Self-insurance group's handling of claim may save company from liability
EEP Workers' Compensation Fund v. Fun & Sun, Inc., No. A10-913 (Minn. Ct. App. 02/01/11).
Ruling: The Minnesota Court of Appeals held that a company was liable to reimburse a self-insurance group fund for payments made on a worker's open claim after the company withdrew from the fund. The court sent the case back to examine an estoppel defense and breach of contract issues.
What it means: In Minnesota, a workers' compensation self-insurance group fund may be equitably estopped from recovering reimbursement from a member if the group fails to keep the member informed of outstanding claims and the member's negative individual fund balance upon and after its withdrawal from the fund.
A concrete paving company joined a self-insurance group fund for contractors. A worker for the company was injured, and the fund paid him benefits. Four years later, the company withdrew from the fund. Additional benefits were paid to the worker after the company withdrew from the fund. Two years later, the company received a letter from the fund stating that it had "an individual negative fund balance." The fund sought reimbursement from the company for the benefits it paid to the worker. The Minnesota Court of Appeals held that the company was liable to reimburse the fund, but the court sent the case back to consider an estoppel defense and breach of contract issues.
The court noted that nothing in the state statutes and rules or the fund's bylaws clearly stated that each member was liable to reimburse the fund for benefits paid to workers, even after the member withdrew. The court found that the fund's bylaws provided that members receive surplus distributions and are assessed deficits according to their individual performance and standing. Contrary to the company's argument, the court found that the underlying claim arose when the worker was injured and the company was a member of the fund.
The company argued that the fund should be equitably estopped from recovering because it failed to inform the company that the claim remained open and subject to further payment at the time of the company's withdrawal. The court sent the case back on this issue to consider the nature and character of representations made to the company during its membership in the fund regarding its liability to pay claims.
The court also sent the case back to consider whether the company established losses due to improper handling of the claim.
Read more at the WorkersComp Forum homepage.
March 17, 2011
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