Mississippi Supreme Court decides on workers’ comp case

Mississippi Supreme Court decides on workers’ comp case | Insurance Business America

Workers Comp

Mississippi Supreme Court decides on workers’ comp case

Key ruling explained

Workers Comp

By
Noel Sales Barcelona

The Mississippi Supreme Court (SC) has affirmed the Appellate Court’s decision over the American Compensation Insurance Co. v. Ruiz case, saying while the Mississippi Workers’ Compensation Act (MWCA) is silent about the insurer’s capacity to void, ab initio, a workers’ compensation (WC) policy based on material misrepresentation, it does not mean that the MWCA allows such action.

In its decision for the case of American Compensation Insurance Co. v. Ruiz, released last June 27, 2024, the Mississippi SC ruled the MWCA does not allow an insurer to rescind a worker’s compensation (WC) policy from the moment of its inception based on an employer’s material misrepresentation.

According to the case history, as cited in the SC’s decision, it stated that a WC insurer filed a lawsuit in federal court against an employer, seeking to rescind or void, ab initio, the employer’s WC policy back to its inception based on material misrepresentations in the application allegedly made by the employer.

The federal appellate court, on the other hand, recognized that Mississippi law was “silent” and did not specifically address whether the insurer could rescind the policy from inception, and had asked the Mississippi SC to rule on the issue.

Based on its analysis of the merits of the case, the Mississippi SC stated that in reviewing statute 71-3-77(1) related to the cancellation and non-renewal of WC policies of the MWCA, it provides that no cancellation or nonrenewal shall be effective until 30 days after service of notice on the insured and notice to the Workers’ Compensation Commission.

The SC also explained that, based on the analysis of the said statute, in the WC context, allowing rescission of a policy is “tantamount to allowing retroactive cancellation of a policy, which is inconsistent with the statute.”

The SC decision also furthered that rescinding the policy from inception goes against the public policy purposes of the Workers’ Compensation Act, which is to pay disability and medical benefits to injured workers who suffer compensable injuries on time.

Because of this, the SC, in its conclusion stated that under Mississippi law, a WC insurer is not allowed to rescind a policy based on an employer’s material misrepresentation.

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