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Corporate officers may be held criminally responsible, along with the corporation, for the failure to pay workers compensation premiums and to file workers compensation reports, according to the Supreme Court of Appeals of West Virginia.

Truong Van Nguyen, in his capacity as president of McDowell Energy Inc. and Steve A. Rife, in his capacity as president of Black Rock Mining Inc., were indicted by the grand jury for the circuit court of Kanawha County, W.Va., for failing to file quarterly reports with the Workers Compensation Commission. The defendants filed motions to dismiss their indictments on the ground that corporate officers cannot be held criminally liable under West Virginia law.

Two circuit court judges ruled on the matters, one of whom agreed with Mr. Rife and dismissed his indictment; the other of whom denied Mr. Nguyen's motion. Mr. Nguyen appealed his unfavorable decision, and the state appealed the dismissal of the Rife indictment. The Supreme Court of Appeals of West Virginia accepted both appeals because they turned on the same legal issue.

The court noted that the West Virginia law that imposes responsibility upon a corporation for paying compensation premiums and filing reports does not specifically mention officers of the corporation. However, the court said the common law rule is entrenched in West Virginia to the extent that officers, agents and directors of a corporation may be criminally liable if they cause the corporation to violate the criminal law while conducting corporate business. The court emphasized that the state Legislature had not expressed a clear intent to exempt corporate officers from criminal liability in this case. Thus, the court said both Messrs. Nguyen and Rife could be indicted under the facts of this case.

State Ex Rel. Van Nguyen vs. Berger, Supreme Court of Appeals of West Virginia, Dec. 16, 1996, Rehearing refused Feb. 11, 1997 (BI/03/O.-$10).

Molestations one 'occurrence'

A single "per occurrences limit" in a sexual misconduct endorsement in a commercial general liability insurance policy applied to children allegedly victimized by sexual molestation, according to the Court of Appeals of Texas.

Three children were allegedly molested by an employee of a church's day care center, prompting two separate lawsuits filed by the children and their parents. The church was covered under a CGL insurance policy issued by Preferred Risk Mutual Insurance Co. The policy covered sexual misconduct with a limitation of $100,000 per "occurrence" and a $300,000 limit per policy period. The insurer took the position that the children's claims collectively constituted only a single "occurrence." The trial court ruled for the children.

The appellate court reviewed the policy language and concluded that all of the church's employee's alleged acts of sexual misconduct and "any" alleged breach of duty that may have contributed to the those acts collectively constituted a single occurrence under the policy. The court emphasized that the policy language defining "occurrence" here-all alleged acts of sexual misconduct and any breach of duty contributing to such acts constitute a single occurrence"-was clear and unambiguous. The lower court judgment was reversed.

Preferred Risk Mutual Insurance Co. vs. Watson, Court of Appeals of Texas, Jan. 9, 1997, Rehearing overruled, Feb. 13, 1997 (BI/02/O.-$10).

Multiple thefts only one 'occurrence'

Under an employee dishonesty insurance policy containing unambiguous occurrence and non-cumulation provisions, a policyholder may not recover more than the policy limit for losses due to the misconduct of one employee occurring over the course of several years, according to the Court of Appeals of Minnesota.

Landico Inc. was covered under an employee dishonesty insurance policy issued on Jan. 4, 1993, by American Family Mutual Insurance Co. The policy provided employee dishonesty coverage of $100,000 per occurrence for an annual premium of $659. The policy provided that regardless of the number of years the insurance remained in force, no limit of insurance cumulates from year to year or period to period. A Landico employee repeatedly embezzled funds throughout 1993 and 1994. Landico filed claims for losses of $47,424 in 1993 and $102,698 in 1994. The insurer paid Landico only $100,000 on its claims. Landico sued for payment on the $47,424 claim. The trial court ruled for the insurer and denied the claim.

On appeal, Landico argued, in part, that the definition of "occurrence" in the policy was ambiguous because the policy language provided coverage for acts "during the policy period" and defined the policy period as one year.

However, the court said the policy also unambiguously limited recovery on claims arising from one employee's misconduct to the stated policy limit (here $100,000) notwithstanding the fact that the thefts of that one employee continued for several years. The trial court decision was affirmed.

Landico vs. American Family Mutual Insurance, Court of Appeals of Minnesota, Feb. 25, 1997 (BI/05/O.-$10).

These abstracts were prepared by Mayo H. Stiegler. Copies of these decisions are available by sending a $10 check payable to Mayo H. Stiegler, to Business Insurance, 740 N. Rush St., Chicago, Ill. 60611-2590. List the number for each opinion.