Prate Roofing & Installations, LLC v. Liberty Mutual Insurance Corp.
Citation2022 IL App (1st) 191842-B
Date Filed2022-12-16
Docket1-19-1842
Cited2 times
StatusPublished
Full Opinion (html_with_citations)
2022 IL App (1st) 191842-B
SIXTH DIVISION
December 16, 2022 Filing Date
No. 1-19-1842
______________________________________________________________________________
IN THE
APPELLATE COURT OF ILLINOIS
FIRST JUDICIAL DISTRICT
______________________________________________________________________________
PRATE ROOFING AND INSTALLATIONS, LLC, ) Appeal from the
) Circuit Court of
Plaintiff-Appellant, ) Cook County.
)
v. ) No. 18 CH 9826
)
LIBERTY MUTUAL INSURANCE CORPORATION, ) The Honorable
THE DEPARTMENT OF INSURANCE, JENNIFER ) Caroline Kate Moreland,
HAMMER, in Her Official Capacity as Director of ) Judge, Presiding.
Insurance, and PATRICK RILEY, in His Capacity as )
Hearing Officer, )
)
Defendants-Appellees. )
JUSTICE ODEN JOHNSON delivered the judgment of the court, with opinion.
Presiding Justice Mikva and Justice Connors concurred in the judgment and opinion.
OPINION
¶1 Plaintiff Prate Roofing and Installations, LLC (Prate), appeals an order from the circuit
court of Cook County, which affirmed the final decision of the Director of Insurance in favor
of defendant, Liberty Mutual Insurance Company (Liberty Mutual), and against plaintiff, Prate,
regarding the partiesâ workersâ compensation insurance dispute. The parties disputed whether
No. 1-19-1842
Prate owed Liberty Mutual additional workersâ compensation insurance premiums because
certain subcontractors hired by Prate did not have individual coverage. Prate challenged that
determination before the Department of Insurance (DOI), wherein Hearing Officer Patrick
Riley (Hearing Officer Riley) presided over the proceedings. Based on Hearing Officer Rileyâs
findings, then-Director of the DOI Jennifer Hammer 1 entered an order agreeing with Liberty
Mutual and finding that Prate owed additional workersâ compensation premiums in the amount
of $127,305.
¶2 Prate subsequently filed suit in the circuit court of Cook County, seeking administrative
review of the Directorâs final decision and an additional claim for declaratory judgment as to
the amount of the premium owed to Liberty Mutual. The circuit court affirmed the Directorâs
decision and dismissed the claim for declaratory judgment.
¶3 Prate has timely appealed, contending that (1) the DOI lacked authority to issue its final
order, which is therefore void pursuant to this courtâs holding in CAT Express, Inc. v. Muriel,
2019 IL App (1st) 181851; (2) the circuit court erred in dismissing its request for declaratory
relief on an issue upon which the DOI had expressly declined and lacked authority to rule; and
(3) the DOI erred in finding that ARW Roofing LLC (ARW LLC) had its own employees who
worked on Prate jobs to justify Liberty Mutual charging an additional premium of $127,305.
In our initial disposition of this case, we vacated the DOIâs final order, finding that it lacked
authority to resolve the partiesâ dispute, and further vacated the judgment of the circuit court
At the time of the Directorâs final order, the Director of the Department was Jennifer Hammer,
1
who was initially named as an appellee in this case. She has been succeeded in that position by Robert
H. Muriel. 735 ILCS 5/2-1008(d) (West 2020).
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No. 1-19-1842
affirming the DOIâs order, as such order was void. Prate Roofing & Installations, LLC v.
¶4
-
Liberty Mutual Insurance Corp., 2021 IL App (1st) 191842-U (Prate I).
Liberty Mutual filed a petition for leave to appeal to the supreme court, which was granted.
The supreme court reversed this courtâs previous ruling, finding that the DOI did in fact have
the statutory authority to resolve the dispute under section 462 of the Illinois Insurance Code
(Code) (215 ILCS 5/462 (West 2018)). Prate Roofing & Installations, LLC v. Liberty Mutual
Insurance Corp., 2022 IL 127140, ¶ 41. The court then remanded the case to this court to
address the partiesâ remaining arguments. Id. For the reasons that follow, we reverse the
finding of the DOI.
¶5 I. BACKGROUND
¶6 A complete background for this case was detailed in Prate I. However, as that was an
unpublished disposition, we will restate it here.
¶7 A. Proceedings Before the DOI
¶8 This case came before the DOI on appeal by Prate after it initially sought administrative
relief from the Illinois Workersâ Compensation Appeals Board (Board). Prate filed an appeal
with the Board to contest Liberty Mutualâs determination that it owed additional workersâ
compensation premiums in the amount of $127,305. In May 2016, the Board held a hearing on
Prateâs dispute and issued its case summary and decision on June 2, 2016, which was disclosed
to the parties in a letter from the National Council on Compensation Insurance (NCCI). In its
letter, the NCCI informed the parties that the Board did not have enough information to rule
on whether Liberty Mutual improperly charged Prate for exposure to liability due to Prateâs
use of a possibly uninsured subcontractor and that Prate had the right to appeal. Prate
subsequently appealed the decision to the DOI.
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No. 1-19-1842
¶9 Hearing Officer Riley was assigned to the case. Following discovery, both parties agreed
to waive their rights to an in-person hearing before the DOI and requested that the issues be
determined by written submissions and exhibits. Upon review of the submissions and exhibits,
Hearing Officer Riley made written findings of fact, conclusions of law, and recommendations.
