Case Title: Uninsured Employer's Fund v. Mounts

Citation: 

Docket Number: 971074

State: virginia

Court: Virginia Supreme Court

Date: 1998-02-27T00:00:00Z

Document:
Present:  All the Justices 
 
 
UNINSURED EMPLOYER’S FUND 
                         OPINION BY JUSTICE A. CHRISTIAN COMPTON 
v.  Record No. 971074                 February 27, 1998 
 
HAROLD C. MOUNTS, ET AL. 
 
FROM THE COURT OF APPEALS OF VIRGINIA 
 
In this workers’ compensation case, the sole issue at this 
stage of the appellate process is whether the Uninsured 
Employer's Fund is liable for payment of compensation for a 
claimant’s occupational disease upon the ground that the 
claimant’s employer violated Code § 65.2-801(A)(1).  The 
statute, a part of the Workers’ Compensation Act, requires every 
employer to “secure his liability thereunder” by “[i]nsuring and 
keeping insured his liability” under the Act. 
Appellee Harold C. Mounts, the claimant, while working as a 
coal miner for appellee Greasy Creek Coal Company, the employer, 
suffered a disabling, compensable back injury in an industrial 
accident on October 12, 1988.  On that date, the employer was 
insured by Rockwood Insurance Company, an insurer authorized to 
transact the business of workers’ compensation insurance in the 
Commonwealth, as required by former Code § 65.1-104.1(A)(1), now 
§ 65.2-801(A)(1).  The claimant stopped working because of the 
disability, and the insurer began paying benefits. 
 
In August 1991, a Pennsylvania court declared the 
insurer insolvent, and liquidation proceedings commenced.  All 
persons with claims against the insurer were required to file 
their claims with the court’s liquidator by August 26, 1992. 
 
In August 1991, appellee Virginia Property and Casualty 
Insurance Guaranty Association, pursuant to Code § 38.2-1606, 
began paying Mounts’ award for the October 1988 accidental back 
injury because, at the time of the insurer’s insolvency, 
Rockwood had been paying the award.  The Guaranty Association, 
established by statute to “provide prompt payment of covered 
claims to reduce financial loss to claimants” resulting from an 
insurer’s insolvency, § 38.2-1600, is obligated to pay such 
claims that existed prior to the insolvency determination.  
§ 38.2-1606(A)(1). 
 
On September 15, 1993, an x-ray report indicated that the 
claimant was suffering from coal workers’ pneumoconiosis.  Nine 
days later, he filed with the Workers’ Compensation Commission a 
claim for benefits for that occupational disease, naming Greasy 
Creek Coal Company as his last employer. 
 
Subsequently, at a January 1996 hearing, a deputy 
commissioner found “that claimant received a communication of 
diagnosis of occupational disease on September 15, 1993.”  The 
deputy denied the claim, however, ruling that it was barred by 
the applicable statute of limitations. 
 
2
 
Upon review, the full Commission reversed the deputy’s 
ruling, finding the claim was timely.  Turning to the merits, 
the Commission determined that the date of claimant’s last 
injurious exposure to the hazards of the disease was October 12, 
1988, while he was employed by Greasy Creek.  The Commission 
ruled that the claimant’s “pneumoconiosis is compensable as an 
occupational disease” under Code § 65.2-400. 
 
Next, the Commission considered whether the Guaranty 
Association “is responsible for payment of the claim.”  The 
Commission concluded that because the September 1993 claim was 
filed after the August 1992 deadline established during the 
liquidation proceedings, the claim was not “covered” and the 
Guaranty Association was “not responsible for paying benefits to 
this claimant.” 
 
Continuing, the Commission ruled, without assigning a 
reason, that the Uninsured Employer’s Fund “is responsible for 
this claim.”  Thus, the Commission entered an award against 
Greasy Creek and the Fund for payment of disability benefits at 
the weekly rate of $451 for a period of 50 weeks, plus medical 
benefits.  
 
