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U.S. Fidelity & Guaranty v. Waco Contractors6/13/2000
An employer indicated in an application for workers' compensation insurance its intent to exclude particular corporate officer employees from coverage under the policy. The insurance company first assessed premium payments based upon exclusion of the listed employees. A later audit by the insurance company resulted in back-assessment of premiums for coverage of the employees indicated as excluded in the policy application. Notice by the insurance company to the local insurance agency of the statutory procedures necessary to effect exemption of the corporate officer employees was insufficient notice to the employer in the contract dispute between the employer and the insurance company. The contractual intent of the employer was known to the insurance company at the time the policy was issued, the insurance company had superior knowledge of the statutory requirements necessary to effect the employer's intent as expressed in the application, the application was used by the insurance company to calculate the premiums due under the policy, and the insurance company failed to give timely notice to the employer of steps necessary to establish the contract as negotiated by the parties. The Judgment of the Trial Court is reversed and remanded.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of Circuit Court Reversed and Remanded.
Swiney, J., delivered the opinion of the court, in which Franks and Susano, JJ. joined.
OPINION
Background
Plaintiff/Appellee U.S. Fidelity and Guaranty ("Plaintiff") is an insurance company doing business in various capacities in Tennessee, including workers' compensation coverage. Defendant/Appellant WACO Contractors, Inc. ("Defendant") is a construction company in Monroe County, Tennessee. Defendant sought to obtain a policy for workers' compensation insurance after its policy with Aetna Insurance was cancelled when Aetna pulled out of the Tennessee workers' compensation market. Tom Walker, in his capacity as a corporate officer of Defendant, contacted a Monroe County insurance agency and filled out an application for workers' compensation coverage dated August 22, 1994. As part of the application used by Plaintiff to issue the policy to Defendant, Tom Walker completed a section headed, "Individuals Included/Excluded." Under this section, Tom Walker as Vice President of Defendant and Martha A. Walker as President were listed as excluded from coverage under the application. Under a separate heading, "Rating Information," ten employees were listed for coverage under four separate employment categories: carpentry, roofing, electrical wiring, and excavating/driving.
Plaintiff entered into evidence at trial an unsigned letter from Plaintiff's workers' compensation service center dated September 13, 1994. This letter is addressed to the local insurance agency that processed Defendant's application, but is not addressed to any particular individual at that agency. The letter identifies Defendant and Defendant's policy number assigned by Plaintiff, and indicates that the application sought to exclude coverage for a "Harshad Patel." While the identity of Harshad Patel is unknown from the record, it is clear that Harshad Patel was not an employee of Defendant, and, in fact, had no connection at all with Defendant. The letter goes on to state,
Please be advised that in order to exclude any corporate officers from the above captioned policy, we will need to receive the appropriate officer exclusion form in our office, filled out by the insured and approved by the Tennessee Department of Labor.
Please note that this policy has been issued with no corporate officers being excluded on the policy.
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