1. Subject Matter Jurisdiction

The Workers' Compensation Court has authority to construe the provisions of an insurance policy if does so as an incident of the determination of the rights of the injured worker.

This Court has held that the Workers' Compensation Court lacks authority to construe contract rights in a dispute purely between an employer and its insurance carrier, to reform an insurance policy, to consider fraud in the inducement of a contract as a defense to an award under the Act, to determine whether an insurance contract is void ab initio for fraud in the execution where invalidity is not apparent on the face of the policy, to decide an action to recover damages for an insurer's failure to defend a claim for workers' compensation benefits, or to determine whether a compensation policy has been canceled under the provisions of the insurance contract.

In Mid-Continent Casualty Co. v. Miller, supra. note 6, we stated:

The [Workers' Compensation] Court does not have the power of courts of general jurisdiction to construe and determine liabilities under contracts, generally, but is vested with authority to determine the liability of an insured's injured employee and, when it becomes necessary as an incident to this determination, to also interpret or construe the policy. The power thus granted to the … Court to so interpret or construe an insurance policy, when necessary to properly exercise the authority vested in that body by the legislature, does not confer the equitable power possessed by courts of general jurisdiction to reform an insurance policy. Id., 1969 OK 2, 451 P.2d at 935 (citations omitted).

The same can be said in the present case. The Workers' Compensation Court has authority to interpret and construe insurance policies when it is necessary to do so when determining the insured's liability to an injured employee. However, the court lacks the power possessed by courts of general jurisdiction to decide tort and general contract matters. The Court of Civil Appeals sitting in review of that tribunal's decision similarly lacks the authority to decide those issues.
Hefley v. Neely Insurance Agency, Inc., 1998 OK 12, 954 P.2d 135

2. General Requirements of the Policy

Every practitioner in the workers' compensation system should be familiar with 85 O.S. §64 which establishes the minimum requirements for an insurance policy covering the work-injury risk.

The Administrator has the right to enforce the liability of the carrier. 85 O.S. §64(A).

In Oklahoma, by statute and practice, the employer and its workers' compensation insurer are one and the same with respect to liability for benefits owed to an injured worker. Notice or knowledge of the injury by either the employer or its insurance carrier is notice or knowledge to the other. 85 O.S. §64(B); Sizemore v. Continental Casualty Co., 2006 OK 36, 142 P.3d 47; United States Fidelity & Guaranty Co. v. Theus, 1972 OK 9, 493 P.2d 433; Supercuts v. Briggs, 2008 OK CIV APP 48, ¶12, 184 P.3d 1089.

Insolvency of the employer does not relieve the employer's insurer of the policy obligations to the employee. 85 O.S. §64(C). In the event of the insolvency of the carrier, it is the employer who is liable for compensaton due under the terms of an award. Rucks-Brandt Const. Corp. v. Silver, 1944 OK 215, 151 P.2d 399.

Right to elect to include business owners in the policy must be disclosed in writing. 85 O.S. §64(E).

Policy is void "unless it shall also cover liability for the payment of the compensation provided for in this title." 85 O.S. §64(F)

2.1. Cancellation of Policy

85 O.S. §64(G) provides that "No contract of insurance . . . shall be canceled within the time limited in such contract for its expiration until at least ten (10) days after notice of intention to cancel such contract, on a date specified in such notice, shall be filed in the office of the Administrator and also served on the employer." Full compliance with Section 64(G) requires notice of cancellation not only to the Administrator, but also service upon the employer of the notice of intent to cancel. Court Rule 63 permits insurers to report proof of coverage information, including notice of intent to cancel, to the Administrator using the NCCI Proof of Coverage system. Notice of intent to cancel provided to the Administrator does NOT serve as notice to the insured employer of the intent to cancel.

