By Bart F. Higgins and David A. Shields

Your company hires employees to do physical labor or work on an assembly line. Your company has opted out of the Texas Worker’s Compensation system and is a “non-subscriber.” Your insurance agent recommends a surplus lines policy to protect against any worker’s compensation claims filed by your employees.

One day, the worst happens: an employee has a serious on-the-job accident. Medical expenses pile on, reimbursement requests come in and you turn the claim and expenses over to the insurance company pursuant to your policy.

What happens next is totally unexpected.

226ASP6179944780The insurance company denies coverage for any number of reasons; the employee falsified his Social Security Number or his accident wasn’t “within the scope of his duties.” The burden of the expenses and management of the claim falls on you, even though you paid for an insurance policy that would cover on-the-job injuries.

What can you do?

The attorneys at Shields Legal Group help businesses pursue insurance companies who have denied claims in bad faith. SLG is an expert in bad faith litigation against insurance companies, having recently obtained judgments totaling more than $20,000,000.

Recently, we filed a bad faith lawsuit against Homeland Insurance Co. of New York and One Beacon Insurance for bad faith denial of coverage, where the insurer, its affiliates and third-party administrator wrongfully denied coverage. They relied on the following provision in the policy:

[T]he Covered Person was untruthful in regard to any aspect of the required information supplied as part of the employment process including, without limitation, information as to physical or mental abilities to perform the job…

In other words, if an employee of your company uses a false Social Security Number during the employment process, the company may have a problem.  However, this narrow approach ignores provisions of the Texas Labor Code granting worker’s compensation benefits to those employees. It also ignores the situation when the insurance agents involved in the placement of the policy may have unlawfully placed your coverage in the surplus lines market. Agents have a statutory duty to make a diligent effort to place as much coverage as they can in the admitted market before accessing the surplus lines market.

When read together with the Texas Labor Code and policy language that requires the policy to conform with state statutes, the denial could be wrongful, potentially entitling your company to the amount of the claim, reasonable and necessary attorney’s fees, and punitive damages.

If your company faces a similar situation, contact Bart Higgins at or David Shields at for an evaluation of your particular situation.

Please note: This article is for general information purposes only and should not be considered legal advice.  You should not act on any information contained in this article without first seeking advice from your legal counsel.

When litigation impacts your company or business, contact Shields Legal Group to learn more about how we may help you navigate those waters. Please visit ShieldsLegalGroup for more information.


David Shields





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