Major Court Rulings Shape P&C Insurance Across the South

Recent court decisions across the South continue to shape the risk management landscape, from workers’ compensation to property insurance issues.

Workers’ comp

In South Carolina, the state Supreme Court recently upended decades of practice and joined the national debate over who is and who isn’t considered an employee. The decision could have significant implications for employers and their insurers.

In Keene v. CNA Holdings, the court declared that some contract workers can no longer be considered employees, covered only by the grand bargain of workers’ comp law and, thus, can now sue the employer for tort claims.

South Carolina claimants’ attorney Malcolm Crosland called it “a potential game changer,” but one that was long overdue.

“The court has recognized that in this day and age, it’s far more common to subcontract out a lot of work that the company doesn’t want to do,” Crosland said.

“This takes a settled defense for employers and turns it on its head,” said defense attorney Stephen Bell. “It’s sent waves through the community about what to do now from a risk mitigation standpoint.”

A number of states in recent years have passed laws and regulations that make it clear that independent contractors are not considered employees. Other states, including California, have done the opposite, emphasizing that gig workers, such as Uber drivers, are to be classed as employees in most cases, eligible for workers’ comp insurance coverage.

South Carolina’s law, penned in the late 1930s, has been a little different than most states. It defined some types of independent contractors as “statutory employees.” If injured on the job, those workers were covered by the exclusive remedy under comp law. The legislature’s original intent was to prevent businesses from contracting out their work in order to avoid comp costs and liability, the court noted.

The reasoning was rooted in the fact that South Carolina was one of the last states to adopt a workers’ comp statute. Many employers, particularly the upstate textile mills, had fought against the idea and lawmakers feared the companies would get around the law by classing workers as contractors, Crosland explained.

In the Keene decision, handed down in August, the high court found that the law has always been less than clear, however, and it was time for a new interpretation.

“For 82 years, this court struggled to correctly apply sections 42-1-400 and -410 of The South Carolina Workers’ Compensation Law,” Justice John Cannon Few wrote for the majority. “The resulting body of jurisprudence is confusing, often conflicting, and always difficult for the workers’ compensation commission and the circuit court to apply.”

The court upheld a circuit court decision and found that the statutory three-part test in determining an employee’s status did not reflect the modern economy in which contract work is now the norm in some fields. A contract worker who died of asbestos-related illness was not an employee and his family is now free to collect tort damages for the company’s negligence, the court said.

A South Carolina jury had awarded the worker’s estate $14 million in actual damages and $2 million in punitive damages. The circuit court denied CNA Holdings’ motion for summary judgment and the appeal ensued.

The Supreme Court justices produced their own test to determine employee status: “If a business manager reasonably believes her workforce is not equipped to handle a certain job, or the financial or other business interests of her company are served by outsourcing the work, and if the decision to do so is not driven by a desire to avoid the cost of insuring workers, then the business manager has legitimately defined the scope of her company’s business to not include that particular work.”

In this case, the worker was covered by workers’ comp, through the subcontractor, as required by the contract with CNA Holdings. But the justices emphasized that the overarching public policy behind the law is to compensate injured workers.

“However, when the public policy favoring coverage is satisfied–as it was here–that policy has nothing to say about providing immunity to the owner. For these reasons, CNA Holdings’ argument that public policy supports its position is misplaced,” the high court wrote.

“That really was the most important part of the decision,” Bell noted.

In Florida, a state appellate court reached a similar conclusion about a subset of contract workers – the cable guy.

Under Florida law, most construction workers are specifically defined as employees, even if they call themselves independent contractors.

In Victor Cabrera vs. Kablelink Communications, Sedgwick Claims Management and New Hampshire Insurance Co., Florida’s 1st District Court of Appeal held in October that a TV cable installer is not a construction worker and is not eligible for workers’ comp after an injury.

Florida law defines construction as “substantial improvement in the … use of any structure.”

The claimant’s attorney, Michael Winer of Tampa, argued that “as a matter of pure common sense,” Cabrera’s work for the cable company should be considered construction work. Most buildings, including courthouses, are structures that are improved by and rely on cable-related communications.

Nonetheless, the judges found that “we cannot determine whether claimant’s cable installation work involved making a ‘substantial improvement’ in the use of the homes served by Kablelink.” The court upheld the compensation judge’s decision and denied benefits for the injured cable guy.

Property Insurance

In Florida’s turbulent property and casualty market, where two carriers have become insolvent in the last year and more may be on the way, insurers have long complained about excessive litigation by unscrupulous repair companies when claims are denied.

But the number of litigated claims has dropped somewhat after reform legislation was passed in 2019 and 2021, according to one case-tabulation report. And several appeals-court decisions have gone in favor of insurers in the last two months.

In a closely watched assignment-of-benefits case, Union Restoration vs. Citizens Property Insurance Co., Florida’s insurer of last resort, the 3rd District Court of Appeal found that a questionable document did not divert insurance payments to a construction firm. Union Restoration, like hundreds of restoration firms have done in Florida in recent years, filed suit after the insurer refused to pay the contractor.

The appeals court affirmed a Miami-Dade Circuit Court decision and noted that a Union principal had “altered the written assignment by changing the date of the claimed loss, changing the number of the claim several times, and adding the insured’s initials to the alterations.”

Under the circumstances, “we have no difficulty in upholding the summary judgment for Citizens,” appeals court Judge Thomas Logue wrote.

In three other decisions, appeals courts sided with Citizens and with two private-market insurers in AOB cases.

In Union Restoration vs. Heritage Property & Casualty Insurance Co, the 3rd District Court of Appeal said that the AOB agreement was invalid because it was not signed by both spouses and the mortgage company, as required by the policy.

Miami-Dade County Court records show that Union Restoration has filed at least 36 lawsuits against property insurers since 2015, adding to insurers’ contention that Florida has become ground zero for AOB abuse.

In a nearly identical case, the 4th DCA in October also upheld the dismissal of a suit brought by a restoration company in Palm Beach County. The appeal court found, in The Kidwell Group (Air Quality Assessors) vs. Geovera Specialty Insurance Co., that both spouses had not signed the AOB agreement.

“It’s a win for our client and it’s a win for consumers, who have seen rates skyrocketing and lawsuits that have gone crazy,” said Patrick Carleton, one of the attorneys who represented Geovera Insurance.

In a third AOB decision, the 4th DCA agreed that policy requirements should be strictly adhered to.

In Damage Services Inc. vs. Citizens Property Insurance, the restoration company, known as DSI, argued it had been assigned benefits by a realty company. When Citizens would not pay the full amount for emergency repairs, DSI sued.

The trial court and the appeal court said that the insurance policy states clearly that it would pay no more than $3,000 for emergency measures to protect the property unless a request was made to exceed that limit.

“Because DSI did not make a request to exceed the policy limit prior to exceeding the limit for the work performed, we affirm” the lower court’s denial of payment to the contractor, the 4th DCA judges wrote.

Florida insurance industry advocates continue to insist that assignments-of-benefits agreements have driven up homeowner premiums by leading to unnecessary work and inflated claims by contractors, then excessive litigation by those contractors when insurers won’t pay. Florida’s Legislature revised the assignments-of-benefits law in 2019 and made further statutory changes this year with Senate Bill 76.

Those laws may be having an impact. A report from CaseGlide, a litigation management software maker that tracks insurance lawsuits, indicates that new litigated claims dropped 9% in September for Florida’s largest property insurers.