No Right to Rescind Workers’ Compensation in Mississippi
Post 4831
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The Supreme Court of Mississippi answered in the negative the inquiry from the United States Court of Appeals for the Fifth Circuit that certified the following question to this Court: “Does the Mississippi Workers’ Compensation Act (MWCA) allow an insurer to void ab initio a workers’ compensation policy based on a material misrepresentation?”
The decision came in American Compensation Insurance Company v. Hector Ruiz et al, No. 2023-FC-01160-SCT, Supreme Court of Mississippi (June 27, 2024) the Supreme Court answered the question in the negative.
THE WORKERS’ COMPENSATION STATUTE
The MWCA is silent with regard to the equitable remedy of rescission as are most statutes that have no reason for a statute to deal with equitable remedies.
The statutory contractor (who will be on the hook if the subcontractor’s insurer is permitted to void the policy) argued that, because the MWCA does not provide for rescission-only cancellation and nonrenewal – then rescission is not an available remedy. The insurer (who will be on the hook for millions of dollars if not permitted to void the policy) argued that, because the legislature opted not to address rescission in the MWCA, reasonably argued that the common law remedy of voiding the policy ab initio is available.
The Mississippi Supreme Court noted that a workers’ compensation policy is different. Not only is it governed exclusively by statute, but also it exists to pay benefits to the injured worker.
Because the MWCA makes no provision for an insurer to void a workers’ compensation policy based on a material misrepresentation and because the MWCA exists to ensure injured workers are compensated, the Supreme Court concluded that the MWCA does not allow insurers to void ab initio a workers’ compensation policy based on an employer’s material misrepresentation.
BACKGROUND FACTS
The employer is Hector Ruiz, doing business as Los Primoz Construction. Ruiz was performing work as a subcontractor for contractor Jesco, Incorporated, when his employee Raul Aparacio fell more than fifteen feet and severely injured himself.
Ruiz had a workers’ compensation insurance policy with the American Compensation Insurance Company (ACIC). ACIC initiated a declaratory action in federal court seeking to retroactively void the policy. ACIC alleged that Ruiz materially misrepresented in his application that his company did not perform work more than fifteen feet above ground. ACIC asserted that, had Ruiz been truthful, ACIC would not have issued the policy. It argued that since the statute did not change the common law right to rescind a contract it was entitled to rescind.
The Mississippi Workers’ Compensation Act (MWCA) Controls
The Mississippi Workers’ Compensation Act (MWCA) represents a wide departure from common law by providing compensation to employees accidentally injured during the course and scope of their employment, regardless of fault. This right to recovery comes at the exchange or abrogation of the common law right to recovery from a potentially negligent employer.
RESCISSION IS INCONSISTENT WITH THE STATUTE
Rescission is a retroactive remedy and renders a contract unenforceable from the outset. In the workers’ compensation context, however, the Supreme Court found that allowing rescission is tantamount to allowing an insurer to retroactively cancel a policy rather than the common understanding that a rescinded policy never existed.
The Supreme Court concluded that in Mississippi, voiding the policy ab initio is inconsistent with the “purpose” of Section 71-3-77(1)-which is to provide assurance to the commission that eligible employees are protected under the act.
Finding the MWCA precludes a common law rescission action, the Supreme Court does not hold that an insurer like ACIC has no remedy against an employer who allegedly makes a material misrepresentation. The sole question is whether the MWCA permits the remedy of voiding a policy ab initio based on an employer’s material misrepresentation. And to this question, the Supreme Court answered “no,” it does not.
COLEMAN, JUSTICE, DISSENTING:
Justice Coleman noted that Mississippi has recognized and followed a robust common-law of contracts since well before the State adopted its Workers Compensation Law in 1948 and there is nothing in the Workers’ Compensation Law generally, and nothing in Section 71-3-77 specifically, that abrogates the common law of contracts principle that a contract based on a material misrepresentation is void ab initio. Justice Coleman disagreed with the majority’s holding and answer to the Fifth Circuit’s question because, according to well-settled law, a clear statement of intent, not silence, is required to abrogate the common law.
ZALMA OPINION
Mississippi, like almost every state, applies the common law and its equitable remedies. One of those remedies is called rescission that finds it is unfair to require a person to fulfill the terms of a contract that is obtained as a result of a misrepresentation or concealment of facts material to the acceptance of the contract and treats such contracts as if they never existed. That common law right can only, in my opinion, be eliminated by a direct and specific action of the Legislature. By allowing rescission, the employer instead of the insurer must pay for the workers’ compensation benefits owed to the injured employee, and allowing rescission might deprive that employee of the benefits does not support forcing the insurer to pay millions of dollars of benefits it would not have owed had the insured been truthful. I understand why the court did what it did but believe Justice Coleman was more in line with the law since the Legislature could have included in the statute the elimination of the right to rescission. It did not.
