Booth v. Hackney Acquisition Co.Â

IN THE COURT OF APPEALS OF NORTH CAROLINA

No. COA17-274

Filed: 7 November 2017

The North Carolina Industrial Commission, I.C. No. W58084

THELMA BONNER BOOTH, Widow and Administratrix of the Estate of HENRY
HUNTER BOOTH, JR., Deceased-Employee, Plaintiff,

v.

HACKNEY ACQUISITION COMPANY, f/k/a HACKNEY & SONS, INC., f/k/a
HACKNEY & SONS (EAST), f/k/a J.A. HACKNEY & SONS, Employer, NORTH
CAROLINA INSURANCE GUARANTY ASSOCIATION on behalf of AMERICAN
MUTUAL LIABILITY INSURANCE, Carrier, and on behalf of THE HOME
INSURANCE COMPANY, Carrier, Defendants.

Appeal by Plaintiff from an Opinion and Award entered 7 December 2016 by

the Full North Carolina Industrial Commission. Heard in the Court of Appeals 6

September 2017.

Wallace & Graham, P.A., by Edward L. Pauley, for Plaintiff-Appellant.

Nelson Mullins Riley & Scarborough LLP, by Christopher J. Blake and Joseph
W. Eason, for Defendant-Appellee North Carolina Insurance Guaranty
Association.

Cranfill Sumner & Hartzog LLP, by Theodore B. Smyth and Joseph C. Tanski,
for amicus curiae National Conference of Insurance Guaranty Funds.

MURPHY, Judge.

Individuals with latent health conditions are not members of a suspect class,

and access to a claim against the North Carolina Insurance Guaranty Association

does not affect a fundamental right. The distinctions imposed by statute are subject
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Opinion of the Court

to minimum scrutiny under the Equal Protection Clause and do not violate the North

Carolina or United States Constitutions, as they further legitimate State interests.

Thelma Bonner Booth (“Plaintiff”), as the administratrix of the estate of Henry

Hunter Booth, Jr. (“Booth”), appeals the Full North Carolina Industrial Commission’s

Opinion and Award certifying a constitutional question to this Court. On appeal,

Plaintiff asserts the following arguments: (1) the “bar date” provision in

N.C.G.S. § 58-48-35(a)(1) (2015) violates Plaintiff’s constitutional rights to equal

protection and due process; and (2) the statute of repose in N.C.G.S. § 58-48-100(a)

(2015) deviates from the purposes of the Workers’ Compensation Act and is also

unconstitutional. After careful review, we hold both provisions do not violate the

North Carolina or United States Constitutions and remand to the Full Commission

for further proceedings.

I. Background

Booth worked at Hackney Industries, Inc. from 1967 to 1989. From September

1988 to September 1990, Hackney was insured by the Home Insurance Company. On

13 June 2003, a court in New Hampshire filed an order of liquidation for Home

Insurance Company and declared the company to be insolvent. The same court

ordered all claims against the company to be filed with the “liquidator” by 13 June

2004, the bar date.

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On 23 June 2008, Booth was diagnosed with lung cancer. On 27 April 2009,

Booth passed away. On 16 November 2009, a doctor opined Booth “developed welding

related conditions including lung fibrosis and adenocarcinoma of the lung which was

caused and/or contributed to by his exposure to welding rod fumes.”

On 1 December 2009, Plaintiff completed a Form 18 (Notice of Accident to

Employer and Claim of Employee, Representative, or Dependent). On 17 June 2013,

the North Carolina Insurance Guaranty Association (“Defendant”) filed a Form 61

(Denial of Workers’ Compensation Claim) for the Home Insurance Company, because

Home Insurance was an insolvent insurance carrier. In the Form 61, Defendant

denied that it owed any obligation regarding Plaintiff’s claim because the claim was

not proper under N.C.G.S. §§ 58-48-35(a)(1) and 58-48-1. On 20 October 2015,

Defendant filed a motion to dismiss Plaintiff’s claim, arguing the bar date and the

statute of repose mandated dismissal of Plaintiff’s claim against Defendant.1

On 2 December 2015, Deputy Commissioner Thomas H. Perlungher denied

Defendant’s motion to dismiss. On 5 January 2016, Defendant appealed to the Full

Commission. On 7 December 2016, the Full Commission certified the following

question to this Court, pursuant to N.C.G.S. § 97-86 (2015):

Do the provisions of N.C. Gen. Stat. §§ 58-48-35(a)(1)
and 58-48-100(a), as applied in workers’ compensation
cases involving occupational diseases which, due to the
very nature of the disease, develop many years after the

1 Defendant also filed another motion to dismiss, but the arguments contained therein are not
at issue in this appeal.

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last injurious exposure, violate the guarantees of due
process and equal protection of law under Article I, Section
19 of the Constitution of the State of North Carolina and/or
under the 14th Amendment to the United States
Constitution to claimants who were injuriously exposed
prior to the bar date but whose occupational disease did not
develop until after the bar date and/or after the last date
allowed by the statute of repose?