¶ 10 Defendants aside, there are four entities relevant to this case: Prate, ARW Roofing, Inc.
(ARW, Inc.), Reliable Trade Services, Inc. (RTS), and ARW LLC. Prate was a roofing and
construction installations contractor organized as an Illinois limited liability company 2 and
owned by Cynthia Rosetti. Michael Prate (M. Prate) was a former agent and officer of Prate
but at the time of these proceedings served as an employee. ARW Inc. was an Illinois company
that entered into agreements with Prate for contracting services. ARW Inc. was involuntarily
dissolved in August 2015. RTS was an Illinois corporation formed on August 1, 2013, that also
entered into contracts with Prate. ARW LLC was a limited liability company organized by
Emmolly Corporation (Emmolly), of which M. Prate was president. According to M. Prate,
Emmolly organized ARW LLC for the purpose of purchasing RTS, but the purchase did not
occur, and Emmolly signed over ownership of ARW Inc. to Michael Gurdak (M. Gurdak).
ARW LLC also entered into contracts with Prate during the policy period at issue.
¶ 11 According to Prate, from May 1, 2013, to May 1, 2014, ARW Inc. carried workersâ
compensation insurance. RTS listed ARW Inc.âs policy as its workersâ compensation
coverage, claiming that ARW Inc.âs name was changed to RTS.
¶ 12 In 2013, Prate sought and obtained workersâ compensation coverage through the Illinois
Assigned Risk Plan. Liberty Mutual was randomly assigned as Prateâs workersâ compensation
2
Although the hearing officerâs written findings describe Prate as a âlimited liability corporation,â
we take judicial notice that in the state of Illinois, LLC refers to a limited liability company.
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No. 1-19-1842
insurance carrier and issued an initial policy that became effective on October 18, 2013. Liberty
Mutual issued Prate a renewal policy (WC5-34S-540426), the policy at issue, which was
effective October 18, 2014, through June 28, 2015. Pursuant to the policy provisions, in 2015,
Prate was subject to both a self-audit and a premium audit. The premium audit would be
conducted by Liberty Mutual to determine if Prate had properly provided workersâ
compensation insurance certificates for all of its subcontractors; Lisa Murphy was assigned as
the auditor for Liberty Mutualâs audit.
¶ 13 As part of the self-audit, Prate disclosed that it had made payments to RTS, ARW Inc., and
ARW LLC between October 18, 2014, and June 28, 2015. Murphy testified that, while Prate
provided certificates of workersâ compensation insurance coverage for RTS, it did not present
one for ARW LLC. Based on those findings, Liberty Mutual argued before the DOI that Prate
utilized services from ARW LLC, which did not carry workersâ compensation coverage and
thus exposed Liberty Mutual to liability, for which it assessed Prate an additional premium of
$127,305.
¶ 14 Conversely, Prate argued that, because ARW LLC had no employees, that entity could not
perform work that would need to be covered under Illinois workersâ compensation law or the
NCCI Basic Manual 3 and, thus, Prate did not expose Liberty Mutual to liability. Accordingly,
Prate argued that it would be improper to factor any payments to that entity into Liberty
Mutualâs premium calculations.
3
The NCCI Basic Manual for Workers Compensation and Employers Liability Insurance contains
rules, classification descriptions, rates/loss costs for each classification and state-specific exceptions
for writing workers compensation insurance. Basic Manual for Workers Compensation and
Employers Liability Insurance, NCCI, https://www.ncci.com/ServicesTools/Pages/BM2001.aspx (last
visited Dec. 8, 2022) [https://perma.cc/ZK7D-L9TK].
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No. 1-19-1842
¶ 15 Prate presented evidence addressing this issue, including two affidavits from M. Prate, who
describes himself as an âemployeeâ of Prate; a number of attachments to M. Prateâs second
affidavit; and an affidavit from M. Gurdak, who was the president of RTS.
¶ 16 As noted above, these affidavits stated that ARW LLC had been organized by Emmolly
Corporation to purchase RTS but that the purchase never happened. Meanwhile, Prate had
entered into subcontracts with ARW LLC to complete certain roofing jobs. ARW LLC
completed those jobs by subcontracting with RTS to complete the jobs for Prate.
Acknowledging that there was some ambiguity with the entitiesâ names, M. Prateâs affidavits
stated that prior to August 1, 2013, RTS was called ARW Inc., which was signed over to M.
Gurdak. He further acknowledged that there was some ambiguity as to the status of ownership
and that M. Gurdak should have filed documentation with the Secretary of State regarding the
entityâs ownership, but nevertheless confirmed that ARW Inc. and ARW LLC were two
separate organizations.
¶ 17 In his first affidavit, M. Prate explained that â[s]ince at least May 1, 2013, ARW Roofing,
Inc. and Reliable Trade Services, Inc. carried workersâ compensation insurance through
American Interstate Insurance Company, Policy No. AVWCIL2200772013. All of the
employees who performed work on Prate Projects were covered under this policy.â M. Prate
averred that ARW LLC ânever had any employees, and, thus, no [ARW LLC] employee ever
performed any work on any Prate Project.â M. Prate also stated that any work that was the
subject of a contract between Prate and either ARW LLC or ARW Inc. âwas performed entirely
by employees of [ARW Inc.] or [RTS].â
¶ 18 M. Prate also attached additional supporting documents to his second affidavit, including
a March 2016 letter written by M. Gurdak to the NCCI; a letter written by Thomas Low of the
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Beth & Rudnicki Insurance Agency; a âspreadsheet showing all the jobs [for which] Prate
issued payment to âARW Roofingâ during the policy audit period along with the actual labor
cost for each jobâ; documents for each job referenced in the spreadsheet; copies of invoices;
Prateâs checks to âARW Roofingâ and documents provided by [RTS] showing that it performed
all labor and the cost of such labor.
