A limited liability company engaged in home renovation work brought claims against its insurance broker and carrier following the cancellation of its workers’ compensation policy. The company operated as a single-member LLC that relied entirely on subcontractors, placing it in a high-risk insurance category and leading to coverage being placed through the assigned risk pool.
During the policy period, the insurer requested an audit to confirm that the company had no employees, as this determination affected both coverage and premium calculations. Despite multiple requests, the company failed to respond, and the broker did not adequately follow up or assist in resolving the issue. As a result, the insurer cancelled the policy for non-compliance with the audit.
Shortly after cancellation, an independent worker was injured at a job site. The insurer denied coverage on the basis that the policy was no longer in force. The company ultimately resolved the workers’ compensation claim through the state commission, paying a settlement of approximately $70,000, and then initiated litigation against both the insurer and the broker for improper cancellation and failure to secure or maintain proper coverage.
Through mediation, the matter was resolved, with the insurer contributing the majority of the settlement payment. The broker’s contribution was modest and below the amount reserved by its errors and omissions carrier.