The two-pronged requirements of 85 O.S. §64G are mandatory. Tri-State Casualty Co. v. Speer, 1941 OK 229, 115 P.2d 130. Notice to the employer is mandatory even if employer has requested the cancellation. Traders & General Insurance Co. v. Harris, 1965 OK 23, 398 P.2d 843. Insurance carrier has burden to prove that certified mail notice was actually received by the insured. Rasberry v. R. O. Knost & Sons, 1930 OK 459, 293 P. 778 (certified letter returned unclaimed and unopened is ineffective). Cancellation of a workers’ compensation policy is effective 10 days after service of the notice on the employer. Farmers Gin Company of Manitou v. Jones, 1930 OK 533, 293 P.527. The purpose of §64G is to allow the employer time to obtain substitute coverage and thereby protect itself and its employees from uninsured loss. An insurance carrier will be relieved of the notice requirement when it cancels the policy at the request of the insured and at the time the insured obtains substitute coverage. In Re Hines, 1973 OK 46, 509 P.2d 669. Failure of carrier to notify the court of its intention to cancel the policy results in the policy remaining in effect for its full contractual term even if the employer is granted own-risk status prior to expiration of the term. Empire Fire and Marine Ins. Co. v. Spurlock, 1979 OK 54, 593 P.2d 768.

3. Secondary Liability

A principal employer is secondarily liable for injuries occurring to the employees of its subcontractor if the subcontractor has failed to provide coverage and the principal employer has failed to exercise good faith to determine the existence of coverage under a valid insurance policy. 85 O.S. §11(B)(2). Additionally, the work of the subcontractor must be necessary and integral to the work of the principal employer.

The statute of limitations for joining a principal employer and its insurance carrier is co-extensive with that of the immediate employer.

Normally a policy's term of coverage is for one year. The "good faith" requirements of 85 O.S. §11(B)(2) are met when the principal employer receives a certicate of coverage that includes the period of the subcontactor's work. However, the good faith responsibility includes the continuing obligation to obtain a current certificate on the expiration date of the coverage. "Good faith is not demonstrated when a principal employer accepts proof of his subcontractor's workers' compensation coverage but remains indifferent to the stated expiration date of that coverage." Smalygo v. Green, 2008 OK 34, 184 P.3d 554.

Myers v. Wescon Construction, Inc., 2002 OK CIV APP 116, 59 P.3d 1277; principal employer gets a certificate of insurance from subcontractor issued by the sub's insurance agent, but no policy is ever issued. The principal employer is entitled to rely on the certificate of coverage and is not secondarily liable.

4. Estoppel

Every employer and every insurance carrier who . . . pays, receives or collects any premiums upon any insurance policy covering the liability of such employer under the Workers' compensation law . . . shall be estopped to deny that such employee was employed by the employer in a hazardous employment subject to and covered by the Workers' compensation law if such person receives an accidental personal injury arising out of and in the course of his employment, during the period for which such premium was so received, . . . . [Emphasis added.]
85 O.S. §65.2

Every contract of insurance . . . shall be conclusively presumed to be a contract for the benefit of each and every person upon whom insurance premiums are paid, collected, or whose employment is considered or used in determination of the amount of premium collected . . . which contract may be enforced by such employee as the beneficiary thereof.
85 O.S. §65.3

John Shorter was a shareholder in a subchapter S corporation when he injured his hand. After paying TTD for 52 weeks, NAIC denied coverage. Shorter asserted estoppel claiming that despite the appearance of his name on the exclusion endorsement, his salary was in fact included in the calculation of the workers' compensation insurance premiums to be paid by Tulsa Used Equipment, his employer. NAIC urged rejection of the estoppel act because NAIC did not accept an insurance premium that included Shorter's wages in the calculation; rather, it accepted only a deposit. Shorter's wages, which were included in determining the premium at the beginning of the policy's term, were deducted from the computations in the annual end-of-policy audit and refunded to employer.

The Supreme Court held that Shorter met the criteria of the tribal sovereignty cases of Dominic v. Creek Nation, 1997 OK 41, 936 P.2d 935, which required an injured worker to "prove but three elements: 1) the claimed injury occurred during the time the premium-paying insured maintained a compensation liability policy (2) claimant's earnings were used in the calculation of the premium that was paid by the insured and 3) claimant's injury occurred while he was acting for the insured." Further, the Court held "An unrequested post-accident refund does not defeat the employer's or insurer's already incurred liability."

A second reason (waiver) for upholding the estoppel order of the trial court was raised sua sponte by the Supreme Court. It again relied on Dominic, supra at fn 22, where it held that "payment of TTD sans contest of the employment-related nature of the claimant's harm constitutes a waiver of its defenses against liability." Shorter v. Tulsa Used Equipment and Industrial Engine Services, 2006 OK 72, 148 P.3d 864, at fn 53.

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