Court Case Update, Mississippi – July 2024

On June 27, 2024, the Supreme Court of Mississippi, in American Compensation Insurance Co. v. Ruiz, ruled that the Mississippi Workers' Compensation Act does not allow an insurer to rescind a workers compensation (WC) policy from the moment of its inception based on an employer's material misrepresentation.

A WC insurer filed a lawsuit in federal court against an employer, seeking to rescind or void, ab initio, the employer's WC policy back to its inception based on material misrepresentations in the application allegedly made by the employer. The federal appellate court, recognizing that Mississippi law was silent and did not specifically address whether the insurer could rescind the policy from inception, asked the Mississippi Supreme Court to rule on the issue.

In its analysis, the Mississippi Supreme Court reviewed statute 71-3-77(1) related to cancellation and nonrenewal of WC policies, which provides that no cancellation or nonrenewal shall be effective until 30 days after service of notice on the insured and notice to the Workers' Compensation Commission. The court reasoned that in the WC context, allowing rescission of a policy is tantamount to allowing retroactive cancellation of a policy, which is inconsistent with the statute. The court further added that rescinding the policy from inception goes against the public policy purposes of the Workers' Compensation Act, which is to pay timely disability and medical benefits to injured workers who suffer compensable injuries. As a result, the court concluded that under Mississippi law, a WC insurer is not allowed to rescind a policy based on an employer's material misrepresentation.

For more information on other cases monitored by NCCI's Legal Division, visit previous Court Case Updates and Court Case Insights under the Legal section of INSIGHTS on ncci.com.

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