¶ 19 M. Gurdakâs March 21, 2016, letter to the NCCI stated that âARW Roofingâ had not had
any employees since âSeptember 23, 2013, and there are still none as of today.â The letter
written by Low on September 30, 2015, said that his insurance agency did ânot write any
Workers Compensation coverage for ARW Roofing.â Mr. Low explained that â[a]ll of the
employees [were] employed by [RTS], and [RTS] provide[d] all of the labor to ARW
Roofing.â Mr. Low stated plainly that âARW Roofing does not have any employees.â The
spreadsheet showed, per M. Prateâs affidavit, 13 jobs for which Prate paid âARW Roofing.â
The next exhibit included documents for the jobs referenced on the spreadsheet, including
invoices, checks, and documents from RTS showing that it actually paid the employees on the
job and also paid workersâ compensation for the labor.
¶ 20 M. Gurdak reiterated in his affidavit that during the relevant time period âall work which
was the subject of agreements or contracts between [Prate] on the one hand, and [ARW LLC],
[ARW Inc.], and/or [RTS] on the other hand, *** was performed entirely by employees of
[RTS]â and that all payments from Prate to ARW LLC, ARW Inc., or RTS were used to pay
ARW Inc. or RTS for the âlabor and material costsâ of the projects.
¶ 21 Hearing Officer Riley found that it was undisputed that Prate contracted with several
subcontracting entities: in 2013, Prate subcontracted with both ARW Inc. and RTS, which
listed the workersâ compensation policy used by ARW Inc. At issue was whether Liberty
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No. 1-19-1842
Mutual justifiably assessed Prate an additional premium for its use of services by ARW LLC,
which it deemed an uninsured contractor. Hearing Officer Riley noted that the central questions
to be considered were (1) did ARW LLC have a workersâ compensation insurance policy
during Prateâs period of coverage at issue in the hearing, (2) did ARW LLC have any
employees who were required to be covered according to Prateâs policy, (3) did the
arrangements between Prate and ARW LLC expose Liberty Mutual to workersâ compensation
liability and subject Prate to an increased premium, and (4) if Liberty Mutual was exposed to
liability from ARW LLC, did Liberty Mutual appropriately use certain payments from Prate
to ARW LLC as the basis for calculating the additional premium?
¶ 22 With respect to the first question, Hearing Officer Riley found that it was undisputed that
ARW LLC did not have a workersâ compensation insurance policy of its own during Prateâs
policy period of October 2014 through June 2015. He noted that âa common pattern in the
filings offered [by the parties] that initially complicates th[e] determination [was] the
conflation of ARW LLC with ARW Inc.â As an example, the hearing officer noted that both
parties referred to an NCCI ownership name change ruling regarding âa subcontractor ARW.â
However, the NCCI did not define which âARWâ was the subject of its ruling. Additionally,
the NCCI stated that the âBoard could not confirm or refute whether the legal status issue of
ARW being an âLLCâ or an âInc.â when work was performed had a bearing on the dispute.â
Hearing Officer Riley also found that M. Prate, M. Gurdak, and then-president Cynthia Rosetti
were all knowledgeable about the status and business dealings of the two entities, as detailed
in affidavits and answers to Liberty Mutualâs interrogatories. Hearing Officer Riley ultimately
concluded that ARW Inc. and ARW LLC were legally independent of one another despite
common ownership or management, and further that ARW LLC did not have insurance
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No. 1-19-1842
coverage, either independently or in association with another entity during the policy period at
issue.
¶ 23 Regarding the second issue, Hearing Officer Riley noted Prateâs assertion that ARW LLC
had no employees and that, instead, the labor was supplied by RTS. That assertion was echoed
by both M. Prate and M. Gurdak in their respective affidavits. However, Hearing Officer Riley
concluded that ARW LLC was considered a separate entity for the purposes of workersâ
compensation coverage and that ARW LLC likely had employees to carry out contracts on
behalf of Prate and/or RTS. Hearing Officer Riley indicated that this conclusion was based on
other information supplied during discovery, most notably, documents supplied by Prate that
listed RTS at the top and appeared to be proofs of payment by RTS to ARW LLC for workersâ
compensation payroll during the policy period at issue. The hearing officer also noted an
admission made by Rosetti, Prateâs president, in a letter to Liberty Mutual where she stated
that ARW LLC and RTS were one and the same company but that they would each complete
the unfinished contracts of the other. The hearing officer found that this admission contradicted
the assertion that only RTS provided employees, as it would be impracticable for a construction
entity such as ARW LLC to complete projects for RTS without its own employees.
Additionally, the hearing officer found that Prate had the opportunity to provide an alternative
explanation for those payments from RTS to ARW LLC through its answers to Liberty
Mutualâs interrogatories but did not. The hearing officer found it âdubiousâ that no information
could have been provided to Liberty Mutual in the answers to interrogatories to substantiate
that ARW LLC had no employees. Thus, Hearing Officer Riley specifically found that ARW
LLC had employees during the policy period at issue.
