Recession

Southern Insurance Company v. Workers’ Compensation Appeals Board (Berrios-Segovia) (Court of Appeal, published) 82 C.C.C. 448

The Court of Appeal annulled a September 6, 2016 decision of the Board which affirmed the decision of the arbitrator that applicant’s claimed injury of April 6, 2009 was covered by a workers’ compensation insurance policy that had not been “retroactively rescinded” but “prospectively cancelled.”

The Court of Appeal stated that a workers’ compensation insurance policy was issued based on the express representation that the covered employer’s employees did not travel out of state. After an employee was injured out of state, the insurer notified the employer that it was rescinding the policy because of the employer’s misrepresentation and returned the premium. The issue of insurance coverage went to mandatory arbitration wherein the arbitrator concluded that, as a matter of law, the insurer could not rescind the policy and that the policy was in effect. The Workers’ Compensation Appeals Board affirmed the arbitrator’s decision. The Court of Appeal stated that, contrary to the arbitrator’s ruling, a workers’ compensation insurance policy may be rescinded. (Ins. Code, § 650.) A rescission is enforced by a civil action for relief based on rescission (Civ. Code, § 1692) or by asserting rescission as a defense. (Resure, Inc. v. Superior Court (1996) 42 Cal.App.4th 156, 165-166.)

Because the arbitrator and the appeals Board did not address and determine whether rescission was a meritorious defense to the employee’s claim, they annulled the appeals Board’s decision and remanded the case with directions to hear and determine whether the insurer was entitled to rescind, and did rescind, the policy.

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