Zaloudek Grain Co. v. CompSource Oklahoma

Zaloudek Grain Company held a workers' compensation policy with CompSource Oklahoma for approximately ten years prior to 2011. Zaloudek was required each year to provide payroll audit information to CompSource. The audit information was used to determine the proper premium for each year. CompSource sent a notice in late 2010 to Zaloudek requesting audit information. In January, 2011, Zaloudek's policy was renewed for all of 2011 through January 1, 2012. On January 18, 2011, CompSource sent another letter requesting Zaloudek provide the necessary payroll audit information, but Zaloudek was unresponsive. Subsequently, CompSource sent Zaloudek a notification to inform the company that the process of canceling its policy would begin if CompSource did not receive the audit information. The audit information was not provided; CompSource ultimately canceled the policy when Zaloudek ignored several subsequent requests. CompSource issued a refund for payments made under the policy. Later that summer, two teenage workers were seriously injured in the grain auger at Zaloudek's facility. CompSource did not accept the company's new insurance application because it was incomplete and was not signed by an owner of Zaloudek. Zaloudek sued a few weeks following the rejection of its application, asking for a judgment against CompSource for breach of contract and bad faith and further requested declaratory relief in the form of an order requiring CompSource to provide workers' compensation coverage. Zaloudek filed a motion for summary judgment claiming CompSource lacked legal justification for terminating its policy and requested orders to establish there was no lapse in coverage and requiring CompSource to provide coverage for its two injured employees. Zaloudek further requested a finding that CompSource was in breach of contract. CompSource moved for summary judgment, arguing Zaloudek was not covered at the time of the incident and its policy was properly canceled. Zaloudek filed a counter-motion for summary judgment asserting CompSource should be estopped from denying coverage because it retained premiums and acted in a manner toward Zaloudek consistent with continued coverage. The trial court issued an order dismissing Zaloudek's bad faith claim but left pending its claims for breach of contract and declaratory relief. CompSource appealed. After its review, the Supreme Court concluded that CompSource was authorized to cancel a policy for an insured's failure to participate in the audit. The Court remanded the case for further proceedings on the other contract issues raised.View "Zaloudek Grain Co. v. CompSource Oklahoma" on Justia Law