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¶ 24 With respect to the third issue, Hearing Officer Riley noted that Prate and its subcontractors
with employees were required to carry workersâ compensation coverage under section 1(a)(3)
of the Workersâ Compensation Act (Act) (820 ILCS 305/1(a)(3) (West 2018)). That section
provides that, if a subcontractor, such as ARW LLC, had employees but did not have the
requisite workersâ compensation coverage, then a contractor, such as Prate, that engaged the
subcontractor to do work would be liable to pay compensation to the subcontractorâs
employees. Id. Further, section 4(a)(3) of the Act provides that the general contractor and any
subcontractors who fall within the provisions of section 3 of the Act must insure the entire
liability of all employees and the entire compensation liability of the insured. Id. § 4(a)(3).
¶ 25 Hearing Officer Riley found that, because Prateâs policy must cover âthe entire
compensation liability of the insuredâ and because Prate would be liable to pay compensation
to ARW LLCâs employees if ARW LLC lacked it.s own coverage, Liberty Mutual would be
required by law to assume that liability under the circumstances. It followed then that Prate
was required both to secure workersâ compensation coverage for itself as principal and to
ensure that ARW LLC had coverage as a subcontractor. Based on the prior findings that ARW
LLC had employees during the policy period but lacked its own coverage, Hearing Officer
Riley found that Liberty Mutual was exposed under Prateâs policy to workersâ compensation
liability from ARW LLCâs employees.
¶ 26 With respect to the final issue, Hearing Officer Riley noted that the contract language in
the policy stated that the premium included âpayroll and other remuneration[4] paid,â which
4
Remuneration is payment for work or services. Cambridge English Online Dictionary, https://
dictionary.cambridge.org/us/dictionary/english/remuneration (last visited Dec. 12, 2022) [https://
perma.cc/K7MV-ADW8].
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No. 1-19-1842
included âthe insuredâs direct employeesâ and âall other persons engaged in work that could
make [Liberty Mutual] liable.â Under the Act, Hearing Officer Riley found that the ARW LLC
employees could have made Liberty Mutual liable, so it was proper to assess some amount of
premium for them. Prate disputed that its insurance coverage was also bound by Rule 2-H of
the NCCI Basic Manual, which states that âthe contractor must furnish satisfactory evidence
that the subcontractor has workers[â] compensation insurance in force.â Nevertheless, Hearing
Officer Riley noted that the binder of coverage initially issued to Prate stated that coverage
was provided under the stateâs workersâ compensation laws âin accordance with the Plan rulesâ
and that coverage would be given âunder the applicable Workersâ Compensation Insurance
Plan developed or administered by NCCI.â As such, Hearing Officer Riley found that Prate
âcontractually consented to the laws of Illinois and specific rules of the NCCIâ that allowed
for the âdetermination of a premium based upon uninsured subcontractors with employees
engaged in work for the policyholder.â
¶ 27 According to the policy at issueâs provision regarding premiums, Liberty Mutual could
only assess a premium âdetermined by multiplying a rate times a premium basis,â which
included âpayroll and all other remuneration paid or payable during the policy period for
services of: 1) all your officers and employees engaged in work covered by th[e] policy; and
2) all other persons engaged in work that could make [Liberty Mutual] liable under Part One
of th[e] policy.â The policy further provided that if the insured did ânot have payroll records
for [those] persons, the contract price for their services and materials may be used as the
premium basis.â Accordingly, Hearing Officer Riley found that, under the terms of the policy,
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No. 1-19-1842
Liberty Mutual could charge a premium based on the contract price for ARW LLCâs services
and materials for Prate during the policy period at issue, which would be reflected in Prateâs
payments to ARW LLC.
¶ 28 Despite Prateâs argument that it would be improper to factor any payments to ARW LLC
into Liberty Mutualâs premium calculations, Hearing Officer Riley found that, given Prateâs
âapparent inabilityâ to supply any payroll records for the ARW LLC employees or supply
sufficient financial records from ARW LLC showing that there were no employees, there was
no other basis for estimating the applicable payroll and other remuneration for the employees.
Further, Hearing Officer Riley found that Liberty Mutual had no contractual or statutory right
to audit ARW LLC directly to obtain those records based on prior DOI precedent and, as such,
it was permitted to use the contract price for services and materials as the basis for the premium.
¶ 29 In her affidavit, Murphy averred that, during her audit of Prate, she found that the total
payments made by Prate to ARW LLC were $300,673.46. 5 After excluding 10% for materials,
a total of $270,606.20 was added to Prateâs audited payroll exposure. In a letter sent to the
NCCI by Liberty Mutual, Murphy stated that the additional premium was calculated according
to Tables 1 and 2 of Rule 2-H of the Basic Manual. Rule 2-H provided for the additional
premium to be calculated based on ânot less than 90% of the subcontract priceâ for labor only.
Hearing Officer Riley found that Liberty Mutual permissibly used an estimated payroll amount
of $270,606.20, which was 90% of the total subcontract price between ARW LLC and Prate,
as the basis for calculating the additional premium owed by Prate.
This figure was based on Prateâs profit and loss statement for the period between October 18,
5
2014, and June 28, 2015, that was sent to Liberty Mutual as part of its self-audit.
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No. 1-19-1842
¶ 30 Hearing Officer Riley concluded, âbased upon a preponderance of the evidence and upon
consideration of the Record as a whole or such portion thereof as may be supported by
competent material and substantial evidence,â Liberty Mutualâs calculation of the additional
premium due to the policy at issue should be upheld. Therefore, Hearing Officer Riley
recommended to the Director of the DOI that Liberty Mutual was entitled to the premium
charges assessed to Prate regarding workersâ compensation policy number WC5-34S-540426-
024 and that the costs of the proceeding be waived.
