United States: Dual Coverage For Workers' Compensation Insurance Under A Voluntary Policy And Assigned Risk Plan In Georgia

Last Updated: June 17 2019
Article by Nirav Patel

Georgia employers are required by law to retain workers’ compensation insurance if they employ three or more full time, part time, or seasonal employees.  This is an arduous endeavor, however, as several employers are unable to obtain workers’ compensation coverage in the standard insurance market.  Fortunately, every state provides employers an opportunity to acquire workers’ compensation insurance through a Workers' Compensation Assigned Risk Plan, Pool, or Residual Market. 

Employers may be denied workers compensation coverage for several reasons.  These reasons may involve their lack of effective loss control measures or the inherent occupational hazards associated with their business model.  Alternatively, new or small businesses may be denied coverage due to an insurer’s inability to reference previous loss history and/or assess the risk associated with the business and its operations.  Whatever the reason may be, under O.C.G.A. § 34-9-133, employers with four rejections or declinations from duly authorized insurers may avail themselves of coverage through an assigned risk plan, administered by the National Council on Compensation Insurance (“NCCI”).  The application must be submitted by the employer to NCCI directly and must include proof of rejections within seventy-five (75) days of the application date.

Further, entities are deemed ineligible for the assigned insurance if applying in bad faith.  This includes employers that are aware of their impending bankruptcy; employers that knowingly refuse to meet reasonable health, safety, or loss control requirements; employers with outstanding premium obligations; and employers that have issued misrepresentations to obtain coverage.

Upon receipt of the application, NCCI assigns the employer to an assigned insurance carrier and group classification based on the risk associated with the employer’s business.  All employers to which this plan applies shall be directed utilizing the classification forms and rating plans filed by NCCI.  Employers are generally placed within one of three groups, comprising of 1) Employers which have insufficient prior workers' compensation experience to be rated; 2) Employers which are not Group 1 or 3 rates; and 3) Employers that have an experience rating modification greater than 1.0.  The mutual rates for the groups shall be determined by applying a deviation factor for each group to the plan rates. The assigned insurance carriers, however, are mandated to provide the same type of services to assigned employers that they would to their voluntary policyholders. 

Although any insurer to whom a particular risk is assigned must accept the assignment and provide coverage, it is allowed to collect higher premiums, proportionate with the particular risk.  These premiums are determined by a rating system, which accounts for the nature, number, and severity of violations and incidents associated with the relevant employer.  Therefore, unlike voluntary policyholders, employers within an assigned risk plan are unable to negotiate the terms of their coverage contracts.  Rondale Bus Svc. v. American Cas. Co., 189 Ga.App. 869, 870-871(1), 377 S.E.2d 726 (1989). 

The essential unilateral nature of this contract is evident within its terms, comprising of high premiums, limited coverage, and the employer’s lack of choice in insurers and of payment plans.  Consequently, while assigned risk coverage assists employers in complying with Georgia law, it often comes at a greater disadvantage, latent within the expenses associated in maintaining coverage.  Employers attempt to mitigate this issue by continually seeking voluntary coverage, and, often obtaining dual coverage by failing to first disassociate with or discontinue their assigned risk plan.  This period of dual coverage may result in a conflict between the voluntary and assigned risk insurers when employees wish to avail themselves of workers’ compensation by filing a claim within this period.

Although there is no case law directly on point within Georgia, the issue of dual coverage with a voluntary insurer and an assigned risk insurer has been litigated within the neighboring state of South Carolina.  In Avant v. Willowglen Academy, 367 S.C. 315, 319, 626 S.E.2d 797, 799 (2006), the South Carolina Supreme Court held that the assigned risk coverage is automatically terminated when workers' compensation coverage commenced under a voluntary insurance policy.  In Avant, Travelers insured the employer, Willowglen Academy, through an assigned risk workers' compensation policy administered by NCCI.  The Policy was effective from August 24, 1996 through August 24, 1997.  Although covered under this policy, the employer procured voluntary insurance from United Heartland, effective from July 1, 1997. The court found that an employer able to procure voluntary insurance is ineligible for assigned risk coverage. However, Willowglen failed to notify Travelers or NCCI of the voluntary coverage and did not attempt to cancel the assigned-risk policy. More important, Willowglen renewed the assigned-risk policy with Travelers for the period August 24, 1997 through August 24, 1998. 

On September 6, 1997, while both policies were in effect, Marty Avant, an employee of Willowglen, was injured and filed a workers compensation claim.  The claim was submitted to Travelers, which remained unaware of the voluntary policy with United.  Travelers accepted the claim and began providing benefits.  However, Travelers subsequently received notice of the coverage allotted by United in January 1998. In response, it immediately issued a notice of cancelation retroactive to July 1, 1997, the date on which Willowglen acquired voluntary insurance from United.  Travelers also refunded all premiums paid by Willowglen for the assigned risk coverage. Finally, Travelers filed a motion with the Workers' Compensation Commission of South Carolina to identify United as the sole responsible carrier.  NCCI was also notified of Willowglen's dual coverage and held in accordance with the court’s findings that "Travelers' assigned risk coverage terminated as a matter of law on July 1, 1997, the date on which United began providing voluntary coverage. 

The Supreme Court of South Carolina, prior to its ruling in Avant, affirmed the appellate court’s findings in Rodriguez v. Romero, 363 S.C. 80, 88, 610 S.E.2d 488, 492 (2005), holding that an assigned risk policy does not become effective if the employer’s voluntary policy was in force during the issuance of the assigned coverage.  The court also recognized that in duplicate or dual coverage scenarios, existing when two insurers issue two policies to the same employer and secure the same liability, the policy with the later date nullifies the earlier policy.  In either scenario, the court established persuasive precedent for Georgia Courts and the Georgia Board of Workers’ Compensation in holding that assigned risk coverage cannot co-exist with voluntary insurance coverage.  In fact, the existence of a voluntary workers compensation policy, will nullify the assigned risk policy altogether.

Moreover, Georgia has reinforced this notion in its cases regarding rescission of insurance policies.  Generally, in order for an insurer to rescind its policy, it must first determine that it has an application misrepresentation defense and promptly declare the policy void within a reasonable time of its acquiring such information.  It must then submit notice to the employer of its decision to rescind.  However, in Georgia, the insurer does not have to return the premium payments for fraudulent misrepresentation.  Accordingly, despite the unfavorable terms provided through the assigned risk plans, employers should remain wary of attempting to obtain voluntary coverage while retaining coverage through an assigned risk policy. 

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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