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Court Says Insurer Can’t Be Saddled With ‘Known Loss’

Leon County Judge John Cooper on June 30, 2022, in a screen grab from The Florida Channel.
Mercedes Marler (Flickr)
The Florida Channel
Leon County Judge John Cooper on June 30, 2022, in a screen grab from The Florida Channel.

An appeals court Wednesday ruled that an insurer shouldn’t have to pay a claim under a workers’ compensation insurance policy that was written hours after a piece of heavy machinery ran over a construction worker’s foot. 

The ruling by a panel of the 1st District Court of Appeal in favor of Normandy Insurance Co. stemmed from a May 2016 accident when a Bobcat machine ran over Jose Sorto’s foot on a job site.

Sorto’s employer, J.A.M. Construction, a subcontractor on the job, called its insurance broker about the expected claim. The broker then submitted paperwork to obtain workers’ compensation coverage from Normandy Insurance without disclosing the Sorto claim, according to Wednesday’s ruling.

J.A.M. did not know at the time it did not have workers’ compensation coverage.

Normandy wrote the policy but later refused to pay the claim, contending it should be covered by Amerisure Insurance Co., which was the insurer for the general contractor on the job.

A judge of compensation claims ruled against Normandy, saying the policy had become effective at 12:01 a.m. on the day of the morning accident. But the appeals court Wednesday overturned that decision.

“The key question in this appeal is whether a workers’ compensation insurer must cover claims that were known to the insured before procuring coverage, but that weren’t disclosed to the insurer,” said the seven-page ruling, written by appeals-court Judge Timothy Osterhaus and joined by judges Clay Roberts and T. Kent Wetherell. “Nothing in the workers’ compensation law … requires new insurers to cover an insured’s prior known losses. Nor do we think that the parties’ contract in this case compels Normandy to cover J.A.M.’s known loss. Rather, our cases explicitly forbid insureds from saddling insurers with known losses, as opposed to covering for the risk of loss. Insurance is meant to cover uncertainties, not certain losses. And we have recognized that extending insurer liability to cover known losses would undermine the concept of insurance and the stability of the insurance system.”