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Travelers Property Casualty Company of America v. Jet Midwest Technik, Inc.

United States District Court, W.D. Missouri, St. Joseph Division

June 26, 2017




         Pending are Plaintiff Travelers Property Casualty Company of America's motion for summary judgment (Doc. #59), and Defendant Jet Midwest Technik, Inc.'s motion for partial summary judgment (Doc. #60). Because the Court finds Plaintiff failed to exhaust its administrative remedies, the Court denies both motions, and dismisses the matter without prejudice.

         I. BACKGROUND

         Plaintiff, a stock insurance company, issued a workers' compensation and employers' liability insurance policy to Defendant in January 2013 as part of Missouri's residual market for workers' compensation. Doc. #68, at 3. Defendant, whose business involves painting aircraft, provided an application in which Defendant estimated its payroll during the policy term, and provided code classifications which were used to calculate premium due on the policy.[1] Id.

         In June 2013, pursuant to the policy terms, Plaintiff conducted an audit of Defendant's business to determine whether the code classifications appropriately captured the type of work performed by Defendant's employees. Id. at 11. Based on the audit, Plaintiff endorsed the policy to add an additional code classification to include coverage for work painting aircraft exceeding thirty feet in height. Id. at 12-13. The parties disagreed about the applicability of this additional code, and the amount of payroll applied to various code classifications under the policy. In October 2013, the National Council on Compensation Insurance conducted a site inspection and issued a report about Defendant's operations, but the parties dispute the correct interpretation and application of this report. Id. at 18-27. Based on the disagreement and nonpayment of premium Plaintiff alleged were due, Plaintiff cancelled the policy in December 2013. Id. at 27.

         A final audit was conducted, but the parties continued to disagree about the amount, if any, of premium Defendant owed Plaintiff. Most relevant to the Court's decision, Defendant filed a dispute before the Missouri Workers' Compensation Determinations Review Board (“the Board”) in August 2015. Id. at 44. The Board determined “the entire payroll for [Defendant's] employees that paint aircraft that exceeds 30 feet in height is correctly classified to Code 5037. Based on the documents presented during the Board meeting, the payroll correctly classified to Code 5037 is $76, 620. The balance of painting payroll is correctly classified to Code 5474.” Doc. #62-8, at 3. The Board informed the parties of their right to appeal, which will be discussed in further detail infra. Id.

         To date, Defendant has paid $151, 462.57 under the policy. Doc. #69, at 47. Plaintiff believes it is owed additional premium based on its calculations and audits, and filed this suit seeking to recover that amount. Defendant moves for partial summary judgment, asking the Court to find as a matter of law that the Board's ruling is binding on Plaintiff. Doc. #61, at 8. Plaintiff moves for summary judgment on Counts I and II, alleging a breach of contract and account stated. Doc. #62, at 35.


         Defendant argues Plaintiff failed to exhaust administrative remedies by failing to appeal the Board's decision, and thus, is prohibited from contesting the Board's findings in this Court. Plaintiff argues the Board's decision was the result of a non-contested case, and therefore, Plaintiff was not required to exhaust administrative remedies prior to filing this suit.


         Under Missouri law, when a remedy before an administrative agency is available, Plaintiff must ordinarily exhaust those remedies before a court can act. Lederer v. Dir. of Div. of Aging, 865 S.W.2d 682, 684 (Mo.Ct.App. 1993) (citations omitted). The exhaustion requirement prevents premature interference with agency process, and affords courts the benefit of administrative experience and expertise in matters of which the agency is most knowledgeable. See Farm Bureau Town & Country Insur. Co. of Mo. v. Angoff, 909 S.W.2d 348, 352 (Mo. banc. 1995). The Court lacks subject matter jurisdiction if administrative remedies are not exhausted prior to judicial review. Lederer, 865 S.W.2d at 684 (citation omitted). Accordingly, the Court must dismiss the matter if Plaintiff failed to exhaust its administrative remedies. Nowden v. Div. of Alcohol & Tobacco Control, No. 79897, 2017 WL 1485545, at *2 (Mo.Ct.App. Apr. 25, 2017) (citation omitted).

         The Court must determine whether an administrative remedy was available to Plaintiff, and whether Plaintiff was required to pursue an administrative remedy prior to filing this suit. In 1993, the Missouri legislature authorized the Director of the Department of Insurance, Financial Institutions and Professional Registration (“the Director”) to develop a residual market “that will guarantee insurance coverage and quality loss prevention and control services for employers seeking coverage through the plan.” Mo. Rev. Stat. § 287.896 (2017). Subsequently, the Director formalized operations of a new Alternative Residual Market Plan (“ARM Plan”). 20 C.S.R. § 500-6.960. A “Dispute Resolution Procedure” contained in this regulation provides:

(A) Any person affected by the operation of the ARM Plan including, but not limited to, insured employers, covered employees, producers, the contract carrier, the plan administrator, a servicing carrier or a direct assignment carrier who may have a dispute with respect to any aspect of the plan, may seek a review of the matter by the department by setting forth in writing with particularity the nature of the dispute, the parties to the dispute, the relief sought and the basis thereof. The department may secure such additional information as it deems necessary to make a decision.
(B) Appeals from insured employers and covered employees on plan matters regarding individual employer disputes shall be within the jurisdiction of the mechanism established to handle such appeals under the applicable ...

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