Plaintiff filed timely notice of appeal.

II. Jurisdiction

Under N.C.G.S. § 97-86, “[t]he Industrial Commission . . . may certify

questions of law to the Court of Appeals for decision and determination by the

Court[,]” prior to entering a final opinion and award. Id. On 7 December 2016, the

Commission certified a constitutional question to this Court, pursuant to section 97-

86. Thus, we have jurisdiction over Plaintiff’s appeal, even though the Opinion and

Award from which Plaintiff appeals is interlocutory.

III. Standard of Review and Level of Scrutiny

This Court reviews alleged violations of constitutional rights de novo.

Piedmont Triad Reg’l Water Auth. v. Sumner Hills Inc., 353 N.C. 343, 348, 543 S.E.2d

844, 848 (2001) (citations omitted) (“[D]e novo review is ordinarily appropriate in

cases where constitutional rights are implicated.”). Plaintiff contends our Court

should apply the highest level of scrutiny, strict scrutiny, and argues that the bar

date and the statute of repose affect her fundamental right “to remedies provided by

the Workers’ Compensation Act[.]” However, the challenged provisions do not affect

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a fundamental right or a suspect class. See Payne v. Charlotte Heating & Air

Conditioning, 172 N.C. App. 496, 505, 616 S.E.2d 356, 362 (2005) (citation omitted).

Therefore, the lowest level of scrutiny, minimum scrutiny, applies to the provisions

in the workers’ compensation scheme. Id. at 505, 616 S.E.2d at 362 (citation omitted).

Under this level of scrutiny:

“The constitutional safeguard (of equal protection) is
offended only if the classification rests on grounds wholly
irrelevant to the achievement of the State’s objective. State
legislatures are presumed to have acted within their
constitutional power despite the fact that, in practice, their
laws result in some inequality. A statutory discrimination
will not be set aside if any statement of facts reasonably
may be conceived to justify it.”

Roberts v. Durham Cty. Hosp. Corp., 56 N.C. App. 533, 539, 289 S.E.2d 875, 879

(1982) (quoting McGowan v. Maryland, 366 U.S. 420, 425-26, 6 L. Ed. 2d 393, 399

(1961)). “[I]t is only necessary to show that the classification created by the statute

bears a rational relationship to or furthers some legitimate state interest.” Walters

v. Blair, 120 N.C. App. 398, 400, 462 S.E.2d 232, 234 (1995) (citation omitted). Thus,

we now review the challenged provisions under minimum scrutiny.

IV. Analysis

A review of the formation of the North Carolina Insurance Guaranty

Association (“NCIGA”) is pertinent to our analysis. In 1971, the NCIGA was created

by statute, N.C.G.S. § 58-48-1 et seq., to maintain accounts for the payment of various

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types of claims on behalf of insolvent insurers. 1971 N.C. Sess. Laws ch. 670. The

purpose of the NCIGA is:

to provide a mechanism for the payment of covered claims
under certain insurance policies, to avoid excessive delay
in payment, and to avoid financial loss to claimants or
policyholders because of the insolvency of an insurer, to
assist in the detection and prevention of insurer
insolvencies, and to provide an association to assess the
cost of such protection among insurers.

N.C.G.S. § 58-48-5 (2015) (emphasis added).

The NCIGA consists of “members”, which are all insurance companies licensed

to do business in the State. N.C.G.S. § 58-48-20(6) (2015). Prior to 1993, the NCIGA

was only responsible for various types of insurance company insolvencies, but not

workers’ compensation. See 1991 N.C. Sess. Laws ch. 802. In 1992, the General

Assembly enacted legislation amending the Insurance Guaranty Association Act and

the Worker’s Compensation Act to place workers’ compensation claims within the

scope and administration of NCIGA. Id. Starting on 1 January 1993, the NCIGA

became responsible for workers’ compensation claims involving insolvent carriers.

Id. We now turn to Plaintiff’s challenges to the bar date and the statute of repose.