¶ 31 On May 7, 2018, the Director of the DOI adopted the hearing officerâs findings of fact,
conclusions of law, and recommendations and ordered that Liberty Mutual was entitled to the
disputed premium charges.
¶ 32 B. Prateâs Motion for Rehearing
¶ 33 Prate subsequently filed a motion for rehearing on May 15, 2018. The DOI found that Prate
failed to demonstrate good cause or legally sufficient grounds to reopen the matter, Prate did
not offer satisfactory explanations to counter the DOIâs conclusion that ARW LLC possessed
employees and was thus liable to Liberty Mutual for additional workersâ compensation
coverage, Prate offered no evidence that Liberty Mutual incorrectly calculated the additional
premium, and Prate asserted conclusory statements on the weight of the evidence and
application of law but did not provide evidence that would alter the analysis upon which the
final order rested. However, the DOI stated that âit [was] not for the Department to determine
the specific amount of the premium charge, but that the parties under the contract conduct
themselves within the statutory and regulatory bounds of Illinois law.â The DOI denied Prateâs
motion for rehearing on July 10, 2018.
¶ 34 C. Circuit Court Proceedings
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No. 1-19-1842
¶ 35 Prate then filed its complaint for administrative review and additionally sought a
declaratory judgment concerning the correct amount of the additional premium owed to
Liberty Mutual in the circuit court of Cook County on August 1, 2018.
¶ 36 The DOI filed a section 2-615 (735 ILCS 5/2-615 (West 2018)) motion to dismiss Hearing
Officer Riley as an unnecessary party and to dismiss Prateâs request for declaratory relief,
arguing that its sole remedy was administrative review. Prate responded that it was entitled to
declaratory relief since the DOI indicated that it was not its job to determine the specific
amount of premium due. On December 12, 2018, the circuit court dismissed Hearing Officer
Riley as a defendant and dismissed the declaratory judgment count of Prateâs complaint as
procedurally improper, both without prejudice. The courtâs order did not contain Illinois
Supreme Court Rule 304(a) (eff. Mar. 8, 2016) language. The circuit court affirmed the
Directorâs final order on August 14, 2019. This timely appeal followed.
¶ 37 Our previous disposition in this case was filed on March 5, 2021. Sometime thereafter,
Liberty Mutual filed a petition for leave to appeal to our supreme court, which subsequently
issued its opinion finding that DOI had the statutory authority under section 462 to resolve this
dispute and accordingly reversing this courtâs order. As a result, this case was remanded for
this court to consider the remaining issues raised in the initial appeal.
¶ 38 II. ANALYSIS
¶ 39 On appeal, Prate contends that (1) the DOI lacked authority to issue its final order, which
is therefore void pursuant to this courtâs holding in CAT Express, Inc., 2019 IL App (1st)
181851, (2) the DOI erred in finding that ARW LLC had its own employees who worked on
Prate jobs to justify Liberty Mutualâs charging an addition premium of $127,305, and (3) the
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circuit court erred in dismissing its request for declaratory relief on an issue upon which the
DOI had expressly declined and lacked authority to rule.
¶ 40 A. Jurisdiction
¶ 41 As a preliminary matter, we address the issue of jurisdiction, as raised by the DOI in its
brief. The DOI contends that a potential jurisdiction question arises because the circuit courtâs
dismissal, of Hearing Officer Riley as a defendant and the declaratory judgment count of
Prateâs complaint without prejudice, was not a final judgment. Additionally, the order entered
on August 14, 2019, did not contain Rule 304(a) language. Further, the DOI asserts that the
circuit court âseemed to intend the words âwithout prejudiceâ to convey that it would entertain
further argument while the administrative review action (count I) was pending, and not that it
wished to preserve the claims (the count II declaratory action and the claims as against Riley)
for refiling in the future.â
¶ 42 While Liberty Mutualâs brief does not contain any statement related to this courtâs
jurisdiction to hear the appeal, Prate, on the other hand, contends that its appeal is from a final
judgment under Illinois Supreme Court Rule 301 (eff. Feb. 1, 1994). The appeal challenges
both the circuit courtâs December 12, 2018, order, which dismissed its declaratory judgment
count, and the final order of August 14, 2019, which affirmed the DOIâs final order. Based
thereon, Prate contends that this court has jurisdiction to hear its appeal.
¶ 43 We begin by noting that a reviewing court has a duty to sua sponte consider whether it has
jurisdiction. In re Estate of Young, 2020 IL App (2d) 190392, ¶ 16. A challenge to our
jurisdiction is a question of law. JPMorgan Chase Bank, N.A. v. East-West Logistics, L.L.C.,
2014 IL App (1st) 121111, ¶ 21. Questions of law are subject to de novo review.Id.
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¶ 44 While Prate asserts that this court has jurisdiction based on entry of a final judgment in the
circuit court, we find that such a conclusion is not immediately clear on the face of the record.
In this case, the circuit court previously granted the DOIâs section 2-615 (735 ILCS 5/2-615
(West 2018)) motion to dismiss both a defendant and count II of the complaint without
prejudice. Thus, we must consider the effect of the circuit courtâs December 12, 2018,
dismissal order on the jurisdiction of this court.
¶ 45 We note initially that the DOI filed a section 2-615 motion to dismiss Hearing Officer Riley
as an unnecessary party and Prateâs declaratory judgment count (count II) for lack of subject-
matter jurisdiction. However, the DOI should have filed a section 2-619 (id. § 2-619) motion
to dismiss. A section 2-615 motion allows for the dismissal of the complaint (or portion
thereof) where the pleading is legally insufficient based on defects apparent on its face. Id. § 2-
615. Conversely, a section 2-619 motion to dismiss admits the sufficiency of the complaint but
asserts an affirmative matter to defeat the claim. Id. § 2-619.
