Court: Employer’s Silence on Audit Requests Justified Policy Cancellation
- California’s Third Appellate District ruled on Aug. 6 that an employer’s failure to respond to roughly three months of payroll audit requests from its insurer, Employers Preferred Insurance Company, justified the cancellation of its workers’ compensation policy, effective Sept. 14, 2021.
- The insurer had sent repeated letters, emails, a certified letter, and finally a cancellation notice seeking payroll records needed to set the policy’s actual premium, but the company, Purchase Green Artificial Grass, never produced them. After a worker was injured on February 2022 and filed a claim, the insurer denied it citing the lapsed coverage.
- The Workers’ Compensation Appeals Board had initially sided with the employer, reasoning neither the policy nor the Insurance Code clearly defined what counts as failing to permit an audit, but the appeals court disagreed, holding the employer had an “affirmative obligation” to turn over records once requested, and that months of silence amounted to a failure to permit the audit regardless of intent.
- The court rejected the company owner’s testimony that he didn’t recall receiving the insurer’s communications, noting that not remembering doesn’t change the outcome, and also rejected the argument that the company never formally refused the audit, since under the policy silence itself was sufficient grounds for cancellation.
ADA Claim That Started as Workers’ Comp Case Revived
- The Fourth Circuit revived a pest control technician’s ADA failure-to-accommodate claim after a federal district court had granted the employer summary judgment, ruling instead that a jury should decide whether the company should have reassigned him to a customer service or sales position after his doctors said he could never return to his physically demanding technician role following a workers’ compensation injury.
- The case underscores that being covered by workers’ compensation doesn’t exempt an employer from its separate ADA obligations. The employer here appeared to treat the situation as binary (return to the old job or stay on leave) rather than considering reassignment, which is itself a form of reasonable accommodation the employer never evaluated despite the employee raising it.
- The court found the employer failed to meaningfully respond to the worker’s repeated requests to return in a lighter role, never engaged in the ADA’s required “interactive process” of brainstorming accommodations with him, and left open whether he could have performed the sales role since that process was never undertaken.
- Extended medical leave is only an appropriate accommodation if the employee is expected to fully recover and return to their original job, or if no other suitable positions exist, according to an analysis of the decision.