Present: All the Justices
UNINSURED EMPLOYER’S FUND
OPINION BY JUSTICE A. CHRISTIAN COMPTON
v. Record No. 971074 February 27, 1998
HAROLD C. MOUNTS, ET AL.
FROM THE COURT OF APPEALS OF VIRGINIA
In this workers’ compensation case, the sole issue at this
stage of the appellate process is whether the Uninsured
Employer's Fund is liable for payment of compensation for a
claimant’s occupational disease upon the ground that the
claimant’s employer violated Code § 65.2-801(A)(1). The
statute, a part of the Workers’ Compensation Act, requires every
employer to “secure his liability thereunder” by “[i]nsuring and
keeping insured his liability” under the Act.
Appellee Harold C. Mounts, the claimant, while working as a
coal miner for appellee Greasy Creek Coal Company, the employer,
suffered a disabling, compensable back injury in an industrial
accident on October 12, 1988. On that date, the employer was
insured by Rockwood Insurance Company, an insurer authorized to
transact the business of workers’ compensation insurance in the
Commonwealth, as required by former Code § 65.1-104.1(A)(1), now
§ 65.2-801(A)(1). The claimant stopped working because of the
disability, and the insurer began paying benefits.
In August 1991, a Pennsylvania court declared the
insurer insolvent, and liquidation proceedings commenced. All
persons with claims against the insurer were required to file
their claims with the court’s liquidator by August 26, 1992.
In August 1991, appellee Virginia Property and Casualty
Insurance Guaranty Association, pursuant to Code § 38.2-1606,
began paying Mounts’ award for the October 1988 accidental back
injury because, at the time of the insurer’s insolvency,
Rockwood had been paying the award. The Guaranty Association,
established by statute to “provide prompt payment of covered
claims to reduce financial loss to claimants” resulting from an
insurer’s insolvency, § 38.2-1600, is obligated to pay such
claims that existed prior to the insolvency determination.
§ 38.2-1606(A)(1).
On September 15, 1993, an x-ray report indicated that the
claimant was suffering from coal workers’ pneumoconiosis. Nine
days later, he filed with the Workers’ Compensation Commission a
claim for benefits for that occupational disease, naming Greasy
Creek Coal Company as his last employer.
Subsequently, at a January 1996 hearing, a deputy
commissioner found “that claimant received a communication of
diagnosis of occupational disease on September 15, 1993.” The
deputy denied the claim, however, ruling that it was barred by
the applicable statute of limitations.
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Upon review, the full Commission reversed the deputy’s
ruling, finding the claim was timely. Turning to the merits,
the Commission determined that the date of claimant’s last
injurious exposure to the hazards of the disease was October 12,
1988, while he was employed by Greasy Creek. The Commission
ruled that the claimant’s “pneumoconiosis is compensable as an
occupational disease” under Code § 65.2-400.
Next, the Commission considered whether the Guaranty
Association “is responsible for payment of the claim.” The
Commission concluded that because the September 1993 claim was
filed after the August 1992 deadline established during the
liquidation proceedings, the claim was not “covered” and the
Guaranty Association was “not responsible for paying benefits to
this claimant.”
Continuing, the Commission ruled, without assigning a
reason, that the Uninsured Employer’s Fund “is responsible for
this claim.” Thus, the Commission entered an award against
Greasy Creek and the Fund for payment of disability benefits at
the weekly rate of $451 for a period of 50 weeks, plus medical
benefits.
The Fund appealed, and a panel of the Court of Appeals
unanimously affirmed the Commission. Uninsured Employer’s Fund
v. Mounts, 24 Va. App. 550, 484 S.E.2d 140 (1997). Among other
issues, the Court of Appeals determined that the Fund was
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responsible for payment of benefits to the claimant and that the
Guaranty Association had no such obligation. Id. at 557, 484
S.E.2d at 143. According to the Court of Appeals, the Fund’s
liability stemmed from the employer’s violation of Code § 65.2-
801(A)(1) in failing to keep its liability insured. Greasy
Creek was not insured on September 15, 1993, the date the
diagnosis was communicated to the claimant.
The Fund filed a petition for appeal in this Court,
assigning error to only one of the Court of Appeals’ rulings.
The Fund’s assignment of error states: “The Court of Appeals’
reliance upon ‘keeping insured his liability’ language in
§ 65.2-801(A)(1) to make the Uninsured Employer’s Fund liable
for pneumoconiosis benefits is erroneous.” Thus, because the
Fund does not assign as error the Court of Appeals’ holding that
the Guaranty Association is not liable for payment of the
claimant’s benefits, the judgment in favor of the Guaranty
Association is final.
Determining that the Court of Appeals’ decision involves a
matter of significant precedential value within the meaning of
Code § 17-116.07(B), we awarded the Fund this appeal from the
April 1997 judgment below.
Initially, the relevant workers’ compensation statutes must
be summarized. Code § 65.2-404 provides that when an employee
has a compensable occupational disease, “the employer in whose
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employment he was last injuriously exposed to the hazards of the
disease and the employer’s insurance carrier, if any, at the
time of the exposure, shall alone be liable therefor, without
right to contribution from any prior employer or insurance
carrier.” The claimant’s entitlement to benefits for an
occupational disease, however, accrues on the date of the “first
communication of the diagnosis.” Code § 65.2-403(A), formerly
§ 65.1-49 (1987 Repl. Vol.); Cooper v. Mary E. Coal Corp., 215
Va. 806, 809, 214 S.E.2d 162, 164-65 (1975).
