Insurance Coverage Denied Were Employer Materially Misrepresents The Scope of its Work in its Applications for Insurance, and Fails to Provide Notice of its Work in a State Not Endorsed for Primary Coverage

Claimant’s employer was a subcontractor on a large construction project.  The employer applied for worker’s compensation coverage and in the application for the policy, confirmed no work was done at heights on exterior buildings above two stories.  The employer had already begun work on the project when the application was submitted. The project was actually a four story hotel.

The policy was issued for primary coverage in the state of Kansas, the employer’s home state.  The policy contained a provision allowing for coverage in another state for work that had already begun in that state, as long as the carrier was notified within 30 days of the effective date of the policy.

Claimant was injured when he fell off the top of a four-story scaffold, and suffered significant injuries.  Coverage was denied based on the misrepresentation of the employer’s scope of work in the insurance application.  A second basis for the denial of coverage was asserted due the work being done in Colorado, which was not a state endorsed for primary coverage, and the carrier was not notified within 30 days of the effective date of the policy that the employer had already begun work in another state.

The ALJ upheld the denial of coverage on both bases.  Underwriting employees testified the carrier would not have issued the policy if the employer had honestly stated in the application for insurance that it was performing work above two stories, as the carrier would not have accepted the risk.  The ALJ found this was a material misrepresentation.  The ALJ also found the employer had begun work at the site in Colorado before the effective date of the policy, and did not provide notice to the carrier according to the provisions of the policy.  No review of the ALJ’s decision was taken.

NOTE: Since the subcontractor was deemed to be uninsured, the general contractor became the statutory employer, and was ordered responsible for paying benefits to Claimant under the Act.

PRACTICE TIP: It is imperative to review the coverage provisions of the policy, including the application for the policy, and provisions relating to work in other states not endorsed for primary coverage.

RICARDO MUNOZ Vs. WOLF CREEK PLASTERING AND STONE LLC And TRAVELERS INDEMNITY COMPANY OF AMERICA; And NGC GROUP DBA NEW GENERATION CONSTRUCTION And THE CINCINNATI INSURANCE COMPANY, No. 5-113-130-002

Would you like to know more? Contact Thomas P. Crowley at tcrowley@pollartmiller.com or 877-259-5693.

From the June 2020 Newsletter

2020-07-02T09:25:15+00:00