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UNINSURED EMPLOYER’S FUND

The Fund was created "[f]or the purpose of providing funds for compensation benefits awarded against any uninsured or self-insured employer under the provisions of this chapter." Code Sec. 65.2-1201. To finance the program, the enabling legislation that created the Fund provides that a tax shall be assessed, collected and paid into the state
treasury by "[e]very person, partnership, association, corporation, . . . company, mutual company or association, the parties to any interindemnity contract or reciprocal plan or scheme, and every other insurance carrier, insuring employers in this Commonwealth against liability for personal injuries to their employees or death caused thereby." Code Sec. 65.2-1000. The commission is authorized to "order payment of any award of compensation benefits . . . from the . . . Fund" when the commission determines that an employer has failed to acquire the requisite workers' compensation insurance or cannot satisfy a compensable claim in whole or in part. Code Sec. 65.2-1203(A). This Court has held that the "purpose of the Fund is to insure that injured employees will be paid their compensation benefits even though their employer has breached his duty to secure compensation insurance." A.G. Van Metre, Jr., Inc. v. Gandy, 7 Va. App. 207, 213, 372 S.E.2d 198, 202 (1988).The Fund, a statutorily created entity financed by taxes levied upon insurers, functions as a workers' compensation insurer of last resort under the limited circumstances described in the statute, i.e., when an employer fails to be suitably insured as required by Code Sec. 65.2-801 or otherwise fails to satisfy a compensable claim. See Code Sec. 65.2-1203(A). See also Gandy, 7 Va. App. at 213-14, 372 S.E.2d at 202 ("The purpose of the Fund is to insure that injured employees will be paid their compensation benefits even though their employer has breached [its] duty to secure compensation insurance."). Upon payment of a claim, the Fund is statutorily "subrogated to any right to recover damages which the injured employee . . . or any other person may have against . . . [the] employer or any other party." Code Sec. 65.2-1204. In addition, the statute permits the Attorney General to "defend any claim against the . . . Fund." Code Sec. 65.2-1202. Under these statutorily defined circumstances, the Fund pays an award to an injured employee much like a workers' compensation insurer. Because the Fund characteristically exhibits indicia of a "governmental insurance or guaranty program" of limited   purpose, Code Sec. 38.2-1610 (A1), the commission properly ruled that the award of lifetime benefits to claimant should not be prorated between the Guaranty Association and the Fund. The Fund falls within the statutory purview of those entities from which recovery must be exhausted before the Guaranty Association is required to make payments. Thus, the commission did not err in ruling that the Guaranty Association only becomes liable for payment in the event the Fund is unable to fully satisfy the award. The commission also did not err when it ordered the Fund to pay the portion of the award that was originally assessed against Rockwood Insurance. The Uninsured Employer's Fund v. Alfred L. Flanary, Moose Coal Company and The Virginia Property and Casualty Insurance Guaranty Association, 27 Va. App. 201, 497 S.E.2d 912 (1998), aff'd, ___ Va. ___, ___ S.E.2d ___ (February 26, 1999). WP Version.

Code Sec. 65.2-1203(A) provides as follows: Whenever, following due investigation of a claim for compensation benefits, the Commission determines that (i) the employer of record has failed to comply with the provisions of Sec. 65.2-801 . . . , and (ii) the claim is compensable, the Commission shall . . . order payment of any award of compensation benefits pursuant to this chapter from the Uninsured Employer's Fund. Id. Code Sec. 65.2-801 provides, in relevant part, as follows: A. Every employer subject to this title shall secure his liability thereunder by one of the following methods: 1. Insuring and keeping insured his liability in an insurer authorized to transact the business of workers' compensation insurance in this Commonwealth . . . .Id. To read Code Sec. 65.2-801 to require only that employers have insurance on the date of the employee's last exposure, and not on the date when the diagnosis of the disease was communicated to the employee, would exempt employers from insuring themselves against a great number of occupational disease claims. Moreover, Code Sec. 65.2-801, by its use of the phrase "keeping insured," requires employers to remain insured. Therefore,   because employer was not insured on the date the diagnosis was communicated to claimant, employer failed to "keep[][itself] insured" as required by Code Sec. 65.2-801. Uninsured Employer's Fund v. Harold C. Mounts, Record No. 2116-96-3 (April 22, 1997), 24 Va. App. 552, 484 S.E.2d 140 (1997), aff'd, 255 Va. 254, 497 S.E.2d 464 (1998) WP Version: Given the statutory mandate to insure and keep insured its liability, an employer with employees susceptible to pneumoconiosis must anticipate that claims may accrue in the future and must secure its liability for potential claims as required by § 65.2-801,even when its insurer has been declared insolvent. Here there was a failure to do so, and the Court of Appeals correctly found the Uninsured Employer's Fund is liable because the employer violated its statutory duty. 

"The purpose of the Fund is to insure that injured employees will be paid their compensation benefits even though their employer has breached his duty [under Code Sec. 65.2-801]." A.G. Van Metre, Jr.,Inc. v. Gandy, 7 Va. App. 207, 213, 372 S.E.2d 198, 202 (1988).

