SCF General Insurance Company v. Industrial Commission of Arizona – 2/24/2015
Arizona Court of Appeals Division One holds that a company that has filed a request to reinstate a lapsed insurance policy must inform the insurance company of injuries or loss claims occurring after its request for reinstatement and before its policy is reinstated.
In 2011, Walia purchased a workers’ compensation insurance policy from SCF General Insurance Company (“SCF”). On June 1, 2012, SCF sent Walia a notice of nonrenewal because Walia had failed to submit information for the audit required by the policy. When Walia did not submit the requested information, its worker’s compensation insurance lapsed on January 22, 2013.
That same date, Walia filed a request to reinstate its policy. In the request, Walia represented that there had been no claims or injuries since the cancellation date. The following day, however, one of Walia’s workers sustained an industrial injury. Walia did not notify SCF of the injury and, on January 25, 2013, SCF reinstated Walia’s insurance policy, with coverage retroactive to January 22, 2013.
When SCF became aware that an injury had occurred before the policy reinstatement, it rescinded Walia’s coverage. SCF then denied coverage when the employee filed a report of injury. The Industrial Commission of Arizona scheduled a hearing, and the administrative law judge entered an award finding the employee’s claim compensable and the sole responsibility of SCF. SCF appealed.
The Court of Appeals overturned the award, concluding that Walia had a duty to inform SCF of the injury and that SCF was entitled to rescind the policy based on Walia’s failure to do so. Under Arizona law, insurance applicants are under a common-law duty to update an insurer of any known changes that occur between the time an application for insurance is submitted and the time the policy is issued. The Court found no meaningful difference between an application for new insurance and a request to reinstate a lapsed insurance policy and, as a result, held that Walia was subject to this rule.
Judge Thompson authored the opinion; Judges Kessler and Cattani concurred.