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WireCo WorldGroup, Inc. v. Liberty Mutual Fire Insurance Co.

United States District Court, W.D. Missouri, Northern Division

January 30, 2017

WIRECO WORLDGROUP, INC., Plaintiff,
v.
LIBERTY MUTUAL FIRE INSURANCE COMPANY, THE FIRST LIBERTY INSURANCE CORPORATION, Defendants.

          ORDER

          ROSEANN A. KETCHMARK, UNITED STATES DISTRICT COURT JUDGE

         Now pending before the Court are Plaintiff's and Defendants' cross motions for summary judgment. (Docs. 68, 70.) On January 10, 2017, the Court held oral arguments on the motions. (Doc. 79.) The facts presented in the motions fall within the arena of workers' compensation insurance, which uses a complex formula to calculate an employer's annual premium. Specifically, the parties dispute whether one factor - the Schedule Rating Modification factor - was appropriately applied within the otherwise correct premium calculation. After careful review, the Court DENIES Plaintiff's Motion for Summary Judgment (doc. 68) and GRANTS Defendants' Motion for Summary Judgment (doc. 70).

         I. Background

         Plaintiff WireCo WorldGroup, Inc. (“WireCo”)'s action against Defendants Liberty Mutual Fire Insurance Company and The First Liberty Insurance Corporation (collectively, “Liberty”) stems from the allegation that WireCo is entitled to a partial refund of insurance premiums that it paid Liberty for workers' compensation insurance.

         WireCo is a large wire and cable manufacturing company that operates in many states, including Texas and Missouri. Beginning in 2009, WireCo purchased a series of workers' compensation insurance policies from Liberty. The first policy's inception date was June 30, 2009, and expired on June 30, 2010 (“2009 Policy”). (Doc. 1-1.) For the next three years, Liberty issued a renewal policy to WireCo providing workers' compensation and employers' liability insurance coverage. The first renewal policy (“2010 Renewal”) was in effect from June 30, 2010, to June 30, 2011. (Doc. 1-2.) The second renewal policy (“2011 Renewal”) was in effect from June 30, 2011, to June 30, 2012. (Doc. 1-3.) The third renewal policy (“2012 Renewal”) was in effect from June 30, 2012, to June 30, 2013. (Doc. 1-4.) The Court will refer to the 2010 Renewal, 2011 Renewal, and 2012 Renewal, collectively as the “Renewal Policies.” The Renewal Policies each consist of an Information Page, terms and conditions, as well as numerous endorsements. (Docs. 1-2, 1-3, 1-4.) They provide that the premium is to be calculated twice: first, before the policy goes into effect (the “estimated premium”); and second, after the policy expires (the “final premium”). (Doc. 1-2 at 96, Doc. 1-3 at 39, Doc. 1-4 at 30.)

         In addition, the Renewal Policies reflect that WireCo was to pay the estimated premium before the policy expired, and then once the policy expired and the final premium was calculated, WireCo was entitled a refund or required to pay an additional amount:

The premium shown on the Information Page, schedules and endorsements is an estimate. The final premium will be determined after this policy ends by using the actual, not the estimated, premium basis and the proper classifications and ratings that lawfully apply to the business and work covered by this policy. If the final premium is more than the premium you paid us, you must pay us the balance. If it is less, we will refund the balance to you.

(Id.) Additionally, the Renewal Policies state:

All premiums for this policy will be determined by our manuals of rules, rates, rating plans and classifications. We may change our manuals and apply the changes to this Policy if authorized by law or a governmental agency regulating this insurance.

(Doc. 1-2 at 95, Doc. 1-3 at 38, Doc. 1-4 at 29.) Finally, the Information Page of the Renewal Policies states:

The premium for this policy will be determined by our Manuals of Rules, Classifications, Rates and Rating Plans. All information required below is subject to verification and change by audit.

(Docs. 1-2 at 2, Doc. 1-3 at 42, Doc. 1-4 at 33.)

         The parties dispute whether the premiums for the Renewal Policies were properly determined in accordance with Liberty's rating plans - specifically, whether the premiums for the policies were properly determined in accordance with Liberty's Schedule Rating Plans. Additionally, the parties dispute whether Liberty's Schedule Rating Plans are incorporated into the Renewal Policies such that a breach of a term in the Schedule Rating Plans is a breach of the corresponding policy.

         Schedule rating is a method of adjusting the premium applied to a workers' compensation risk in order to account for readily-identifiable factors having a bearing on the probability or severity of future losses and other risk factors not accounted for by other rating adjustments. (Doc. 69 at 10; Doc. 74 at 6, 10.) With respect to both Missouri and Texas, schedule rating debits and credits are discretionary, but if applied by an underwriter, then the debits and credits are applied at policy inception; stated another way, the debits and credits are applied to the estimated premium. (Id.) A schedule rating debit of 10% increases the premium by roughly 10%; conversely, a schedule rating credit of 10% lowers the premium by roughly 10%. (Id.)

         Here, Liberty filed Schedule Rating Plans with the directors of insurance for Missouri and Texas, and these plans were approved by each director for Liberty's use (“Missouri Schedule Rating Plan”, “Texas Schedule Rating Plan”, and collectively “Schedule Rating Plans”). (Docs. 1-7, 1-8.) According to the Schedule Rating Plans, Liberty's underwriter may adjust the insurance premium based on a number of “Risk Characteristics” within specified ranges of adjustment. (Id.) The Risk Characteristics include items such as safety devices, employee training, drug testing, age of equipment, and medical facilities. (Doc. 1-7 at 8, Doc. 1-8 at 6.) By way of example, in accordance with the Missouri Schedule Rating Plan, Liberty could factor in a 5% debit or credit based on WireCo's employee training at WireCo's Missouri facilities; and in accordance with the Texas Schedule Rating Plan, Liberty could factor in a 20% debit or credit based on WireCo's employee training at WireCo's Texas facilities. (Id.) In addition, Liberty's Missouri Schedule Rating Plan states:

No [s]chedule debit or credit can take effect until the evidence supporting the modification is in our files.
***
The customer will be informed in writing within ninety (90) days of the policy inception or renewal date, of the basis for any schedule debit or credit applied. If the policy is subject to any changes in its schedule debits or credits upon renewal, we will notify the customer.

(Doc. 1-7 at 9.) The Texas Schedule Rating Plan states:

At the time that the schedule rating factor is applied, the carrier must have documentation on file detailing the basis for the credit or debit.

(Doc. 1-8 at 6.)

         The following chart reflects the schedule ratings for Missouri and Texas for the 2009 Policy, 2010 ...


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