Jerri Simmons Secures Ghost Policy Coverage Denial

Jerri Simmons, a partner at Cranfill Sumner LLP, recently secured a favorable outcome for an insurance carrier client in a workers’ compensation dispute before the North Carolina Industrial Commission. The case involved an LLC owner who alleged a knee injury sustained while working at a customer’s property and sought workers’ compensation benefits under a policy issued by the insurance carrier client.

The central issue was whether the insurance carrier client was liable for coverage, given that the policy was a “ghost policy”, a type of insurance obtained by sole proprietors or LLCs with no employees, primarily to satisfy contractual requirements, but which does not cover the business owner unless they affirmatively elect coverage and pay the required premium. Evidence showed that the owner had not elected to be covered under the policy, as indicated by the application and renewal documents, and had consistently rejected coverage. The Commission further found no evidence of fraud or misrepresentation by the insurance carrier client or its agents.

Ultimately, the Commission concluded that the statutory requirements for coverage under North Carolina law were not met, as the owner did not elect to be included for workers’ compensation coverage. As a result, the claim for benefits was denied, and the insurance carrier’s denial of coverage was upheld as proper and in accordance with state law.