Zalma on Insurance
Education • Business
Insurance Claims professional presents articles and videos on insurance, insurance Claims and insurance law for insurance Claims adjusters, insurance professionals and insurance lawyers who wish to improve their skills and knowledge. Presented by an internationally recognized expert and author.
Interested? Want to learn more about the community?
July 11, 2024
Common Law Right Eliminated by Statute

No Right to Rescind Workers’ Compensation in Mississippi

Post 4831

Read the full article at https://lnkd.in/g3sf4v5f; see the full video at https://lnkd.in/giTV6SEa and at https://lnkd.in/g3fFfbbv and https://zalma.com/blog plus more than 4800 posts.

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.

Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos.

Subscribe to my substack at https://barryzalma.substack.com/subscribe or Subscribe to my substack at https://lnkd.in/gmmzUVBy

Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01; Go to Barry Zalma videos at Rumble.com at https://rumble.com/account/content?type=all; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg.

Go to X @bzalma; Go to the Insurance Claims Library – https://lnkd.in/gwEYk

00:10:39
Interested? Want to learn more about the community?
What else you may like…
Videos
Posts
15 hours ago
Ambiguity in Insurance Contract Resolved by Jury

Jury’s Findings Interpreting Insurance Contract Affirmed
Post 5105

See the full video at https://lnkd.in/gPa6Vpg8 and at https://lnkd.in/ghgiZNBN, and at https://zalma.com/blog plus more than 5100 posts.

Madelaine Chocolate Novelties, Inc. (“Madelaine Chocolate”) appealed the district court’s judgment following a jury verdict in favor of Great Northern Insurance Company (“Great Northern”) concerning storm-surge damage caused by “Superstorm Sandy” to Madelaine Chocolate’s production facilities.

In Madelaine Chocolate Novelties, Inc., d.b.a. The Madelaine Chocolate Company v. Great Northern Insurance Company, No. 23-212, United States Court of Appeals, Second Circuit (June 20, 2025) affirmed the trial court ruling in favor of the insurer.

BACKGROUND

Great Northern refused to pay the full claim amount and paid Madelaine Chocolate only about $4 million. In disclaiming coverage, Great Northern invoked the Policy’s flood-exclusion provision, which excludes, in relevant part, “loss or damage caused by ....

00:07:02
June 23, 2025
The Clear Language Of The Insurance Contract Controls

Failure to Name a Party as an Additional Insured Defeats Claim
Post 5104

Read the full article at https://lnkd.in/gbcTYSNa, see the full video at https://lnkd.in/ggmDyTnT and at https://lnkd.in/gZ-uZPh7, and at https://zalma.com/blog plus more than 5100 posts.

Contract Interpretation is Based on the Clear and Unambiguous Language of the Policy

In Associated Industries Insurance Company, Inc. v. Sentinel Insurance Company, Ltd., No. 23-CV-10400 (MMG), United States District Court, S.D. New York (June 16, 2025) an insurance coverage dispute arising from a personal injury action in New York State Supreme Court.

The underlying action, Eduardo Molina v. Venchi 2, LLC, et al., concerned injuries allegedly resulting from a construction accident at premises owned by Central Area Equities Associates LLC (CAEA) and leased by Venchi 2 LLC with the USDC required to determine who was entitled to a defense from which insurer.
KEY POINTS

Parties Involved:

CAEA is insured by Associated Industries Insurance Company, Inc. ...

00:08:22
June 20, 2025
Four Corners of Suit Allows Refusal to Defend

Exclusion Establishes that There is No Duty to Defend Off Site Injuries

Post 5103

Read the full article at https://lnkd.in/geje73Gh, see the full video at https://lnkd.in/gnQp4X-f and at https://lnkd.in/gPPrB47p, and at https://zalma.com/blog plus more than 5100 posts.

