WC court can decide premium payment dispute

In Minnesota, workers' compensation courts have authority to hear insurance coverage disputes.

Case name: Giersdorf v. A & M Construction, Inc., No. A11-1841 (Minn. 09/05/12).

Ruling: The Minnesota Supreme Court held that the workers' compensation court had authority to hear a subcontractor's insurance coverage dispute.

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What it means: In Minnesota, workers' compensation courts have authority to hear insurance coverage disputes.

Summary: An insurer provided workers' compensation insurance to a subcontractor. The insurer increased the subcontractor's annual premium and billed it for the entire amount. The subcontractor said the insurer had agreed to bill it in equal installments during the policy year. When the subcontractor failed to pay the annual premium, the insurer canceled the policy.

One month after the policy was canceled, one of the subcontractor's employees suffered a work-related injury. He sought workers' compensation from the subcontractor and contractor. The insurer denied the claim on the ground that it canceled the policy due to the subcontractor's nonpayment of premiums. The subcontractor alleged that the insurer breached the insurance contract when it assessed the premium in one lump sum instead of prorated payments. The insurer argued that the workers' compensation court did not have jurisdiction over the claim. The Minnesota Supreme Court held that the workers' compensation court had jurisdiction over the insurance coverage dispute.

The court explained that in order to allocate liability between the contractor and subcontractor the workers' compensation court had authority to determine the respective liabilities of the parties. The decision about whether the subcontractor had insurance at the time of the injury was ancillary to a determination about how to allocate liability.

The court rejected the insurer's argument that the claim was not a coverage issue. The court found that the subcontractor was challenging the insurer's determination that it was not financially responsible for the worker's benefits. The court said that the real nature of the action was an insurance coverage dispute, not a breach of contract action.

Read more at the WorkersComp Forum homepage.

December 6, 2012

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