The Fund appealed, and a panel of the Court of Appeals 
unanimously affirmed the Commission.  Uninsured Employer’s Fund 
v. Mounts, 24 Va. App. 550, 484 S.E.2d 140 (1997).  Among other 
issues, the Court of Appeals determined that the Fund was 
 
3
responsible for payment of benefits to the claimant and that the 
Guaranty Association had no such obligation.  Id. at 557, 484 
S.E.2d at 143.  According to the Court of Appeals, the Fund’s 
liability stemmed from the employer’s violation of Code § 65.2-
801(A)(1) in failing to keep its liability insured.  Greasy 
Creek was not insured on September 15, 1993, the date the 
diagnosis was communicated to the claimant. 
 
The Fund filed a petition for appeal in this Court, 
assigning error to only one of the Court of Appeals’ rulings.  
The Fund’s assignment of error states:  “The Court of Appeals’ 
reliance upon ‘keeping insured his liability’ language in 
§ 65.2-801(A)(1) to make the Uninsured Employer’s Fund liable 
for pneumoconiosis benefits is erroneous.”  Thus, because the 
Fund does not assign as error the Court of Appeals’ holding that 
the Guaranty Association is not liable for payment of the 
claimant’s benefits, the judgment in favor of the Guaranty 
Association is final. 
 
Determining that the Court of Appeals’ decision involves a 
matter of significant precedential value within the meaning of 
Code § 17-116.07(B), we awarded the Fund this appeal from the 
April 1997 judgment below. 
 
Initially, the relevant workers’ compensation statutes must 
be summarized.  Code § 65.2-404 provides that when an employee 
has a compensable occupational disease, “the employer in whose 
 
4
employment he was last injuriously exposed to the hazards of the 
disease and the employer’s insurance carrier, if any, at the 
time of the exposure, shall alone be liable therefor, without 
right to contribution from any prior employer or insurance 
carrier.”  The claimant’s entitlement to benefits for an 
occupational disease, however, accrues on the date of the “first 
communication of the diagnosis.”  Code § 65.2-403(A), formerly 
§ 65.1-49 (1987 Repl. Vol.); Cooper v. Mary E. Coal Corp., 215 
Va. 806, 809, 214 S.E.2d 162, 164-65 (1975). 
 
On the date of this claimant’s last injurious exposure to 
the hazards of pneumoconiosis in October 1988, former Code 
§ 65.1-149(A) (1990 Cum. Supp.) (now § 65.2-1203(A)(2)) 
provided:  “After an award has been entered against an employer 
for compensation benefits . . . and upon a finding that the 
employer has failed to comply with the provisions of § 65.1-
104.1 . . . the Commission shall order the award, or any unpaid 
balance, to be paid from the Uninsured Employers Fund.”  The 
Fund was created by the General Assembly to provide funds to 
claimants for benefits awarded against an employer which has 
breached its duty “to secure compensation insurance.”  A. G. Van 
Metre, Jr., Inc. v. Gandy, 7 Va. App. 207, 213, 372 S.E.2d 198, 
202 (1988).  See § 65.2-1201(A). 
 
In October 1988, former Code § 65.1-104.1(A)(1) (1987 Repl. 
Vol.), like present § 65.2-801(A)(1), provided that every 
 
5
employer “shall secure his liability” for workers’ compensation 
payments by, among other methods, “[i]nsuring and keeping 
insured his liability” with an authorized workers’ compensation 
carrier. 
 
The Court of Appeals, in ruling against the Fund, stated: 
   “To read Code § 65.2-801 to require only that 
employers have insurance on the date of the employee’s 
last exposure, and not on the date when the diagnosis 
of the disease was communicated to the employee, would 
exempt employers from insuring themselves against a 
great number of occupational disease claims.  
Moreover, Code § 65.2-801, by its use of the phrase 
‘keeping insured,’ requires employers to remain 
insured.  Therefore, we hold that because Greasy Creek 
was not insured on the date the diagnosis was 
communicated to Mounts, Greasy Creek failed to ‘keep[] 
[itself] insured’ as required by Code § 65.2-801.” 
 
