The Connecticut Supreme Court has ruled that insurers must comply with both state workers’ compensation rules and contract law requirements when issuing policy cancellation notices.
Notices must be “definite, certain and unambiguous,” according to the court’s decision, which overturned a lower court ruling.
The case involved a roofing company that purchased workers’ compensation policies from carriers including Ace American Insurance Co and Chubb Ltd. The dispute arose after the company received multiple conflicting notifications regarding policy cancellation and audit compliance in April 2018.
The first notice, dated April 5, 2018, warned that failure to complete an audit would result in policy cancellation but did not specify an effective cancellation date. A second notice, also dated April 5, stated that the policy was canceled, effective April 25, 2018.
According to a report from AM Best, neither notice referenced the other. On April 6, the carrier sent the cancellation notice – but not the noncooperation notice – to the Connecticut Workers’ Compensation Commission.
The roofing company mailed the requested tax documents on April 7 and followed up with its insurance producer on April 10. According to court documents, the producer informed the company that it was compliant, and certificates of insurance were issued.
However, on April 16, the carrier requested additional audit documents by April 21, but did not mention the cancellation date. The roofing company did not act on this notice, dismissing it as “noise,” according to the court ruling.
In May 2018, an employee of the roofing company sustained an injury and filed a workers’ compensation claim. The claim was denied on the grounds that the policy had been canceled. The Workers’ Compensation Commission upheld the denial, finding the cancellation notices satisfied state workers’ compensation requirements.
The Supreme Court, however, determined that the carrier’s notifications failed to meet broader contractual obligations. While the notices complied with workers’ compensation rules requiring notification to the commission, they did not provide the insured with clear and unambiguous notice of cancellation. The court emphasized that statutory requirements for notifying the commission do not relieve insurers of their contractual duty to ensure policyholders are properly informed.
“The statute does not purport to dictate or otherwise regulate the content of the cancellation notice that must be sent to the insured and contains no suggestion that the required notice to the chairperson satisfies the insurer’s obligation to properly and unambiguously notify its insured of the cancellation,” the court said.
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