A. N.C.G.S. § 58-48-35(a)(1) Bar Date

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Plaintiff first argues the bar date provision in N.C.G.S. § 58-48-35(a)(1)

violates her constitutional right to equal protection.2 We disagree.

N.C.G.S. § 58-48-35(a)(1) states:

In no event shall the Association be obligated to a
policyholder or claimant in an amount in excess of the
obligation of the insolvent insurer under the policy from
which the claim arises. Notwithstanding any other
provision of this Article, a covered claim shall not include
any claim filed with the Association after the final date set
by the court for the filing of claims against the liquidator or
receiver of an insolvent insurer.

Id. (emphasis added). Thus, in this case, to be a “covered claim,” the claim must have

been filed against Defendant (as it stands in the place of the insolvent Home

Insurance Company) by 13 June 2004, the date set by the New Hampshire court. All

parties agree Plaintiff did not file her claim by 13 June 2004.

We conclude the bar date passes constitutional muster, as there is a legitimate

State interest—indeed, several legitimate State interests—furthered by the

distinction made in N.C.G.S. § 58-48-35(a)(1). As stated in Plaintiff’s brief, the bar

date “is a method to ensure that the NCIGA has the opportunity to recover any sums

2 In Plaintiff’s brief, she offers only one paragraph for her argument that the bar date provision
violates her fundamental right to due process. Plaintiff cites no case law in this paragraph. It is not
our duty “to supplement an appellant’s brief with legal authority[.]” Eaton v. Campbell, 220 N.C. App.
521, 522, 725 S.E.2d 893, 894 (2012) (quotation marks and citations omitted). This argument was not
properly presented to our Court and is “taken as abandoned.” N.C.R. App. P. 28(b)(6) (2017) (“Issues
not presented in a party’s brief, or in support of which no reason or argument is stated will be taken
as abandoned.”).

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expended on covered claims. It is to ensure some measure of recovery from the

bankruptcy estate solely for the benefit of the NCIGA.”3 Additionally, Defendant

presents the following, inter alia, as legitimate policy reasons for the distinction, all

of which we accept and conclude as individually sufficient for the statute to survive

minimum scrutiny:

1. As a State that depends more heavily on foreign rather
than domestic insurers for purposes of workers’
compensation insurance, conforming to the bar date
provision of the [National Association of Insurance
Commissioners] Model [Post-Assessment Guaranty] Act
promoted the State’s and the public’s interest in a more
uniform, national approach to insolvencies of workers’
compensation carriers;

2. As a State that finances the recovery of un-recouped
assessments of the NCIGA via offsets against premium
taxes pursuant to N.C. Gen. Stat. § 105-228.5A, the bar
date provision promotes the interests of the State and the
public by establishing a date on which future liabilities for
claims, and hence tax credits, are capped;

3. Acting together with other provisions of the Guaranty
Act, such as the “net worth” recovery rights under N.C.
Gen. Stat. § 58-48-50(a1) and the “non-duplication of
recovery” provisions of N.C. Gen. Stat. § 58-48-55, the bar
date serves the State’s and the public’s interests by
promoting the marshalling of the insolvent insurer’s assets
to finance the expedited payments and other protections
provided with respect to the claims of “claimants” made

3 Our Court in Payne held the State’s interest in finality failed to pass minimum scrutiny when
the statutes treated claims for asbestosis harsher than other latent occupational diseases. 172 N.C.
App. at 505-06, 616 S.E.2d at 362-63. However, the same issue is not at hand here. The bar provision
does not set a different bar date for only some occupational diseases. Indeed, the bar date does not
create a distinction between different diseases or injuries at all. The only “distinction” is between
claims filed before the bar date and claims filed after the bar date.

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against a “policyholder” or other insureds of the insolvent
insurer;

….

[4]. The bar date promotes the State’s and the public’s
interest in reducing the risk of delay, suspension, or partial
payment of “covered claims” that can result from exceeding
the assessment capacity of the NCIGA during a period of
multiple insolvencies or large workers’ compensation
insurer insolvencies.

Additionally, in its amicus curiae brief, the National Conference of Insurance

Guaranty Funds identifies the following, inter alia, as legitimate reasons for the bar

date:

(1) promote fiscal integrity of NCIGA by limiting claims
against NCIGA, thereby preserving NCIGA’s limited
resources for claimants and policyholders; (2) limit the
burden on the public which provides funds for
NCIGA; . . . ([3]) provide finality to the insurer liquidation
process; and ([4]) preserve the assets of the insolvent
insurer to provide funding to NCIGA.

