An Illinois appellate panel ruled in favor of an Illinois roofing contractor, saying it did not owe thousands of dollars in workers’ compensation despite a previous judgment.

In an order issued Dec. 16, Justice Sharon Oden Johnson of the First District of the Illinois Appellate Court reversed an order from the Cook County Circuit Court and an Illinois Department of Insurance Order saying Prate Roofing owed $127,305 in workers’ compensation premiums.

“After viewing the documentary evidence presented as a whole, we conclude that the [Department of Insurance’s] decision was against the manifest weight of the evidence,” the ruling states.

The previous judgment, in favor of Liberty Mutual Insurance, agreed that Prate Roofing owed additional workers’ compensation insurance premiums due to certain subcontractors that were hired by Prate didn’t have individual coverage. If it didn't pay, it'd be exposing the subcontractor to liability.

The order says Prate Roofing appealed the decision, claiming the Department of Insurance lacked authority to issue its final order and was therefore void. It also claimed that the department made an error in finding that a subcontractor had its own employees who worked on Prate Roofing jobs.

RELATED: Workers' Compensation: A Common Employer's Nightmare

The confusion arose from Prate Roofing’s complex subcontractor network – ARW Roofing, Reliable Trade Services (RTS) and ARW LLC. Prate is a roofing and construction contractor in Illinois owned by Cynthia Rosetti. Court documents say ARW Roofing entered into agreements with Prate for contracting services but was involuntarily dissolved in August 2015. RTS, formed in August 2013, also entered into contracts with Prate. 

Michael Prate was an agent and officer of Prate Roofing, but at the time of the proceedings in this matter, he was an employee. According to the order, ARW LLC is a limited liability company organized by Prate that intended on buying RTS, but the purchase never occurred. ARW was signed over to RTS. 

ARW Roofing carried workers’ compensation coverage from May 2013 and 2014. RTS listed ARW Roofing’s policy as its workers’ compensation coverage, claiming that ARW Roofing’s name was changed to RTS and were one and the same company.

In 2013, Prate Roofing applied for workers’ compensation coverage and was assigned Liberty Mutual, which provided a policy effective Oct. 18, 2014 through June 28, 2015.

As a result, Prate Roofing was subject to a self-audit and premium audit to determine if it properly provided workers’ compensation for all of its subcontractors. Based on the audit, Liberty Mutual stated that Prate Roofing didn’t present a certificate of coverage for ARW LLC and owed the additional compensation. 

Prate Roofing argued that ARW LLC had no employees and therefore couldn’t perform work covered under compensation law. Rosetti said if Prate Roofing had a contract with ARW LLC, it finished that contract with ARW LLC using the employees of RTS. The appellate panel ultimately agreed with Prate Roofing.

“Liberty Mutual, however, submitted no evidence to support its conclusion that ARW LLC in fact had employees that were subject to workers’ compensation coverage,” Oden Johnson wrote in the ruling.