Claims that a workers’ compensation insurer’s acted with negligence after it canceled a policy are for a court, not the state’s workers’ compensation board, to decide, the Connecticut Appellate Court has ruled.
Liberty Mutual Insurance Co. had succeeded before both the Connecticut Workers’ Compensation Review Board (WCB) and on court appeal in its denial of an injured worker’s claim. The insurer won on the basis that it had effectively canceled the employer’s policy due to issues with an audit, despite having also sent contradictory notices that the employer claimed led it to believe that the policy was still in effect.
After the claim denial and policy cancellation were affirmed, the employer, The Grotto, persisted with a lawsuit alleging that Liberty Mutual’s conduct after it canceled the policy was negligent misrepresentation. The Grotto pointed to letters it received from the insurer following the notice of cancellation that it claims were false and induced it to believe the policy was still in effect on the date of the injury and that it need not take any action to prevent a lapse in coverage. The employer said it had paid the premium.
A trial court granted Liberty Mutual’s motion for summary judgment in dismissing The Grotto’s lawsuit. This court concluded that the employer’s action was barred by the doctrine of res judicata, which holds that a party is precluded from bringing a claim after that claim has been the subject of a final judgment in a previous lawsuit. The trial court held that the questions raised were settled when the appeals court upheld WCB’s ruling that the policy was correctly canceled and thus benefits were not available.
However, the appellate court has now rejected the argument that res judicata applies to the claims in The Grotto’s lawsuit because none of the claims raised by The Grotto fall within the scope of the workers’ compensation act and none of the claims were previously addressed.
Not Traditional
The appeals court explained that the injuries claimed by The Grotto do not allege a personal injury compensable under the workers’ compensation act and they differ from traditional claims adjudicated under the act because they involve questions of misrepresentations and negligence by an insurance provider as to the employer, “the resolution of which requires the application of laws that are not part of the act.”
The appeals court noted that the narrow issue before the WCB and upheld on appeal was whether Liberty Mutual had effectively cancelled the policy. The WCB did not consider any causes of action related to Liberty Mutual’s conduct following the effective date of the cancellation. The WCB itself made clear that whether Liberty Mutual “was justified in canceling its policy, or whether it breached its contract with Grotto by doing so, are questions that must be determined in another forum.”
The appellate court found that the trial court incorrectly concluded that res judicata bars The Grotto’s action and improperly rendered summary judgment in favor of Liberty Mutual. The court reversed the summary judgment and remanded the case for further proceedings.
In prior proceedings, The Grotto argued that communications from Liberty Mutual after the asserted cancellation notice led it to believe that the policy was still in effect at the time of the injury. The WCB actually agreed that there was sufficient evidence to support the conclusion that The Grotto “reasonably believed” that the policy was still in force but that was immaterial to whether the policy was effectively cancelled.
Liberty’s Letters
In the administrative hearing on the workers’ compensation claim, the workers’ compensation commissioner reached several factual findings including that Liberty Mutual issued The Grotto a workers’ compensation policy that was scheduled to expire on August 20, 2016. The commissioner noted that Liberty Mutual claimed to have cancelled this policy on October 14, 2015, but the National Council on Compensation Insurance (NCCI) said the policy was cancelled on November 3, 2015. The Grotto argued that it had paid the full premium prior to the date of the injury and reasonably believed the policy was still in effect.
In his findings, the commissioner cited several examples of communications from Liberty Mutual to The Grotto, communications he considered “inconsistent at best.” On February 18, 2016, Liberty Mutual issued a new endorsement and sent it to The Grotto. Liberty Mutual then sent a letter to The Grotto on February 24, 2016, requesting a response to an audit report warning that a failure to submit the audit report “may result in cancellation of your existing policy.” However, a different letter sent by Liberty Mutual to The Grotto on the same day said that the policy had been cancelled on November 3, 2015. This letter also noted the result of an audit determining that there had been a $5 underpayment of the premium.
On March 15, 2016 Liberty Mutual sent two additional letters. One letter, referencing a revised audit, referred to the policy as having been cancelled on November 3, 2015. The other said that The Grotto’s self-audit was incomplete and requested the submission of additional materials. On March 17, 2016, Liberty Mutual sent The Grotto a letter stating a policy issued to them had expired on August 20, 2015, and a final audit determined there had been a premium underpayment of $12.
On April 15, 2016, Liberty Mutual returned to The Grotto a prorated portion of the premium which had been paid on the policy amounting to $3,151.86.
Topics Carriers
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