Insurer balks at workers’ comp claim, cites false application info

| Mar 29, 2019 | workers compensation insurance defense

The workers’ compensation insurance application vetted by Zurich American Insurance Company seemed straightforward enough to its examiners. Based on the information supplied by Tennessee-based Sunshine Enterprise (a seller/distributor of Chinese construction and industrial equipment to American companies), Zurich duly issued a policy providing for coverage.

And then things became far less clear. Virtually the entire leadership and management team of Sunshine Enterprise died in a Georgia airplane crash last year. In its wake, Zurich received a claim from the company for workers’ comp death benefits.

Insurance officials took sharp notice of that, for this material reason: Zurich’s coverage application directly addressed plane-related matters, with the insurer asking specifically of every company applicant whether it owned, leased or operated an airplane.

Sunshine Enterprise’s paperwork contained an interesting answer. The company stated that it had no connection with any aircraft.

That response was notable, because the airplane that crashed was owned by Sunshine’s CEO, as well as personally piloted by him.

The unfolding of those facts yielded a blunt retort from Zurich, which comprises the insurer’s central allegation in a federal lawsuit recently filed by the company. Zurich deems the “no” response a fraudulent entry that voids Sunshine’s claim and, indeed, the entire policy. Zurich officials logically claim that their decision to offer coverage based on an assessment of risk was tarnished by a lack of material information.

The litigation is in its early stages, with a media spotlighting of the matter noting that the complaint is “scant on details about the insurance claim.”