When the Court Finds a Trucking Company Never Updated Its Insurance Contract, the Company Loses Coverage for Workers’ Comp Claims
In 2014, Virginia-based KC Transport, a trucking company, was looking to expand its services and obtain coal-hauling contracts with potential customers. But before any company would sign on with the trucking company contract, they required KC Transport to prove it had adequate workers’ compensation coverage for drivers.
KC Transport thought that an easy fix, and so company president Lynn Compton turned to BB&T Insurance Services for aid. At the time, BB&T was given the following facts: KC Transport was looking for workers’ compensation insurance for its drivers, and KC Transport was located in Virginia. BB&T was told there were four drivers who only performed local hauling duties in the Virginia area.
BB&T found LM Insurance as an appropriate match for the information KC Transport and Compton provided. The LM Insurance policy went into effect May 2014.
Now that it had proof of worker’ comp coverage, KC Transport was able to start a coal-hauling contract with a team in West Virginia. This documentation was sent to BB&T and forwarded to LM Insurance.
In August 2015, one of KC Transport’s drivers sustained an injury while on the job in West Virginia. His workers’ comp claim, however, was denied.
A few months later, in February 2016, another driver was injured on the job in West Virginia. Again, LM Insurance denied coverage.
In both proceeding civil complaints, LM Insurance refused to defend KC Transport. Compton filed suit.
KC Transport alleged BB&T breached its duty by failing to procure coverage for its operations in West Virginia, but BB&T countered it was unaware that KC Transport had any employees in West Virginia until the first workers’ comp claim came in 2015.
When examined further, the court found no evidence that a contract reporting employees in West Virginia existed between KC Transport and BB&T. It questioned how a contract could be breached if there was no contract to be breached in the first place.
Compton countered that the documentation of the contract between KC Transport and the West Virginia coal company should have been proof enough, but the court didn’t see it that way.
“Considering the well-established principles of contract law, plaintiffs’ argument makes no sense. A breach of contract claim requires evidence of a legally enforceable obligation of a defendant to a plaintiff,” the court stated.
Scorecard: The court granted summary judgment to BB&T and LM Insurance, based on the fact that a contract including West Virginian employees never existed.
Takeaway: Agreements and contracts between partners are not a substitute for insurance. If your business model changes and your insurance needs grow, it is best to report those changes to the insurer immediately and clearly. &