Cancellation of an Assigned Risk Workers' Compensation Policy in Massachusetts
Non-renewals, like cancellations, have definite ramifications upon employees, employers, contributors to theTrust Fund and the public at large. See Pillman’s Case, 69 Mass. App. Ct. 178, 185. Consequently, when canceling or non-renewing a policy, insurers must comply with strict notice requirements. See Id.; Armstrong’s Case, 47 Mass. App. Ct. 693 (1999). What’s more, in cases such as this, insurers also have the burden of proof regarding compliance with said requirements. See Armstrong’s Case, 47 Mass. App. Ct. 693 (1999). In the instant case, the Insurer had the burden to prove that it (i) provided clear notice of its intent to non-renew the Employer’s workers’ compensation policy; and (ii) that it sent said notice in the proper manner. Because the Insurer did not meet this burden, the Decision regarding coverage should be affirmed.
Section 65B of M.G.L. c. 152 deals with assigned risk policies such as the one at issue in the instant case. According to s. 65B, if an insurer wishes to “cancel or otherwise terminate," it must, “give notice to the rating organization and the employer of its desire to cancel or terminate the same." M.G.L. c. 152, s. 65B. According to the Court in Dearmon v. Save that Stuff, Inc, the terms “cancel or otherwise terminate" include non-renewals. Dearmon v. Save that Stuff, 13 Mass. Workers’ Comp. Rep.430 (1999), affirmed in In Re Case of Dearmon’s, 790 N.E.2d 706 (2003). The Dearmon Court also held that the written notice “must express an unambiguous intent to cancel or terminate the policy." Id. In Dearmon, the insurer sent the employer an “Insurance Plan Letter" which contained a renewal quote based on the latest payroll classification and stated that if the renewal payment was not received by a certain date, there would be either a lapse in coverage or the check would be returned and no policy would be issued. Id. Significantly, the Dearmon Court held that this Insurance Plan Letter was not a definite and certain notice of the policy’s termination. Id. Consequently, the insurer failed to fulfill its obligations under M.G.L. c. 152, s. 65B and the policy continued to be in effect past the expiration date. Id.; Frost v. David Wells Ins. Agency at 309. (“Coverage continues despite expiration of the policy when there has been no compliance with the statutory notice requirement.")
Similar to the Insurance Plan Letter sent in Dearmon, the renewal quotes sent to the Employer in the instant case were not a “definite and certain notice of termination." Rather, thefirst letter sent to the Employer on May 21, 2002 made no mention at all of non-renewal. It was simply a quote for thefollowing year. The second document, dated July 12, 2002, titled “Revised Workers Compensation Renewal Quote" was simply a second quote/renewal invitation. Although this document did state that the policy would expire on July 28, 2002, then next few paragraphs and pages describe the process for renewal, including the deposits that Employer needed to make. As with Dearmon, thei nvitation to renew did not meet the requirements of M.G.L. c. 152, s. 65B. Consequently, coverage continued beyond July 28, 2002 and specifically through thedate of loss, August 1, 2002. See Armstrong’s Case, 47 Mass. App. Ct. 693 (1999).
Moreover, the decision regarding coverage should be affirmed because the Insurer’s renewal quote was not sent certified mail. Insurers are held to a high standard of diligence when canceling compulsory insurance policies. Dearmon v. Save that Stuff,13 Mass. Workers’ Comp. Rep.430 (1999), affirmed in In Re Case of Dearmon’s, 790 N.E.2d 706 (2003); See M.G.L. c. 175, s. 187C. Section 187C of c. 175 section governs the cancellation of all insurance policies within Massachusetts and states:
"...no written notice of cancellation shall be deemed effective when mailed by the company unless the company obtains a certificate of mailing receipt from the United States Postal Service showing the name and address of the insured stated in the policy.
"The policy behind this requirement is to ensure that insurers makes reasonable efforts to notify insured that the protections afforded by their policies are about to be terminated. Pillman’s Case, 69 Mass. App.Ct. 178, 185 (2007). “Conscientious Compliance" of this statute is required because of the effects a cancellation will have upon employers, employees, Trust Fund contributors and the public. Id.
In the instant case,there is no dispute that this requirement was not met. Ms. X, a representative from the Insurer, testified that the insurer sent the renewal quote standard mail. In its brief, Insurer’s counsel attempts to argue that certified mail is not required of renewal quote letters, only cancellations. However, the Insurer also argues that the renewal quote sent to the Employer had the same effects as a cancellation letter and thus the Employer had no insurance on the date of loss. Given the sound policy behind the requirement of certified mail, it makes no sense to conclude that the“clear notice of intent" policy discussed in Dearmon applies to both cancellations and non-renewals, but that non-renewals are not included in the classification of cancellations for the purposes of c. 175, s. 187C.