Other States Coverage under Workers Comp Policy
April 14, 2014
The insurer filed this action for a declaratory judgment seeking a declaration that a Louisiana workers compensation insurance policy does not provide coverage for an accident that occurred in Mississippi. This case is Bridgefield Casualty Insurance Company v. River Oaks Management, Inc., 2013 WL 5558091.
Bridgefield wrote workers compensation (WC) policies for River Oaks over a number of years, and each policy contained a declaration page that indicated that the policy provided WC insurance for the state of Louisiana. The other states insurance section of the 2006 policy (and subsequent policies) included coverage for nine additional states, including Mississippi. These policies also stated that if River Oaks has work in a state listed in the other states section, the policies would not provide coverage for work in that state unless River Oaks notified the insurer within thirty days of the effective date of the policies.
In 2011, River Oaks contracted with an apartment complex in Mississippi to provide apartment management services. In 2012, a River Oaks employee fell down a ladder at one of the Mississippi locations, sustaining serious injuries. River Oaks filed a claim and Bridgefield filed this action seeking a declaration that the 2012 policy did not provide coverage.
Bridgefield argued that River Oaks had work in Mississippi on the effective date of the 2012 policy (January 1) and that River Oaks failed to notify Bridgefield within thirty days of that effective date. River Oaks admits that it had work in Mississippi on the effective date of the 2012 policy and that it failed to notify Bridgefield. The United States District Court for the Eastern District of Louisiana said, therefore, that the insurer had met its burden to show that there was no genuine dispute of material fact. The court further noted that the relevant policy language is clear and unambiguous and must be applied as written, so because River Oaks failed to notify Bridgefield that it was working in Mississippi within thirty days of the effective date of the 2012 policy, the policy expressly excludes coverage for the Mississippi claim.
However, River Oaks claimed that the policy was unenforceable under Louisiana law and that Bridgefield is estopped from denying coverage. The court took up these arguments.
The insured argued that the relevant policy provision is unenforceable based on a Louisiana statute that declared that “no oral or written misrepresentation or warranty made in the negotiation of an insurance contract shall be deemed material or defeat or void the contract unless the misrepresentation or warranty is made with the intent to deceive.” The court noted that this statute prevents an insurance company from voiding an entire insurance policy based on alleged fraud on the part of the insured unless the insurer meets a heightened burden of proof imposed by the statute. The court said that the statute only applies where the insurer is attempting to nullify an entire insurance policy and so, it is not applicable in this instance since Bridgefield is only relying on an exclusion contained within the policy.
River Oaks then argued that Bridgefield is estopped from denying coverage because it later accepted premiums that were calculated, in part, based on Mississippi salaries. This argument focused on a payroll audit that occurred in March of 2012. River Oaks alleges that the payroll numbers in this audit included Mississippi payrolls and the estimated premium was based on the Mississippi wages. Thus, the insured claimed, the insurer is estopped from denying coverage for Mississippi workers because the insurer accepted premiums that were partially based on Mississippi payroll.
The court said that for this argument to have merit, River Oaks would have to demonstrate that Bridgefield received information that gave it the right to cancel the policy and that Bridgefield continued to accept premiums after receiving that information. There was a genuine dispute of fact as to whether the insurer received such information from the audit. But this fact was not material in the opinion of the court because the knowledge that River Oaks was doing work in Mississippi would not have given the insurer the right to cancel the policy.
River Oaks also argued that Bridgefield is estopped from denying coverage for the accident because Bridgefield already paid a portion of the claim. The court found no merit to this argument.
The motion for summary judgment by the insurer was granted.
Editor's Note: The U.S. District Court in Louisiana enforced the provisions of the WC policy in this instance. The insured was supposed to notify the insurer within a definite time frame if it had work in one of the states listed in the “other states insurance” section of the policy, and it did not do so. The arguments put forth by the insured simply did not nullify this duty.