On the date of this claimant’s last injurious exposure to
the hazards of pneumoconiosis in October 1988, former Code
§ 65.1-149(A) (1990 Cum. Supp.) (now § 65.2-1203(A)(2))
provided: “After an award has been entered against an employer
for compensation benefits . . . and upon a finding that the
employer has failed to comply with the provisions of § 65.1-
104.1 . . . the Commission shall order the award, or any unpaid
balance, to be paid from the Uninsured Employers Fund.” The
Fund was created by the General Assembly to provide funds to
claimants for benefits awarded against an employer which has
breached its duty “to secure compensation insurance.” A. G. Van
Metre, Jr., Inc. v. Gandy, 7 Va. App. 207, 213, 372 S.E.2d 198,
202 (1988). See § 65.2-1201(A).
In October 1988, former Code § 65.1-104.1(A)(1) (1987 Repl.
Vol.), like present § 65.2-801(A)(1), provided that every
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employer “shall secure his liability” for workers’ compensation
payments by, among other methods, “[i]nsuring and keeping
insured his liability” with an authorized workers’ compensation
carrier.
The Court of Appeals, in ruling against the Fund, stated:
“To read Code § 65.2-801 to require only that
employers have insurance on the date of the employee’s
last exposure, and not on the date when the diagnosis
of the disease was communicated to the employee, would
exempt employers from insuring themselves against a
great number of occupational disease claims.
Moreover, Code § 65.2-801, by its use of the phrase
‘keeping insured,’ requires employers to remain
insured. Therefore, we hold that because Greasy Creek
was not insured on the date the diagnosis was
communicated to Mounts, Greasy Creek failed to ‘keep[]
[itself] insured’ as required by Code § 65.2-801.”
Mounts, 24 Va. App. at 556, 484 S.E.2d at 143 (alteration
in original).
In this appeal, the Attorney General contends, on
behalf of the Fund, that by virtue of the language in
§ 65.1-149 (§ 65.2-1203), Greasy Creek was in compliance
with the requirements of § 65.1-104.1 (§ 65.2-801) because
it was insured by Rockwood on October 12, 1988. Thus, the
Attorney General argues, because the Fund can be
responsible for an award only “upon a finding that the
employer has failed to comply with the provisions of
§ 65.1-104.1,” this Court should reverse that portion of
the award that imposes liability upon the Fund.
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Continuing, the Attorney General says that the Court
of Appeals, in holding the Fund liable, incorrectly
“latched onto” the “keeping insured” language in § 65.1-
104.1 (§ 65.2-801(A)(1)), while noting the employer was not
insured in 1993. He argues that the Court of Appeals’
reasoning is flawed because only the carrier that insured
the employer’s liability on the date of the last injurious
exposure can be held liable, in view of the provisions of
§ 65.2-404.
The Court of Appeals answered this argument by saying
that § 65.2-404, by its terms, “addresses only the
liability of the employer in whose employment the employee
was last injuriously exposed, and its insurance carrier, in
contradistinction to prior employers and their insurance
carriers.” Mounts, 24 Va. App. at 557, 484 S.E.2d at 143.
The Court of Appeals stated: “Nothing in Code § 65.2-404
was intended to release employers from the duty of ‘keeping
[themselves] insured’ as required by Code § 65.2-801 or to
exempt the Fund when the employer has breached its
statutory obligation.” Id. (alteration in original).
In a final argument, the Attorney General contends:
“The ‘keeping insured’ language is not meant to require an
employer like Greasy Creek to anticipate future
pneumoconiosis claims when his carrier is declared
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insolvent, particularly in the face of the plain wording of
§ 65.2-404 that makes the employer and carrier on the last
date of injurious exposure liable.” We disagree with the
Attorney General, and agree with the Court of Appeals.
The “keeping insured” language has been a part of the
workers’ compensation statutes since the Act was adopted in
1918. Acts 1918, ch. 400, § 68. We have observed, as the
Court of Appeals correctly held, that the language under
scrutiny here means that an employer subject to the Act
“must be and remain insured.” Hartford Accident & Indem.
Co. v. Fidelity & Guar. Ins. Underwriters, Inc., 223 Va.
641, 643, 292 S.E.2d 327, 328 (1982).
We shall elaborate on the Court of Appeals’ analysis
to answer one portion of the Attorney General’s argument in
this Court. He contends that the statutes do not require
an employer to anticipate future pneumoconiosis claims and
to remain insured when its insurer has been declared
insolvent. This argument, however, is answered by merely
referring to the statute of limitations governing
occupational diseases.
An employer has potential liability for a claim of
coal miners’ pneumoconiosis for “three years after a
diagnosis of the disease” is first communicated to the
employee, or for “five years from the date of the last
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injurious exposure in employment, whichever first
occurs. . . .” Code § 65.2-406(A)(1), formerly § 65.1-
52(1). Therefore, given the statutory mandate to insure
and keep insured its liability, an employer whose employees
are susceptible to pneumoconiosis must anticipate that such
claims will accrue in the future and must secure its
liability for such potential claims as required by § 65.2-
801, even when its insurer has been declared insolvent.
When, as here, there has been a failure to do so, the Fund
will be liable because the employer has violated its
statutory duty.
Consequently, the judgment of the Court of Appeals
will be
Affirmed.
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