Attack by Vicious Dog Excluded

In Foremost Insurance Company, Grand Rapids, Michigan v. Michael B. Steele and Sarah Brown and Kevin Lee Price, Civil Action No. 3:24-CV-00684, United States District Court, M.D. Pennsylvania (June 16, 2025)

Foremost Insurance Company (“Foremost”) sued Michael B. Steele (“Steele”), Sarah Brown (“Brown”), and Kevin Lee Price (“Price”) (collectively, “Defendants”). Foremost sought declaratory relief in the form of a declaration that

1. it owes no insurance coverage to Steele and has no duty to defend or indemnify Steele in an underlying tort action and
2. defense counsel that Foremost has assigned to Steele in the underlying action may withdraw his appearance.

Presently before the Court are two ...

00:08:29
May 15, 2025
Zalma's Insurance Fraud Letter - May 15, 2025

ZIFL Volume 29, Issue 10
The Source for the Insurance Fraud Professional

See the full video at https://lnkd.in/gK_P4-BK and at https://lnkd.in/g2Q7BHBu, and at https://zalma.com/blog and at https://lnkd.in/gjyMWHff.

Zalma’s Insurance Fraud Letter (ZIFL) continues its 29th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma. It is provided FREE to anyone who visits the site at http://zalma.com/zalmas-insurance-fraud-letter-2/ You can read the full issue of the May 15, 2025 issue at http://zalma.com/blog/wp-content/uploads/2025/05/ZIFL-05-15-2025.pdf
This issue contains the following articles about insurance fraud:

Health Care Fraud Trial Results in Murder for Hire of Witness

To Avoid Conviction for Insurance Fraud Defendants Murder Witness

In United States of America v. Louis Age, Jr.; Stanton Guillory; Louis Age, III; Ronald Wilson, Jr., No. 22-30656, United States Court of Appeals, Fifth Circuit (April 25, 2025) the Fifth Circuit dealt with the ...

May 15, 2025
CGL Is Not a Medical Malpractice Policy

Professional Health Care Services Exclusion Effective

Post 5073

See the full video at https://lnkd.in/g-f6Tjm5 and at https://lnkd.in/gx3agRzi, and at https://zalma.com/blog plus more than 5050 posts.

This opinion is the recommendation of a Magistrate Judge to the District Court Judge and involves Travelers Casualty Insurance Company and its duty to defend the New Mexico Bone and Joint Institute (NMBJI) and its physicians in a medical negligence lawsuit brought by Tervon Dorsey.

In Travelers Casualty Insurance Company Of America v. New Mexico Bone And Joint Institute, P.C.; American Foundation Of Lower Extremity Surgery And Research, Inc., a New Mexico Corporation; Riley Rampton, DPM; Loren K. Spencer, DPM; Tervon Dorsey, individually; Kimberly Dorsey, individually; and Kate Ferlic as Guardian Ad Litem for K.D. and J.D., minors, No. 2:24-cv-0027 MV/DLM, United States District Court, D. New Mexico (May 8, 2025) the Magistrate Judge Recommended:

Insurance Coverage Dispute:

Travelers issued a Commercial General Liability ...

April 30, 2025
The Devil’s in The Details

A Heads I Win, Tails You Lose Story
Post 5062

Posted on April 30, 2025 by Barry Zalma

"This is a Fictionalized True Crime Story of Insurance Fraud that explains why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers. The story is designed to help everyone to Understand How Insurance Fraud in America is Costing Everyone who Buys Insurance Thousands of Dollars Every year and Why Insurance Fraud is Safer and More Profitable for the ­­­Perpetrators than any Other Crime."

Immigrant Criminals Attempt to Profit From Insurance Fraud

People who commit insurance fraud as a profession do so because it is easy. It requires no capital investment. The risk is low and the profits are high. The ease with which large amounts of money can be made from insurance fraud removes whatever moral hesitation might stop the perpetrator from committing the crime.

The temptation to do everything outside the law was the downfall of the brothers Karamazov. The brothers had escaped prison in the old Soviet Union by immigrating to the United...

post photo preview
See More
Available on mobile and TV devices
google store google store app store app store
google store google store app tv store app tv store amazon store amazon store roku store roku store
Powered by Locals