In a win for small business owners, the Connecticut Supreme Court has ruled that Ace America Insurance Co. failed to cancel a workers' compensation policy for Napolitano Roofing effectively due to ambiguous communications. 

In its ruling, the high court determined that the insurer failed to cancel a workers’ compensation policy properly because its multiple notices and other conduct were not “definite, certain, and unambiguous” regarding the coverage's status.

The court said that consideration of whether a notice of cancellation is sufficiently specific must include “all relevant communications” between the parties and not just the notice received by the chairperson. The high court said the appellate court erred in not considering all relevant communications.

As a result, Ace America Insurance Co. must defend and indemnify an employer in connection with an employee's injury claim, overturning an appellate decision that favored the insurer over Napolitano Roofing.

The Backstory

Napolitano Roofing, based in Glastonbury, Conn., about 10 miles south of Hartford, held a workers' compensation policy with Ace America Insurance Co. On April 5, 2018, Ace issued two notices to Napolitano: one warning of potential cancellation for non-cooperation regarding a request for financial records and another stating that the policy would be canceled effective April 25, 2018. 

These notices received simultaneously, did not reference each other, leading to confusion about the policy's status.

According to court records, Napolitano provided some of the requested information upon receiving these notices and sought clarification from its insurance agent. The agent informed the company that Ace considered the firm “in compliance,” and certificates of insurance were issued, indicating active coverage. 

However, subsequent communications from Ace requested additional documentation without mentioning the impending cancellation date. Napolitano did not supply further information, so Ace proceeded with the cancellation.

Repercussions 

On May 29, 2018, an employee of Napolitano was injured while on the job and subsequently filed a claim for compensation benefits with the commission. Ace Insurance denied the claim and refused to defend or indemnify Napolitano, stating that the policy had been terminated as of April 25.

The workers’ compensation commissioner found that the employee was injured while working, but Napolitano did not have active workers’ compensation insurance on the incident date because the policy was properly canceled electronically.

Napolitano settled with the injured employee for $225,000 to cover his injuries and medical expenses. In return, the employee withdrew his civil action against his employer. Napolitano then began the process of holding Ace responsible for its failure to provide the roofing contractor ample notification that cancellation of its policy was imminent. 

Napolitano submitted a complaint seeking a judgment that Ace was required to defend and indemnify it regarding the employee's workers' compensation claim and damages for breach of contract. Each party sought summary judgment on the two counts. 

The trial court concluded that the cancellation of workers’ compensation insurance must be  “unambiguous and unequivocal,” and that all communications directly related to the cancellation issue must be considered when making that determination. 

The trial court granted Napolitano’s motion for summary judgment after concluding that the policy was not canceled on April 25 and remained in full effect when the employee was injured because the multiple notices, when considered together, were not “unambiguous and unequivocal.”

Ace appealed the judgment, and the appeals court overturned the trial court, essentially reversing the trial court’s finding that the policy had been effectively canceled and Ace met its obligation when it sent its notice to the commissioner.

In its ruling, the high court said the commissioner “narrowly considered only the issue of whether the NCCI had reported the policy as terminated on the date of cancellation but not whether the notices complied with the defendant’s contractual obligations.”

The court determined that Ace sent Napolitano conflicting notices regarding noncooperation and cancellation about the status of insurance coverage, the requirements to maintain that coverage, and the consequences of failing to meet the deadline for compliance with information requests.

The Supreme Court overturned the appeal, agreeing with the trial court, finding that the appellate court incorrectly concluded that Ace effectively canceled the insurance by providing a cancellation notice that complied with state statutes. 

The high court said the appellate court erred in ignoring that the insurer engaged in “other conflicting conduct” that rendered its notice of cancellation “indefinite, uncertain, and ambiguous.”

Why This Matters

Connecticut’s high court ruling highlights several critical considerations for roofing contractors.

• Maintaining open and precise communication with insurance providers is essential. 
• Any notices regarding policy status should be promptly addressed, and clarifications should be sought immediately to avoid misunderstandings. 
• Familiarity with the statutory and contractual requirements for policy cancellation is crucial. Contractors should know the steps insurers must take to cancel a policy and ensure they receive proper and unambiguous notices. 
• Keeping detailed records of all communications with insurers, including notices received and information provided, can be crucial in coverage disputes. 

These records serve as evidence of compliance and responsiveness. If there is any uncertainty regarding insurance communications or policy status, consulting with legal counsel can provide guidance and help protect the contractor's interests.