.



CONCLUSION

Michael R. Golden d/b/a Michael R. Golden design is the proper party to be named in this lawsuit. Mr. Golden failed to notify the State Insurance Fund, in writing, that the policy needed to be changed to the name of the corporation. Payment of the policy premium with corporate checks does not place the State Insurance Fund on notice of a change in the insured.

Ron Emanuel/Epic Artisans was issued a 1099 by defendant; he works independently providing his own tools, in his own premises and sending his finished product directly to the client. Defendant paid Ron Emanuel by check without making any withholdings, as such Mr. Emanuel is an independent contractor and the money paid to him should not have been included in defendant's payroll.

Workers Compensation Law § 56 does not apply. Mr. Emanuel is self-employed without employees and this section only applies in the case of subcontractors with employees that have neglected to carry the required workers compensation insurance.

Although plaintiff by presenting an application for insurance, audit sheets and invoice with balance due has made out a prima facie case, it is not entitled to an automatic judgment. It only means its case survives a trial order of dismissal. Defendant has sufficiently rebutted plaintiff's case by submission of credible testimony and documentation.

This Court finds by a preponderance of the credible evidence that Ron Emanuel/Epic Artisans was not defendant's employee, the amounts paid to him should not have been included in defendant's payroll, defendant paid the premium for the year in question and there is no amount outstanding.

Accordingly, it is the judgment of this Court that this action be hereby dismissed. The Clerk of

the Court is to enter judgment dismissing the action in accordance with this decision.

This constitutes the decision and judgment of this Court.

Dated:March 17, 2005

MANUEL J. MENDEZ

Judge, Civil Court