(c) 2024 Barry Zalma & ClaimSchool, Inc.
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Concealing a Weapon Used in a Murder is an Intentional & Criminal Act
Post 5002
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In Howard I. Rosenberg; Kimberly L. Rosenberg v. Chubb Indemnity Insurance Company Howard I. Rosenberg; Kimberly L. Rosenberg; Kimberly L. Rosenberg; Howard I. Rosenberg v. Hudson Insurance Company, No. 22-3275, United States Court of Appeals, Third Circuit (February 11, 2025) the Third Circuit resolved whether the insurers owed a defense for murder and acts performed to hide the fact of a murder and the murder weapon.
FACTUAL BACKGROUND
Adam Rosenberg and Christian Moore-Rouse befriended one another while they were students at the Community College of Allegheny County. On December 21, 2019, however, while at his parents’ house, Adam shot twenty-two-year-old Christian in the back of the head with a nine-millimeter Ruger SR9C handgun. Adam then dragged...
Renewal Notices Sent Electronically Are Legal, Approved by the State and Effective
Post 5000
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Washington state law allows insurers to deliver insurance notices and documents electronically if the party has affirmatively consented to that method of delivery and has not withdrawn the consent. The Plaintiffs argued that the terms and conditions statement was not “conspicuous” because it was hidden behind a hyperlink included in a single line of small text. The court found that the statement was sufficiently conspicuous as it was bolded and set off from the surrounding text in bright blue text.
In James Hughes et al. v. American Strategic Insurance Corp et al., No. 3:24-cv-05114-DGE, United States District Court (February 14, 2025) the USDC resolved the dispute.
The court’s reasoning focused on two main points:
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Rescission in Michigan Requires Preprocurement Fraud
Post 4999
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Lie About Where Vehicle Was Garaged After Policy Inception Not Basis for Rescission
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In Samuel Tourkow, by David Tourkow v. Michael Thomas Fox, and Sweet Insurance Agency, formerly known as Verbiest Insurance Agency, Inc., Third-Party Defendant-Appellee. Encompass Indemnity Company, et al, Nos. 367494, 367512, Court of Appeals of Michigan (February 12, 2025) resolved the claims.
The plaintiff, Encompass Indemnity Company, issued a no-fault insurance policy to Jon and Joyce Fox, with Michael Fox added as an additional insured. The dispute centers on whether fraud occurred in...
Insurance Fraud Leads to Violent Crime
Post 4990
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CRIMINAL CONDUCT NEVER GETS BETTER
In The People v. Dennis Lee Givens, B330497, California Court of Appeals, Second District, Eighth Division (February 3, 2025) Givens appealed to reverse his conviction for human trafficking and sought an order for a new trial.
FACTS
In September 2020, Givens matched with J.C. on the dating app “Tagged.” J.C., who was 20 years old at the time, had known Givens since childhood because their mothers were best friends. After matching, J.C. and Givens saw each other daily, and J.C. began working as a prostitute under Givens’s direction.
Givens set quotas for J.C., took her earnings, and threatened her when she failed to meet his demands. In February 2022, J.C. confided in her mother who then contacted the Los Angeles Police Department. The police ...
Police Officer’s Involvement in Insurance Fraud Results in Jail
Post 4989
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Von Harris was convicted of bribery, forgery, and insurance fraud. He appealed his conviction and sentence. His appeal was denied, and the Court of Appeals upheld the conviction.
In State Of Ohio v. Von Harris, 2025-Ohio-279, No. 113618, Court of Appeals of Ohio, Eighth District (January 30, 2025) the Court of Appeals affirmed the conviction.
FACTUAL BACKGROUND
On January 23, 2024, the trial court sentenced Harris. The trial court sentenced Harris to six months in the county jail on Count 15; 12 months in prison on Counts 6, 8, 11, and 13; and 24 months in prison on Counts 5 and 10, with all counts running concurrent to one another for a total of 24 months in prison. The jury found Harris guilty based on his involvement in facilitating payments to an East Cleveland ...
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To Dispute an Arbitration Finding Party Must File Dispute Within 20 Days
Post 4988
EXCUSABLE NEGLECT SUFFICIENT TO DISPUTE ARBITRATION LATE
In Howard Roy Housen and Valerie Housen v. Universal Property & Casualty Insurance Company, No. 4D2023-2720, Florida Court of Appeals, Fourth District (January 22, 2025) the Housens appealed a final judgment in their breach of contract action.
FACTS
The Housens filed an insurance claim with Universal, which was denied, leading them to file a breach of contract action. The parties agreed to non-binding arbitration which resulted in an award not
favorable to the Housens. However, the Housens failed to file a notice of rejection of the arbitration decision within the required 20 days. Instead, they filed a motion for a new trial 29 days after the arbitrator’s decision, citing a clerical error for the delay.
The circuit court ...