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UNINSURED EMPLOYER'S FUND v. MOUNTS, ET AL.


UNINSURED EMPLOYER’S
FUND v. MOUNTS, ET AL.


February 27, 1998
Record No. 971074

UNINSURED EMPLOYER’S FUND

v.

HAROLD C. MOUNTS, ET AL.

OPINION BY JUSTICE A. CHRISTIAN COMPTON
FROM THE COURT OF APPEALS OF VIRGINIA

Present: All the Justices


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.

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
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
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
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.

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 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 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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