Court Opinion

ID: 6827791
Source: CourtListenerOpinion
Date Created: 2022-07-23 19:34:52.216265+00
Date Added: 2024-06-11T16:04:26.861393
License: Public Domain

Duff, J.,
dissenting in part.
I join the majority in affirming the opinion of the Industrial Commission with regard to the first three issues raised. However, I respectfully dissent from the majority’s reversal on the issue of insurance coverage. In my view, the record supports the commission’s finding that Federal Insurance Company (Federal) should be solely responsible for providing compensation benefits to the claimant.
The record shows that when N.S. & T. Bank (N.S. & T.) purchased Franklin Mortgage Company (Franklin) on April 8, 1985, Franklin became a named insured under N.S.& T’s workers’ compensation policy with Federal. By letter dated June 11, 1985, Mr. Clarence Spiva, Senior Vice President of N.S.& T., instructed Aetna to cancel its policy covering Franklin, effective April 8, 1985. Nothing in the record suggests that a back-dated cancellation is not a standard practice in the industry.1 N.S. & T. was *103aware of the claimant’s accident at the time it instructed Aetna to cancel the policy. When Aetna cancelled the policy, effective April 8, 1985, it issued a premium refund for the period subsequent to that date. However, Aetna did not notify the Industrial Commission of the cancellation until October 9, 1985, admittedly a violation of Code § 65.1-105.
In Hartford Co. v. Fidelity & Guaranty, 223 Va. 641, 292 S.E.2d 327 (1982), the Supreme Court allowed the cancellation of a compensation policy, effective prior to the date of the accident, although the insurer failed to timely notify the Industrial Commission pursuant to Code § 65.1-105. The Court noted that the statute served two purposes: (1) to give the employer an opportunity to acquire other insurance and (2) to make it possible for the commission to timely invoke its enforcement authority under Code § 65.1-106. Both purposes were designed to offer protection to an injured employee against a lapse of insurance coverage.
In the present case, the commission’s holding is in accordance with the purposes articulated in Hartford because there was adequate coverage for the claimant under Federal’s policy. The commission’s holding also finds support in opinions from other jurisdictions. In Saracione v. Oliver Construction Co., 87 A.D.2d 926, 450 N.Y.S.2d 63 (1982), the court overruled a workers’ compensation board decision, finding dual coverage where a carrier failed to comply with the cancellation and notice provision of the compensation code. In language similar to that found in Hartford, the Saracione court stated:
The purpose of the statutory notice requirement is to protect employers from an unexpected lapse of coverage, not to provide a windfall to subsequent insurers who have assumed the risk. Accordingly, since the employer had obtained other coverage, there was no need to impose the remedy of continued liability on American Mutual for its failure to comply with the notice requirement.
Id. at 926, 450 N.Y.S.2d at 64.
*104In Hines v. Cherokee Lines, Inc., 509 P.2d 669 (Okla. 1973), the Oklahoma Supreme Court addressed the issue of whether a carrier’s failure to comply with the notice and cancellation statute would result in joint and several liability with the other carrier. The court construed a statute similar to Virginia’s and stated:
[W]hen . . . the employer and employee are protected by other insurance then the statute should not be rigidly construed so as to unjustly penalize an insurance carrier for its failure to strictly comply with the notice requirements. Especially is this so where the employer himself has requested the cancellation and has procured insurance protection from another carrier.
Id. at 671 (emphasis added).
In this case, it was the employer (N.S. & T., purchaser of Franklin Mortgage) who requested the cancellation because it had other coverage with Federal.
The majority opinion states that the Hartford decision is not controlling because a lapse in insurance coverage is not the dispositive issue. They rely on the proposition that the rights of the parties are fixed as of the date of the accident. With great respect for the majority’s opinion, while I agree that this proposition is a correct statement of law as it applies to the rights of the claimant, the approach is too inflexible in a case where the claimant’s rights are not in issue. Here, Mrs. Walker was fully protected by Federal’s coverage for all rights accorded to her under the Workers’ Compensation Act. Thus, the real conflict is between Aetna and Federal.
The majority finds that Aetna received a windfall when Federal became an automatic coinsurer of Franklin prior to the accident. As I view the case, the majority opinion confers a windfall on Federal by reducing its liability by one-half, although it received a full premium for its increased exposure subsequent to April 8, 1985. Conversely, the majority imposes a liability on Aetna even though its policy had been cancelled at the request of N.S. & T. and Aetna had refunded the premium to them. Federal had no right to expect N.S. & T. to continue paying premiums for Aetna’s policy on Franklin when Federal’s policy provided identical coverage.
*105No authority suggests that a back-dated cancellation with a premium refund is illegal or prejudicial to a claimant’s rights. Therefore, I would hold that Aetna’s policy was effectively can-celled as of April 8, 1985, and that the sole coverage for the industrial accident was with Federal. The old adage that “loss follows the premium” should be applicable in this instance.
The record supports a finding that, at the time of the claimant’s accident, all parties were aware that Federal was the compensation insurance carrier. N.S. & T. and Federal knew of this because of the endorsement on the policy issued by Federal. Franklin was aware of this because the employer’s first report, filled out shortly after the accident, listed the Chubb Group as the carrier, and Federal was a part of the Chubb Group. Accordingly, I would hold that the cancellation of Aetna’s policy at the request of N.S. & T., with no prejudice to the claimant, was a matter of private contract between Aetna and N.S. & T., and that we should not interfere in this area. The commission held: “[T]o find Aetna Casualty and Surety responsible for any of the benefits would be contrary to the election by N.S. & T to cancel coverage and serve no legislative purpose.”
Therefore, I believe the record contains ample credible evidence to support the commission’s holding on the issue of coverage, and I would affirm.

 For this proposition, the appellant cited in argument Grayson-Carroll-Wythe Mutual Insurance Company v. Allstate Insurance Company, 582 F. Supp. 560 (W.D. Va. 1984), rev'd, 753 F.2d 1070 (4th Cir. 1985). Careful examination of the district court opinion demonstrates its inapplicability to the present case. The Grayson-Carroll-Wythe case was a contribution action involving two fire insurance policies, each containing apportionment clauses in the event of other insurance. The critical issue turned on Allstate’s *103position that its policy had terminated by nonacceptance of an offer of renewal. However, the district court rejected this assertion primarily because Allstate had sent the insureds a Notice of Cancellation, which contained a termination date subsequent to the fire loss.