The Court of Appeals recently remanded a case back to the Administrative Law Judge to determine whether Pinnacol Assurance should be estopped from denying coverage to a subcontractor because Pinnacol failed to notify the general contractor and the owner of rental property that Pinnacol cancelled the policy. Hoff v. Industrial Claim Appeals Office, ___ P.3d ___ (2014 COA 137 (Colo. App. 2014). In Hoff, the owner of a rental property contracted with a general contractor to perform repairs to the rental property. The general contractor hired a subcontractor. The subcontractor obtained workers’ compensation insurance from Pinnacol Assurance, and Pinnacol provided a Certificate of Insurance to the general contractor which verified that the subcontractor had workers’ compensation insurance through Pinnacol. The Certificate of Insurance stated that ““SHOULD ANY OF THE ABOVE DESCRIBED POLICIES BE CANCELLED BEFORE THE EXPIRATION THEREOF, NOTICE WILL BE DELIVERED IN ACCORDANCE WITH THE POLICY PROVISIONS.” Pinnacol subsequently cancelled the policy for non-payment of premiums, but did not provide notice of the cancellation to the general contractor. The claimant sustained serious injuries while working for the uninsured subcontractor, and at hearing the Administrative Law Judge held the general contractor and the owner of the property jointly liable for the claimant’s workers’ compensation benefits because the subcontractor was uninsured.
The owner of the real property appealed, arguing that Pinnacol should be estopped from denying coverage because the general contractor obtained a Certificate of Insurance from Pinnacol which indicated that Pinnacol would deliver notice if the policy were to be cancelled, but then failed to so notify the general contractor. The Industrial Claim Appeals Office rejected the owner’s promissory estoppel claim, finding that there was not evidence demonstrating that Pinnacol provided a Certificate of Insurance to the owner (rather than to the general contractor). The Court of Appeals first found that the owner of the rental property had standing to appeal because it was an indirect beneficiary of the promise from Pinnacol to the general contractor to notify the general contractor of a cancellation of the policy. The Court of Appeals then reversed the ICAO decision, finding that the ICAO misapplied the law on promissory estoppel because an indirect beneficiary of a promise to another person can recover from the promisor under a promissory estoppel claim. The test in a promissory estoppel claim is test is whether the promisor (in this case Pinnacol) reasonably should have expected that the promise (to notify the general contractor of a cancellation of coverage) would induce action or forbearance by the promisee (the general contractor and, indirectly, the owner of the property). Therefore, the Court of Appeals remanded the case back to the Administrative Law Judge to determine whether the owner of the real property met all of the elements of promissory estoppel: A promise which the promisor should reasonably expect
to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise.
The Court of Appeals went on to hold as a matter of law that the issuer of the Certificate of Insurance (Pinnacol) was required to provide notice to the holder of the Certificate of Insurance (the general contractor) of cancellation of the policy. Pinnacol argued that the Certificate of Insurance was silent as to whom notice was to be given, and that, therefore, the Certificate of Insurance should be interpreted to required notice only to the policy holder (the subcontractor). The Court of Appeals rejected this argument, finding that “[the general contractor] indisputably sought and obtained a certificate from Pinnacol’s agent to protect itself and its customer, [the owner of the real property], from precisely the type of liability that has been assessed against [the holders of the Certificate of Insurance].” Thus, it defies logic to require notice only to the subcontractor, when it was the general contractor that was seeking evidence of insurance to protect itself from liability.
Although the holding on standing may not extend to insurers, any respondent who has obtained a Certificate of Insurance and later is brought into an action as a statutory employer should consider the affirmative defense of promissory estoppel if the issuer of the Certificate of Insurance did not provide notice of cancellation of the policy to the holder of the Certificate.