Mounts, 24 Va. App. at 556, 484 S.E.2d at 143 (alteration 
in original). 
 
In this appeal, the Attorney General contends, on 
behalf of the Fund, that by virtue of the language in 
§ 65.1-149 (§ 65.2-1203), Greasy Creek was in compliance 
with the requirements of § 65.1-104.1 (§ 65.2-801) because 
it was insured by Rockwood on October 12, 1988.  Thus, the 
Attorney General argues, because the Fund can be 
responsible for an award only “upon a finding that the 
employer has failed to comply with the provisions of 
§ 65.1-104.1,” this Court should reverse that portion of 
the award that imposes liability upon the Fund. 
 
6
 
Continuing, the Attorney General says that the Court 
of Appeals, in holding the Fund liable, incorrectly 
“latched onto” the “keeping insured” language in § 65.1-
104.1 (§ 65.2-801(A)(1)), while noting the employer was not 
insured in 1993.  He argues that the Court of Appeals’ 
reasoning is flawed because only the carrier that insured 
the employer’s liability on the date of the last injurious 
exposure can be held liable, in view of the provisions of 
§ 65.2-404. 
 
The Court of Appeals answered this argument by saying 
that § 65.2-404, by its terms, “addresses only the 
liability of the employer in whose employment the employee 
was last injuriously exposed, and its insurance carrier, in 
contradistinction to prior employers and their insurance 
carriers.”  Mounts, 24 Va. App. at 557, 484 S.E.2d at 143.  
The Court of Appeals stated:  “Nothing in Code § 65.2-404 
was intended to release employers from the duty of ‘keeping 
[themselves] insured’ as required by Code § 65.2-801 or to 
exempt the Fund when the employer has breached its 
statutory obligation.”  Id. (alteration in original).  
 
In a final argument, the Attorney General contends:  
“The ‘keeping insured’ language is not meant to require an 
employer like Greasy Creek to anticipate future 
pneumoconiosis claims when his carrier is declared 
 
7
insolvent, particularly in the face of the plain wording of 
§ 65.2-404 that makes the employer and carrier on the last 
date of injurious exposure liable.”  We disagree with the 
Attorney General, and agree with the Court of Appeals. 
 
The “keeping insured” language has been a part of the 
workers’ compensation statutes since the Act was adopted in 
1918.  Acts 1918, ch. 400, § 68.  We have observed, as the 
Court of Appeals correctly held, that the language under 
scrutiny here means that an employer subject to the Act 
“must be and remain insured.”  Hartford Accident & Indem. 
Co. v. Fidelity & Guar. Ins. Underwriters, Inc., 223 Va. 
641, 643, 292 S.E.2d 327, 328 (1982). 
 
We shall elaborate on the Court of Appeals’ analysis 
to answer one portion of the Attorney General’s argument in 
this Court.  He contends that the statutes do not require 
an employer to anticipate future pneumoconiosis claims and 
to remain insured when its insurer has been declared 
insolvent.  This argument, however, is answered by merely 
referring to the statute of limitations governing 
occupational diseases. 
 
An employer has potential liability for a claim of 
coal miners’ pneumoconiosis for “three years after a 
diagnosis of the disease” is first communicated to the 
employee, or for “five years from the date of the last 
 
8
injurious exposure in employment, whichever first 
occurs. . . .”  Code § 65.2-406(A)(1), formerly § 65.1-
52(1).  Therefore, given the statutory mandate to insure 
and keep insured its liability, an employer whose employees 
are susceptible to pneumoconiosis must anticipate that such 
claims will accrue in the future and must secure its 
liability for such potential claims as required by § 65.2-
801, even when its insurer has been declared insolvent.  
When, as here, there has been a failure to do so, the Fund 
will be liable because the employer has violated its 
statutory duty. 
 
Consequently, the judgment of the Court of Appeals 
will be 
Affirmed. 
 
9