In American Millennium_v. Berganza, the Court examined the case where a drywall subcontractor, Mr. Berganza, obtained workers’ compensation coverage with American Millennium Insurance Company on January 18, 2003, with an effective date of January 19, 2003. On January 21, 2003, Mr. Berganza’s employee, Jose Arias, fell off of a ladder and broke his leg on the work site. The trial judge found that Mr. Berganza reported the accident to the broker three days after the accident, and that on January 29 or 30 American Millennium issued the insurance policy to Mr. Berganza, with an effective date of January 19, 2003.
However, American Millennium refused to provide workers’ compensation coverage for Mr. Arias and filed suit to rescind the policy after a review of their documents revealed that Mr. Berganza made fraudulent statements in the insurance application process. The insurer also claimed that, considering the fact that Mr. Berganza waited three days to report the accident while his application for a back-dated policy was pending, he had committed fraud.
The Appellate Court in New Jersey held that American Millennium could not deny its obligation to the injured employee based on fraud committed by the employer because the workers’ compensation policy was in effect on the date of the injury, and there was no valid cancellation. Case law, as explained in American Millennium, established that a workers’ compensation carrier cannot void a policy in an instance where the application by the employer contained fraudulent statements.