The General Assembly created the Virginia Property and Casualty Insurance Guaranty Association to "provide prompt payment of covered claims to reduce financial loss to [any person instituting a liability claim] or policyholders resulting from the insolvency of an insurer." Code Sec. 38.2-1600; see also Code Sec. 38.2-1602. The Association's duties and powers are explicitly defined by statute. See Code Sec. 38.2-1606. The statutory scheme requires the Association to pay "[t]he full amount of a covered claim for benefits under a workers' compensation insurance coverage." Code Sec. 38.2-1606(A)(1)(i). However, that statutory duty is limited by the proviso that"[n]otwithstanding any other provision of this chapter, a covered claim shall not include any claim filed with the . . .Association after the final date set by the court for the filing of claims against the liquidator or receiver of an insolvent insurer." Code Sec. 38.2-1606(A)(1)(ii). The legislation that created the Association, "considered as a whole, clearly indicates that the General Assembly did not intend . . . the Association . . . [to be] merely a solvent substitute for an insolvent insurance company." Virginia Property and Cas. Ins. Guar. Ass'n v. International Ins. Co., 238 Va. 702, 703, 385 S.E.2d 614, 616 (1989). When the Pennsylvania court declared Rockwood to be insolvent, the court-appointed liquidator set August 26, 1992 as the last date for filing claims. The evidence proved that Mounts' claim for benefits was not filed until 1993. Clearly, the Association was barred by statute from considering Mounts' claim to be "a covered claim," Code Sec. 38.2-1606(A)(1)(ii), and was not authorized to pay benefits. Accordingly, the commission properly ruled that the Fund, not the Association, was liable for payment of Mounts' claim. Uninsured Employer's Fund v. Harold C. Mounts, Record No. 2116-96-3 (April 22, 1997), 24 Va. App. 552, 484 S.E.2d 140 (1997), aff'd, 255 Va. 254, 497 S.E.2d 464 (1998) WP Version: Given the statutory mandate to insure and keep insured its liability, an employer with employees susceptible to pneumoconiosis must anticipate that claims may accrue in the future and must secure its liability for potential claims as required by § 65.2-801,even when its insurer has been declared insolvent. Here there was a failure to do so, and the Court of Appeals correctly found the Uninsured Employer's Fund is liable because the employer violated its statutory duty.

CIGNA, the putative insurer, complied with Code Sec. 65.2-804 (B) in canceling employer's workers' compensation insurance policy where credible evidence supported the commission's finding that the employer received notice of cancellation. Sec. 65.2-804 (B) provides, in pertinent part: "No policy of insurance hereafter issued under the provisions of this title . . . shall be cancelled or nonrenewed by the insurer issuing such policy . . . except on thirty days' notice to the employer and the Workers' Compensation Commission . . ." In American Mutual Fire Insurance Co. v. Barlow, 4 Va. App. 352, 355-56, 358 S.E.2d 184, 186-87 (1987), we held that the notice must actually be received by the commission in order for cancellation to be effective. In deciding whether actual receipt is necessary to effect cancellation, the language of the statute controls. Where the statute provides that the policy may be cancelled by giving a certain number of days' notice to the insured, and does not specify mailing as the method of providing notice, actual receipt is required for the notice to be effective. This rule is well established in both cases and commentary. See Scanlon v. Empire Fire and Marine Insurance Co., 117 Idaho 691, 693-94, 791 P.2d 737, 739 (1990); Larocque v. Rhode Island Joint Reinsurance Assoc., 536 A.2d 529, 530-31 (R.I. 1988); Nunley v. Florida Farm Bureau Mutual Insurance Co., 494 So.2d 306, 307 (Fla. Dist. Ct. App. 1986); Osborne v. Unigard Indemnity Co., 719 S.W.2d 737, 740-41 (Ky. Ct. App. 1986); Smith v. Municipal Mutual Insurance Co., 169 W.Va. 296, 298-99, 289 S.E.2d 669, 670-71 (1982); Rocque v. Co-operative Fire Insurance Association of Vermont, 140 Vt. 321, 325, 438 A.2d 383, 385-86 (1981); Martin J. McMahon, Annotation, Actual Receipt of Cancellation Notice Mailed By Insurer as Prerequisite to Cancellation of Insurance, 40 A.L.R. 867, 873, 883-88 (4th ed. 1985); 43 Am. Jur. 2d, Insurance Sec. 391 (4th ed. 1982). This rule is consistent with the policy that underlies Code Sec. 65.2-804 (B). As the Court noted in Barlow, one purpose of the notice requirement is to allow employers to secure insurance with another carrier. See also Hartford Accident & Indemnity Co. v. Fidelity & Guaranty Insurance Underwriters, Inc., 223 Va. 641, 643-44, 292 S.E.2d 327, 328 (1982). If the employer does not receive the notice, the employer does not have the opportunity to secure other insurance, and thus the statutory purpose is not
fulfilled. See Larocque, 536 A.2d at 531; Smith, 169 W.Va. at 299, 289 S.E.2d at 671. CIGNA met its burden of showing, based on credible evidence, that the employer actually received the notice. Evidence of regular practices of mailing showed CIGNA mailed the notice. None of the notices sent to employer were returned by the post office. Even if the notice was actually received late, under the rule generally applicable to cancellation of insurance, failure to give the notice of the requisite length does not void the notice; instead, cancellation becomes effective after the required period has lapsed. See Wright v. Grain Dealers National Mutual Fire Insurance Co., 186 F.2d 956, 960-61 (4th Cir. 1950) (applying Virginia law); 43 Am. Jur. 2d Insurance, Sec. 389 (1982). In addition, both CIGNA and NCCI informed employer in August, more than two months before the cancellation date, that his insurance would be cancelled for failure to provide information necessary for the audit. Employer's insurance was effectively cancelled under Code Sec. 65.2-804(B). Robert A. Villwock, T/A Pioneer Construction Co., Inc. v. Christopher R. Routh, et al., Record No. 0434-95-3 (March 19, 1996).

         

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