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Insurer must pay cost of employee’s injuries


An insurer must cover the cost of a worker’s injuries despite its contention that it would not have issued the workers compensation policy had the company’s information been accurate in its application.

In Grange Mutual Casualty Co. v. Bennett, a three-judge panel of the Court of Appeals of Georgia, 4th Division affirmed on Wednesday a Georgia Board of Workers Compensation ruling that an insurance company failed to show its workers comp policy was void.

A construction company involved in greenhouse repair and maintenance held a workers compensation policy through Boston-based Liberty Mutual Insurance Co., but when it was time for renewal, the company chose to purchase a policy from Grange Mutual Casualty Co., based in Columbus, Ohio. The insurance agent pulled the company’s business information from its Liberty Mutual policy to complete the new policy application. The Liberty Mutual application indicated that the construction company performed work outside of Georgia, but the agent indicated on the new policy that the company only performed work in state. She also misclassified the company as performing janitorial work. She said she sent the completed application to the construction company for review and that it was signed and returned. The owner of the company, however, claimed that the agent emailed him a blank application to sign. Ultimately, the application submitted to Grange Mutual said that the construction company provided janitorial services, that employees did not travel out of state and that workers did not perform work above 15 feet.

After the policy was issued by Grange Mutual, on Aug. 8, 2014, one of the construction company’s employees was injured while working in Louisiana. Grange denied the claim because it occurred out of state. The construction company said it told the agent that the insurance policy needed to be fixed because 85% of the company’s work was performed out of state.

The insurer then conducted an investigation of the company’s business operations and said it would not have issued the policy if the application had correctly stated that the company operated in 30 states because Grange Mutual was not licensed to issue policies in all of those states, or noted that employees were cleaning windows over 15 feet high. Grange then sent a policy cancellation notice effective March 8, 2015, giving the company 90 days to find alternative coverage.

On March 7, 2015, an employee hired to perform snow removal in New York was traveling in an employer-owned truck when it was involved in an accident. The worker suffered extensive injures and filed a workers comp claim. At an administrative law judge hearing, Grange Mutual argued that its policy did not cover out-of-state work injuries, that the owner was aware of the policy terms but did not advise his agent that he needed multistate coverage, and that Grange Mutual would not have issued the policy had it received an accurate description of the company’s business operations.

The administrative judge, however, held that Grange Mutual’s policy covered the employee’s injuries and that by agreeing to pay for workers comp claims under the laws of Georgia, the Georgia-based company’s workers were covered even when out-of-state. Grange Mutual appealed to the board, but the board upheld the administrative judge’s findings. A superior court affirmed the board’s order and Grange Mutual appealed.

Grange Mutual argued that the board misapplied the legal standard for determining whether the insurance policy was void, but the appellate court disagreed.

The court noted that under Georgia law, an insurer seeking to rescind a policy must announce its intent and “adhere to the intent to rescind and may waive any defense of rescission by failing to do so.”

The appellate court held that Grange Mutual waived its void policy defense when — after discovering the inaccurate information on the application — it informed the company that its coverage would continue for 90 says. The court said that if the insurer “believed that the policy was void based on fraud, it should have immediately rescinded it.”

Although the insurer alleges that the “fraudulent misrepresentations” by the company and its insurance agent undermine the validity of the entire policy, the court held that Grange Mutual was obligated to pay any valid claims arising under the policy terms within the 90-day period before coverage ended.

Attorneys in the case did not immediately return calls for comment.





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