In a published decision with a dissent, the NC Court of Appeals denied the Plaintiff’s motion to add North Carolina Self-Insurance Security Association as a party to the claim.
On June 4, 2025, the NC Court of Appeals issued a decision in the case Bessie Peacock Cloer, Widow and Administrator of the estate of James Richard Cloer v. King Arthur Inc., Thonet Indus., Inc., SCH Liquidating Corp., Shelby Williams Indus., Inc., and NC Self-Insurance Security Assoc. (IC Nos. 13-710197 and 20-734821). In this case, a majority of the Court of Appeals panel declined to add the Association as a party-defendant. However, as noted, a dissent was filed which gives the Plaintiff the right to appeal the decision to the NC Supreme Court.
The facts of the underlying injury are straightforward. The decedent worked at a furniture factory for many years, including 1987-1997. Sixteen years after his last date of employment with Shelby Williams, the Plaintiff was diagnosed with mesothelioma. He filed an IC Form 18B with the NC Industrial Commission alleging exposure to asbestos during his employment. The Plaintiff died in July 2013 due to the disease, and an amended Form 18B was filed to make a claim for death benefits.
The claim was filed against Shelby Williams. Shelby Williams was approved to self-insure its workers’ compensation claims by the NC Department of Insurance as of July 1, 1989, and it was a member of the Association from July 1, 1989, through June 30, 1999. The decedent claimed to have been last injuriously exposed in 1997.
The Plaintiff moved to add Commercial Furniture Group as a defendant in 2018; this was granted by the Executive Secretary. The Plaintiff then moved to add the Association as a party defendant; this motion was also granted by the Executive Secretary. The Association appealed this decision by filing a Form 33.
In 2022, the Plaintiff’s widow settled the claim with Shelby Williams and Hartford, who insured Shelby Williams from June 1987 to June 1988. The Plaintiff also settled the claim against Commercial Furniture Group (CFG) for the “period of self-insurance by Shelby Williams for which CFG may be liable.”
Both a deputy commissioner and a panel of the Full Commission denied the Plaintiff’s motion to add the Association as a party defendant.
To qualify as a self-insurer under the NC Workers’ Compensation Act, the employer needs to show that it has total fixed assets of $500,000.00 or more, and it must apply for and receive a license to self-insure from the Commissioner of Insurance. Employers must also apply for a license with the Association, and they must be members of the Association in order to obtain the license for self-insurance. The Association is not an insurance carrier, but it provides mechanisms for the payment of covered claims against member self-insurers in the event of the insolvency of said member self-insurer.
In order for the Association to incur liability, it must involve a “covered claim,” which is defined as an “unpaid claim against an insolvent self-insurer.” Four requirements must be met: (1) The self-insurer must be insolvent, (2) the claim must be unpaid, (3) the claim must relate to an injury that occurred when the self-insurer was a member of the Association, and (4) the claim must be compensable under the Workers’ Compensation Act.
The Court held that requirements 3 and 4 were met, but that requirements 1 and 2 were not.
In May 1999, Shelby Williams was acquired by Falcon. In 2005, Falcon – including Shelby Williams – filed for bankruptcy. All of Shelby Williams’s pre-petition workers’ compensation claims were paid, and the bankruptcy reorganization plan made no provisions for incurred but not yet reported claims. Falcon changed its name to CFG in 2005, and CFG became the surviving entity after a merger with Shelby Williams. Since CFG was not insolvent, there was no “covered claim” in 2013, when the claim was reported, for which the Association could be liable. Furthermore, the Plaintiff settled its claim against CFG, and as such, the claim was not unpaid.
The dissent argues, however, that Shelby Williams was self-insured and a member of the Association in 1997, which is when the decedent was last injuriously exposed to asbestos, which led to his subsequent diagnosis of mesothelioma. Shelby Williams made no payment on the claim before its insolvency. Judge Hampson argues that (1) the self-insurer was insolvent; (2) the claim was unpaid; (3) the claim relates to an injury that occurred while the self-insurer was a member of the Association; and (4) the claim is compensable under the Act, and accordingly, this is a “covered claim” and the Association should be made a party to the matter.
The judge held, in the dissent, that a dispute remains as to whether the Shelby Williams/Falcon bankruptcy discharged any liability by CFG for the Plaintiff’s claim. Therefore, the dissenting opinion holds that the Commission erred by dismissing the claim against the Association.
Next, we see what the Supreme Court will decide. As always, we will keep you posted on that outcome!
