Husband/Wife Bakery Ends Up With Two Policies; Insurers Must Split Cost of Death Claim

Policy Procured “by Mistake” Remains in Force Since Cancellation Wasn’t Done According to Missouri Law

Cancellation of a workers’ compensation insurance policy, even when both the insured and the insurer contend the policy was issued by mistake, must be in conformity with state law as to cancellations, held the Eighth Circuit Court of Appeals [Employers Preferred Ins. Co. v. Hartford Accident and Indem. Co., 2019 U.S. App. LEXIS 851 (Jan. 10, 2019)]. Accordingly, where a husband and wife each procured workers’ compensation insurance policies for the Missouri bakery (“the Bakery”) they jointly operated, cancellation of “the wife’s policy” by the husband was ineffective, since it was not accomplished under the state’s cancellation statute. The bakery was deemed to have two policies of insurance and each insurer was responsible for one-half the benefits owed when a bakery employee sustained fatal injuries in a work-related automobile accident before the attempted “cancellation.”


The Bakery had an existing policy with Hartford, and the wife completed a renewal application and paid the premium for a new policy to run from July 20, 2013, to July 20, 2014. A few weeks later, on August 9, 2013, the husband submitted an application and paid the premium for a policy from Employers, also to run from July 20, 2013, to July 20, 2014. The Court indicated the specific reason for this double coverage was unclear, but by mid-August 2013, the Bakery had acquired two workers’ compensation insurance policies, one from Hartford and one from Employers.

In May 2014, an employee of the Bakery died in an automobile accident in the course of his employment. Employers covered the legal costs and attorney fees associated with the subsequent workers’ compensation claim and paid benefits to the deceased employee’s widow. Employers then sought equitable contribution from Hartford, on the ground that both policies were in effect on the date of the accident and both policies contained language guaranteeing an equal division of costs in the event of concurrent coverage. When Hartford declined to contribute, Employers filed the instant action in federal court. The district court granted summary judgment for Employers.

Confusion Among Husband and Wife

On appeal, Hartford maintained that it did not owe any contribution because the husband and wife never intended to carry two policies for the Bakery and terminated the redundant coverage with Hartford. When a Hartford agent told the husband after the accident that the Hartford policy was active, the husband filed a cancellation request on July 8, 2014. Hartford retroactively cancelled the policy, effective July 20, 2013, and issued the Bakery a full refund of the premium. Hartford contended it owed no contribution because the husband and wife never wanted the Hartford policy in the first place, and Hartford never would have issued the policy if it had known that they did not want the coverage.

Cancellation Must be Accomplished Pursuant to Statute

The Eighth Circuit stressed that Hartford’s argument failed because HN2 Missouri law barred Hartford from cancelling a policy, and eliminating its duty to defend and indemnify, after an insured had become liable for a workers’ compensation claim. The governing statute [Mo. Rev. Stat. § 379.195.2] provided that no contract of insurance could be cancelled or annulled “by any agreement between the insurance company and the assured after the said assured has become responsible for such loss or damage, and any such cancellation or annulment shall be void.” Hartford’s cancellation of the Bakery’s policy on July 8, 2014, almost two months after the Bakery employee’s fatal accident, was therefore void.

No Mutual Mistake

Nor was there a mutual mistake, stressed the Eighth Circuit. The wife’s submission of the Hartford application and payment of the premium to Hartford created a binding contract. Whatever the husband might later have believed when he submitted an application for insurance with Employers could not demonstrate a mistake at the time when the Bakery, through the wife, contracted with Hartford. At most, the contract with Hartford constituted an “administrative misstep” by the husband and wife, not a mutual mistake under contract law that could avoid the prohibition on cancellation under the Missouri statute. The district court’s judgment in favor of Employers was affirmed.

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