Moreover, the State has an interest in preserving the integrity of the Guaranty Fund.

We further note “classifications are largely matters of legislative judgment.”

Lamb v. Wedgewood South Corp., 308 N.C. 419, 435, 302 S.E.2d 868, 877 (1983)

(citation omitted). Indeed, “a court may not substitute its judgment of what is

reasonable for that of the legislative body, particularly when the reasonableness of a

particular classification is fairly debatable.” A-S-P Assocs. v. City of Raleigh, 298

N.C. 207, 226, 258 S.E.2d 444, 456 (1979) (citations omitted). With these principles

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in mind, we conclude the bar date provision does not violate Plaintiff’s constitutional

right to equal protection.

B. N.C.G.S. § 58-48-100(a) Statute of Repose

Plaintiff next argues the statute of repose in N.C.G.S. § 58-48-100(a) is

unconstitutional and deviates from the purpose of the Workers’ Compensation Act.

We disagree.

A statute of repose “constitutes a substantive definition of, rather than a

procedural limitation on, rights.” Lamb, 308 N.C. at 426, 302 S.E.2d at 872 (citing

Bolick v. American Barmag Corp., 306 N.C. 364, 293 S.E.2d 415 (1982)). As our

State Supreme Court did in Lamb, we keep two principles in mind when reviewing

the challenged statute of repose: First, “there is a presumption in favor of

constitutionality; reasonable doubts must be resolved in favor of sustaining the act.”

Id. at 433, 302 S.E.2d at 876 (citations omitted). Second, “so long as an act is not

forbidden, the wisdom of the enactment is exclusively a legislative decision.” Id. at

433, 302 S.E.2d at 876 (citation omitted). See also Rhyne v. K-Mart Corp., 358 N.C.

160, 170-71, 594 S.E.2d 1, 9 (2004) (citation omitted) (explaining it is within the power

of the legislature to establish statutes of repose, as long as the statutes do not violate

constitutional rights).

The challenged statute of repose states:

Notwithstanding any other provision of law, a covered
claim with respect to which settlement is not effected with

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the Association, or suit is not instituted against the insured
of an insolvent insurer or the Association, within five years
after the date of entry of the order by a court of competent
jurisdiction determining the insurer to be insolvent, shall
thenceforth be barred forever as a claim against the
Association.

N.C.G.S. § 58-48-100(a).

Here, the insurer, Home Insurance Company, was declared to be insolvent on

13 June 2003. Thus, to not violate the statue of repose, Plaintiff’s claim would have

to have been filed by 13 June 2008. Id. However, Booth was diagnosed and passed

away after the tolling of the statute of repose.

Plaintiff presents the same constitutional arguments under this analysis as

she did for the bar date. As we held supra, the State has a legitimate interest in

protecting the integrity of the Guaranty Fund, and the other interests listed above.

These interests are furthered by the statute of repose. Accordingly, we hold the

statute of repose is not in violation of the North Carolina or United States

Constitutions.

Although Plaintiff asks us to determine whether this statute of repose

“deviates from the purposes of the Act”, we cannot answer that question in this

interlocutory appeal.4 The certified question to this Court under N.C.G.S. § 97-86 is

4 In support of her arguments, Plaintiff cites to Wilder v. Amatex Corp., 314 N.C. 550, 336
S.E.2d 66 (1985). In Wilder, our State Supreme Court analyzed a statute of repose to determine
whether the statute covered claims arising out of disease, when it did not explicitly state so. Id. at
554-63, 336 S.E.2d at 68-73. Wilder did not involve a question of constitutionality of the statute. No

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limited to whether the bar date provision and the statute of repose violate either the

North Carolina or United States Constitutions, not whether the statute of repose

deviates from the purposes of the Act. Thus, we need not address that argument.

V. Conclusion

In conclusion, we hold the bar date in N.C.G.S. § 58-48-35(a)(1) and the statute

of repose in N.C.G.S. § 58-48-100(a) do not violate either the North Carolina or United

States Constitutions, either facially or as applied to Plaintiff. Accordingly, we

remand to the Full Commission for further proceedings consistent with this opinion.

REMANDED.

Judges CALABRIA and ZACHARY concur.

party in the case at hand argues the statute of repose does not govern latent diseases, from which
Booth allegedly suffered. Instead, the question before the Court is whether the statute is
unconstitutional. Accordingly, contrary to Plaintiff’s arguments, Wilder does not demand a different
result.

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