Ruling States Unfiled Workers’ Comp Side Agreements Are Unenforceable
RPNA attorneys Nicholas Roxborough and Ryan Salsig won a huge victory for California workers’ comp policyholders with the recent Federal Court decision stating Zurich can’t enforce side agreements that were not filed with the Workers’ Compensation Insurance Rating Bureau (WCIRB).
What makes the July 9 decision in Zurich American Insurance Company v. Country Villa Service Corp. significant is that it’s the first precedential decision to state expressly that all provisions in a policy, endorsement, or form are unenforceable if the form hasn’t been submitted to the WCIRB for review before being issued.
“The decision puts to rest a lot of the arguments made by Zurich and other carriers that agreements relating to large-deductible policies, typically styled as ‘deductible agreements,’ ‘financial agreements,’ or ‘program agreements’ by the carriers, can be enforced even though they were not filed with the WCIRB or reviewed by the insurance commissioner,” explains Roxborough.
Insurance Code Section 11658 prohibits carriers from issuing any policy or endorsement unless it has been filed with the WCRIB and the insurance commissioner has not rejected the form. California Code of Regulations Section 2268 further requires carriers to attach all agreements to a policy when the policy is issued.
Ryan Salsig says this precedential decision can impact other workers’ compensation insurance companies including Travelers, AIG, National Union, and Argonaut who used agreements similar to those declared void by the Court.
“This ruling may profoundly affect California employers who were issued workers’ compensation policies with unfiled side agreements between 1995 and mid-2013,” explains Salsig. “Policyholders should examine any agreements they signed with a workers’ compensation carrier that amends, modifies, alters, varies, or adds any new terms or conditions to an existing workers’ compensation policy. If it does so, and the subsequent agreement was not filed with the state prior to being issued, it is likely to be invalid as a matter of law.”
In the case of some employers who were required to pay millions of dollars to cover claims under their deductible before any claims were even incurred, this decision effectively means that insurance companies may have no legal claim to the money they are holding and may be required to issue a substantial refund.
Read more about this decision in the July 15 article of WorkCompCentral. (subscription required)
RPNA is pleased to answer any questions you may have regarding this decision. Please contact Nick Roxborough or Ryan Salsig at (818) 992-9999 or via email.