¶ 46 In this case, there were affirmative matters raised by the DOI that defeated portions of
plaintiffâs claims. With respect to count I, the DOI sought dismissal of Hearing Officer Riley
because he was not a necessary party to the administrative review action. With respect to count
II, the DOI sought dismissal because the circuit court lacked subject-matter jurisdiction to
review a claim for declaratory judgment in an administrative review case. These matters should
have been raised in a section 2-619 motion and were improperly raised in a section 2-615
motion.
¶ 47 Ordinarily, the failure to properly designate a motion to dismiss would result in reversal if
prejudicial to the nonmovant. Illinois Graphics Co. v. Nickum, 159 Ill. 2d 469, 484 (1994).
However, in this case, because we find that the parties were not prejudiced by the mislabeling
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as will be further detailed below, in the interest of judicial economy, we will treat the
improperly designated motion to dismiss as if it were properly designated when filed. Talbert
v. Home Savings of America, F.A., 265 Ill. App. 3d 376, 379 (1994).
¶ 48 Turning our attention to the jurisdiction question, the Illinois Constitution provides for
appellate jurisdiction to hear appeals from all final judgments entered in the circuit court. Ill.
Const. 1970, art. VI, § 6. The Constitution also grants our supreme court the authority to
provide by rule for appeals from less than final judgments. Id. Absent an applicable supreme
court rule, this court may not exercise appellate jurisdiction over a judgment, order, or decree
that is not final. Flores v. Dugan, 91 Ill. 2d 108, 112 (1982). Illinois Supreme Court Rules 301
and 304 provide the jurisdictional basis for appealing final judgments. Lewis v. Family
Planning Management, Inc., 306 Ill. App. 3d 918, 921 (1999).
¶ 49 Generally, an order of dismissal entered âwithout prejudiceâ is a nonfinal order and is not
appealable. Ally Financial Inc. v. Pira, 2017 IL App (2d) 170213, ¶ 28. However, motions to
dismiss that were granted without prejudice become part of the final ruling on the case when
no interlocutory appeal is taken or where the order contains no Rule 304(a) language. Thus,
the circuit courtâs rulings on the DOIâs motion to dismiss, even though granted without
prejudice in the December 12, 2018, order, are final orders and are properly part of our
jurisdiction over the final ruling in the case. See Reed v. Retirement Board of the Firemanâs
Annuity & Benefit Fund of Chicago, 376 Ill. App. 3d 259, 267 (2007) (once a final order has
been entered in a case, all nonfinal orders previously entered may be reviewed by the appellate
court).
¶ 50 Therefore, once the entire action terminated on August 14, 2019, Prate could file its notice
of appeal for all orders entered by the circuit court. Accordingly, we find that we have
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jurisdiction over this appeal pursuant to Illinois Supreme Court Rule 301 (eff. Feb. 1, 1994)
and turn to the merits of the appeal.
¶ 51 B. The DOIâs Authority to Rule
¶ 52 As noted previously, Prate contends that the DOI lacked authority to issue its final order,
which is therefore void pursuant to this courtâs holding in CAT Express, Inc., 2019 IL App
(1st) 181851. As also noted previously, we agreed with Prateâs conclusion in our disposition
in Prate I. However, on appeal by Liberty Mutual to our supreme court, our finding was
reversed. Specifically, the supreme court found that the DOIâs resolution of the dispute at issue
fell within the scope of authority granted by section 462 of the Code providing for the review
of the manner in which a rating system had been applied. Prate Roofing, 2022 IL 127140,
¶¶ 31-41. It then remanded the case to us to address the remaining issues raised on appeal. As
this issue has been disposed of by the supreme courtâs ruling, we decline to further address
Prateâs arguments on this issue and turn our attention instead to its remaining arguments.
¶ 53 C. The DOIâs Finding that ARW LLC Had Its Own Employees
¶ 54 Prate contends that the DOI erred in finding that ARW LLC had its own employees who
worked on Prate jobs to justify Liberty Mutual charging an additional premium of $127,305.
Specifically, it argues that the agency incorrectly âignored or misinterpreted competent and
uncontroverted evidence that ARW LLC had no employees and [that] all labor was
subcontracted to RTS.â Prate maintains that, under the plain language of the Act, if a
subcontractor only operates as a middleman that turns around and subcontracts all labor to a
different subcontractor who is properly insured for workersâ compensation, there is no
exposure to the hiring party or its insurer. Thus, the insured status of a middleman without
employees is irrelevant. Prate further contends that the undisputed facts in this case are that it
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No. 1-19-1842
hired an uninsured subcontractor, ARW LLC, and further that ARW LLC acted merely as a
middleman who âturned aroundâ and subsequently subcontracted all labor on Prate jobs to
RTS, who was properly insured. Accordingly, the employees who actually worked on Prate
jobs were protected under RTSâs insurance policy. Prate also argues that it provided
uncontradicted proof to the DOI that ARW LLC had no employees of its own in the form of
affidavits from the owner and/or employee of the relevant subcontractors. This argument goes
to the heart of the dispute and this appeal.
