Triple H Debris Removal, Inc. v. Companion Property and Casualty Insurance Co., No. 08-1137 (8th Cir. 03/30/09).
The 8th U.S. Circuit Court of Appeals reversed summary judgment for an insurance carrier, finding there was a bona fide dispute over the amount of the premium owed on a workers' compensation insurance policy and whether the employer had breached the policy.
What it means: When an employer and a carrier dispute the amount of premium the employer owes on a workers' comp insurance policy, and the carrier cancels a second policy due to the employer's refusal to pay the premium on the first policy, there is an issue concerning whether the employer breached the contract which may be considered by a court.
A debris removal service obtained a workers' compensation policy that provided the carrier would audit the policy to determine the actual premium owed. Although the carrier gave the employer an estimated premium, the parties agreed the audit would ultimately determine the premium.
The policy was canceled for the employer's nonpayment, and the employer took out a second policy after paying the balance on the first. The carrier determined an additional premium payment was owed on the first policy. The employer argued the premium should not have changed and forwarded its payroll information to dispute the audit's accuracy. The employer refused to pay, and the second policy was also canceled for nonpayment. The employer sued the carrier for breaching the policy after a worker was seriously injured and the carrier denied coverage.
The 8th Circuit denied summary judgment for carrier. It held there was an issue concerning whether the employer breached the first policy by not paying the additional premium and whether the carrier was therefore entitled to cancel the second policy and deny coverage.
The policies stated that the employer had to raise a "bonafide dispute" as to the amount owed in order to avoid breaching the policies after a premium audit. The court found such a dispute existed because the employer disputed the premium by refusing to pay, submitted its payroll data, and informed an insurance agent that it believed it had paid the amount owed on the first policy. The court stated it was "at a loss as to what more [the carrier] could reasonably expect of [the employer] when attempting to dispute the premium charge."
It reversed the summary judgment and remanded the case.
May 18, 2009
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