Mallett Buildings Lawsuit: LWCC Audit and Spell Injury Case

The Mallett Buildings lawsuit history centers on two Louisiana Workers’ Compensation Corporation investigations into how Lee Mallett’s construction companies reported employee wages and calculated insurance premiums, along with a separate personal injury case, Spell v. Mallett, Inc., in which a worker who fell from a ladder sued the company and its liability insurer. Regulators sanctioned Mallett-owned entities in both LWCC matters, and the injury suit ended with the appellate court affirming that the insurer’s employee-injury exclusion barred coverage.

The 2005 LWCC Audit and $1.3 Million Premium

In 2005, the Louisiana Workers’ Compensation Corporation audited one of Mallett’s companies and found it had reported a workers’ compensation premium of just $8,100. The audit determined the correct premium was nearly $1.3 million.¹

When the LWCC sought payment of the difference, Mallett transferred ownership of the company to his father, who then placed it into bankruptcy to avoid the debt.²

The 2018 Progressive Buildings Investigation

More than a decade later, the LWCC opened a second investigation, this time into Progressive Buildings, another Mallett-owned company, examining how it reported employee compensation. Workers’ compensation premiums are calculated from wages, and mileage reimbursements and donations to employees are excluded from those calculations. Investigators found Progressive Buildings was paying workers modest salaries while reporting large sums as mileage reimbursements, a structure that reduced the company’s premium obligations.¹

The specific figures were unusual. One employee was reported as earning roughly $18,000 in wages but receiving $95,000 in mileage reimbursements, which would have required driving approximately 3,400 miles per week. Another employee was paid $17,000 in wages and $54,000 in mileage. Across 46 employees, the company reported $452,000 in total wages, $553,000 in mileage reimbursements, and nearly $200,000 in “donations.”²

A Tulane University law professor described the pattern across the two investigations as a “continuing course of conduct — clearly a knowing course of conduct to defraud the worker’s comp board.”¹

Cancellation, Appeal, and Ruling

The LWCC canceled Progressive Buildings’ workers’ compensation coverage one month after the policy was signed. Mallett’s attorney, Larry Bankston, appealed the cancellation to the Louisiana Department of Insurance. Insurance Commissioner Jim Donelon heard the appeal and ruled against Mallett, finding that his companies had “failed to provide complete and accurate information.”¹

Bankston characterized the LWCC’s actions as retaliation, arguing the agency’s “real motive was to punish Mallett for not paying the $1.3 Million debt” from the 2005 matter. He told Fox 8 that any issues with the 2018 wage and mileage reporting were the fault of an employee and would be corrected, and that Mallett’s companies had since secured workers’ compensation coverage through a private insurer.¹

Spell v. Mallett, Inc.: The Construction Injury Case

On November 6, 2004, a construction worker named Kirk Richard Spell fell from a ladder while helping build a pole barn in Abbeville, Louisiana. He broke his back and required surgery to place hardware in his spine. Spell sued Mallett, Inc., the company’s commercial general liability insurer Atlantic Casualty Insurance Company, and two subcontractors, Keith and Kyle Carlson, alleging the subcontractors had improperly installed trusses.³

Atlantic Casualty moved for summary judgment on the ground that its policy excluded coverage for injuries to employees of the insured. The trial court agreed and dismissed the insurer. Spell and Mallett’s workers’ compensation carrier, Employers Self-Insured Fund, appealed.

On May 2, 2007, the Louisiana Third Circuit Court of Appeal affirmed. The court found the policy contained an unusually broad definition of “employee” that reached anyone “hired, loaned, leased, contracted, or volunteering” to provide services to the insured, regardless of whether the person was technically an independent contractor. Because Spell fell within that definition, the employee-injury exclusion barred his claim against Atlantic Casualty.⁴ Appeal costs were assessed to Spell and the intervenor.³

Background on the Company and Its Owner

Mallett Buildings is a licensed residential and commercial contractor based in Iowa, Louisiana, that has operated for more than 26 years, providing design, construction, repair, and maintenance services across Louisiana, Southeast Texas, and Southwest Mississippi. It also operates the Mallett Truss Plant, which manufactures trusses for post-frame buildings. Lee Mallett serves as president, and the company is also known as Best Buy Industries LLC.⁵

Mallett has also owned other entities, including Progressive Buildings, the company at the center of the 2018 LWCC investigation. He has held state appointments across three gubernatorial administrations, including a seat on the LSU Board of Supervisors and, previously, chairmanship of the Louisiana State Licensing Board for Contractors.⁶

1
Fox 8 Live. State Officials, Companies Sanctioned in Two Separate Investigations
2
WorkCompCentral. Mallett Investigation Report
3
FindLaw. Spell v. Mallett, Inc.
4
vLex. Spell v. Mallett, Inc., 957 So.2d 262
5
Mallett Buildings. Why Mallett
6
Bayou Brief. Insurance Commissioner Race Could Be a Circus