¶ 55 In an administrative review appeal, we review the decision of the agency, not the decision
of the circuit court. Moore v. State Department of Human Services, 2017 IL App (4th) 160414,
¶ 12. In administrative review cases, reviewing courts may encounter questions of fact,
questions of law, and mixed questions of law and fact. Van Dyke v. White, 2016 IL App (4th)
141109, ¶ 19. An administrative agencyâs findings and conclusions on questions of fact are
deemed prima facie true and correct; a reviewing court does not weigh the evidence or
substitute its judgment for that of the agency. Id. Instead, a reviewing court is limited to
ascertaining whether such findings of fact are against the manifest weight of the evidence,
meaning that the opposite conclusion is clearly evident. Id. In contrast, an agencyâs decision
on a question of law is not binding on a reviewing court, and we review such decisions de novo.
See AFM Messenger Service, Inc. v. Department of Employment Security, 198 Ill. 2d 380, 395
(2001). Mixed questions of fact and law are questions where the historical facts are admitted
or established, the rule of law is undisputed, and the issue is whether the facts can satisfy the
statutory standard: whether the rule of law as applied to the established facts is or is not
violated. Moore, 2017 IL App (4th) 160414, ¶ 13. A decision on a mixed question of law and
fact will not be reversed on appeal unless it is clearly erroneous, meaning that the reviewing
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No. 1-19-1842
court is left with the definite and firm conviction that a mistake has been made. Van Dyke,
2016 IL App (4th) 141109, ¶ 19.
¶ 56 Here, the DOIâs determination of whether ARW LLC had employees involves a question
of fact because it required the DOI to make factual determinations based on the evidence
presented by the parties. We therefore review the DOIâs decision under the manifest weight of
the evidence standard. See id. A judgment is against the manifest weight of the evidence only
when an opposite conclusion is apparent or when findings appear to be unreasonable, arbitrary,
or not based on evidence. Battaglia v. 736 N. Clark Corp., 2015 IL App (1st) 142437, ¶ 23.
¶ 57 In considering an agencyâs factual findings, a reviewing court does not weigh the evidence
or substitute its judgment for that of the agency. Hopkins v. Board of Trustees of the
Firefighters Pension Fund of East St. Louis, 2016 IL App (5th) 160006, ¶ 38. However, the
deference accorded an agencyâs decision is not without limitation. Id. A reviewing court may
reject an agencyâs findings if such findings clearly contradict the manifest weight of the
evidence. Id. Even when supported by some evidence that, if undisputed, would sustain the
administrative finding, it is not sufficient if upon a consideration of all the evidence the finding
is against the manifest weight. Id. If, after examining the entire record, we believe the manifest
weight of the evidence favors the party who did not prevail, then it is our duty to reverse. Id.
¶ 58 That is precisely the situation presented here. As noted above, the DOIâs decision was
wholly based on documentary evidence, and there was no live testimony heard. Indeed, in
reviewing the proffered documentary evidence, the DOI acknowledged that the affidavits
presented by Prate averred that ARW LLC had no employees and, instead, the labor was
supplied by RTS. Hearing Officer Riley also found that the assertion was echoed by both M.
Prate and M. Gurdak in their respective affidavits. However, based on âother information
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No. 1-19-1842
supplied during discovery,â Hearing Officer Riley concluded that ARW LLC was considered
a separate entity for the purposes of workersâ compensation coverage and that ARW LLC
likely had employees to carry out contracts on behalf of Prate and/or RTS. This finding was
specifically based on Prate-supplied documents that listed RTS at the top and appeared to be
proofs of payment by RTS to ARW LLC for workersâ compensation payroll during the policy
period at issue. Hearing Officer Riley found those documents to be a further indication that
ARW LLC had its own employees for which RTS covered the cost of exposure. The hearing
officer also noted an âadmissionâ made by Prateâs president, Cynthia Rosetti, when she sent a
letter to Liberty Mutual stating that ARW LLC and RTS were one and the same company but
that they would each complete the unfinished contracts of the other. Hearing Officer Riley
found that this âadmissionâ contradicted Prateâs assertion that only RTS provided employees,
as it would be âimpracticable for a construction entity such as ARW LLC to complete projects
for RTS without its own employees.â Additionally, Hearing Officer Riley found that Prate had
the opportunity to provide an alternative explanation for payments made from RTS to ARW
LLC through its answers to Liberty Mutualâs interrogatories but did not. The hearing officer
found it âdubiousâ that no information could have been provided to Liberty Mutual in the
answers to interrogatories to substantiate Prateâs claim that ARW LLC had no employees.
Thus, Hearing Officer Riley specifically found that ARW LLC had employees during the
policy period at issue.
¶ 59 Considering the record before us as well as Prateâs arguments on appeal, we find that the
DOIâs findings of fact regarding whether ARW LLC had employees was against the manifest
weight of the evidence. The uncontradicted affidavits submitted by M. Prate and M. Gurdak
indicated that ARW LLC had no employees. Liberty Mutual, however, submitted no evidence
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No. 1-19-1842
to support its conclusion that ARW LLC in fact had employees that were subject to workersâ
compensation coverage. Rather, the hearing officer determined that Prateâs position was
contradicted by two pieces of evidence: the letter from Rosetti and the RTS documents that
showed RTS payments for workersâ compensation coverage. Hearing Officer Riley
specifically found that
â[a] telling admission was made by Ms. Cynthia Rosetti, president of Prate Roofing, when
she sent a letter to Liberty Mutual that stated, âARW Roofing, LLC and Reliable Trade
Services, LLC are one and the same company,â but also explained that ARW LLC and RTS
would complete the unfinished contracts of the other. [Citation.] If ARW LLC and RTS
would complete the contracts for one another, this contradicts the assertion that only RTS
provided employees, as it would be impracticable for a construction entity such as ARW
LLC to complete projects for RTS without employees of its own.â
¶ 60 However, none of this evidence contradicts the clear evidence presented by Prate.
Additionally, Rosettiâs letter that the DOI relied on as dispositive of the issue and contradictory
to the affidavits Prate submitted was itself contradicted by a second letter from Rosetti. The
second letter clarified that she erroneously used both LLC and Inc. with respect to ARW LLC
ânot realizing that [she] was doing that.â ARW Inc. became RTS, so it was those two
companies that were âone and the same company.â Nor did Rosetti say that ARW LLC and
RTS would complete the contracts of each other; rather, in the January 14, 2016, letter she
explained that ARW LLC remained the company on the contract with Prate:
âThe name change did not happen overnight. Many of our contracts covered extended
periods of time. If our contract started with ARW Roofing, LLC, then we finished with
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No. 1-19-1842
ARW Roofing, LLC. When all of the contracts that were started with ARW Roofing, LLC
were completed, we then contracted with [RTS].
¶ 61 Contrary to Hearing Officer Rileyâs characterization of Rosettiâs letter, Rosetti did not say
that ARW LLC and RTS finished one anotherâs contracts but only that, if Prate had a contract
with ARW LLC, it finished that contract with ARW LLC using the employees of RTS. Rosetti
emphasized again in that letter that RTS âwas the labor and carried the workers compensation.â
Thus, this letter provided no support for the hearing officerâs conclusion that ARW LLC had
employees.
¶ 62 Hearing Officer Riley also relied â[m]ost substantiallyâ on RTS documents that were
attached to M. Prateâs second affidavit, which was submitted with Prateâs reply in support of
its trial brief. Hearing Officer Riley concluded that these documents âappear[ed] to be proofs
of payment by RTS to ARW LLC for workersâ compensation payroll during the policy period
at issueâ and that â[p]ayments for workers compensation payroll ostensibly indicate[ed] that
ARW LLC had its own employees for which RTS covered the cost of exposure.â M. Prate
explained what those documents were in his affidavit, saying they were part of the âdocuments
provided by [RTS] showing that it performed all labor and the cost of such labor.â Looking at
the documents themselves, that is exactly what they appear to beâan accounting by RTS of
what it had paid in workersâ compensation for its own employees that worked on an ARW
LLC job. We find such documents do not rise to the level of conclusive evidence that ARW
LLC had employees.
¶ 63 Additionally, Hearing Officer Riley apparently completely discounted Lowâs statement
that ARW LLC did not have employees because he concluded that it was ânot clear how [Low]
would have reliable knowledge about that entityâs staffing.â Yet Rosetti explained to Liberty
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No. 1-19-1842
Mutualâs auditor in a letter attached to Liberty Mutualâs position paper that ARW LLC and
RTS, also known as ARW Inc., both used the same insurance agent. Low was therefore very
much in a position to know whether ARW LLC had employees, as he provided insurance for
all of the companies involved and understood the relationship between them.
¶ 64 Hearing Officer Riley also expressed concern that Prate could have âprovided an
alternative explanation for these payments through interrogatories served by Liberty Mutual,â
but the two interrogatories cited did not ask for such an explanation but rather were broad
requests for payroll details and payments from RTS and ARW LLC. We thus find that this was
also not conclusive and dispositive evidence that ARW LLC had employees.
¶ 65 In short, the evidence relied on by Hearing Officer Riley to conclude that ARW LLC had
employees who were subject to workersâ compensation coverage did not support such a
finding. Such a finding ignored the uncontradicted evidence provided by Prate to the contrary.
After viewing the documentary evidence presented as a whole, we conclude that the DOIâs
decision was against the manifest weight of the evidence. Accordingly, we reverse the factual
finding of the DOI that ARW LLC had its own employees for purposes of requiring workersâ
compensation coverage, as it was against the manifest weight of the evidence.
¶ 66 D. Prateâs Request for Declaratory Relief
¶ 67 The final issue before us is whether the circuit court erred in dismissing Prateâs request for
declaratory relief when the DOI expressly stated that it âwas not its job to determine the
correctness of the premiumâ assessed to Prate by Liberty Mutual. Prate contends that its request
satisfied the elements of an action for declaratory judgment: Prate has a tangible interest,
Liberty Mutual has an adverse interest, and an actual controversy exists.
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No. 1-19-1842
¶ 68 Our determination that the DOIâs conclusion that ARW LLC had employees was against
the manifest weight of the evidence renders this issue moot, and no further relief is necessary.
¶ 69 CONCLUSION
¶ 70 For the foregoing reasons, we reverse the final order of the DOI in favor of Liberty Mutual.
Accordingly, we reverse the circuit court of Cook Countyâs order affirming the DOI.
¶ 71 Circuit court judgment reversed.
¶ 72 Department order reversed.
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No. 1-19-1842
Prate Roofing & Installations, LLC v. Liberty Mutual Insurance Corp.,
2022 IL App (1st) 191842-B
Decision Under Review: Appeal from the Circuit Court of Cook County, No. 18-CH-
9826; the Hon. Caroline Kate Moreland, Judge, presiding.
Attorneys Kevin J. Kuhn, of Kuhn Firm P.C., of Chicago, for appellant.
for
Appellant:
Attorneys James T. Barnes and John C. Schmadeke, of Barnes, P.C., of
for Chicago, for appellee Liberty Mutual Insurance Corporation.
Appellee:
Kwame Raoul, Attorney General, of Chicago (Jane Elinor Notz,
Solicitor General, and Mary C. LaBrec, Assistant Attorney
General, of counsel), for other appellees.
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