State Ex Rel. Flowers v. TENNESSEE TRUCKING ASSN.State Ex Rel. Flowers v. TENNESSEE TRUCKING ASSN.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Affirmed
FRANK G. CLEMENT, JR., J., delivered the opinion of the court, in which WILLIAM C. KOCH, JR., P.J., M.S., and PATRICIA J. COTTRELL, J., joined.
Roland M. Lowell, Nashville, Tennessee, for the appellants, Christenberry Trucking, Inc., DCI Transportation, LLC, Empire Express, Inc., Fineline Carriers, Inc., Ocoee River Transport, Inc., Specialized Transportation Services, Inc., and Western Express, Inc.
Paul G. Summers, Attorney General and Reporter; Michael E. Moore, Solicitor General; and Sarah Ann Hiestand, Senior Counsel, Office of the Attorney General; Hugh O. Brock, Tennessee Department of Commerce and Insurance; and Renard A. Hirsch, for the appellee, Statе of Tennessee.
OPINION
Fifty trucking companies entered into a series of agreements in 1995 to form the Tennessee Trucking Association Self-Insurance Group Trust.1 The self-insurance group was formed in compliance with statutory and regulatory requirements of the Tennessee Workers’ Compensation Act, specifically,
The Trust was subject to review and audit by the Tennessee Department of Commerce and Insurance. The Trust was required to file an audited financial statement annually.
With the approval of the court, the Commissioner appointed two Special Dеputy Liquidators to administer the Trust. Their duties included making temporary total disability benefit payments and medical payments to, or on behalf of, insured employees who had sustained compensable injuries. The Deputy Liquidators were also responsible for ensuring the Trust was solvent. To accomplish this, it was necessary the Deputy Liquidators impose assessments against members of the Trust because the premium structure the members had agreed upon was inadequate to fund the obligations of the Trust.5
When the Trust was formed, each member entered into a series of agreements with the Trust. One of those agreements pertained to the premium to be paid by each member. The premium obligation of each member was based on several factors, including the job classifications of its employees and the number of employees in the respectivе classifications. Once the base premium was determined, other factors were considered that could increase or decrease the premium. One of those factors which would decrease a member‘s premium, was designation as a drug-free workplace by the Department of Labor.
Following a detailed examination of the financial records of the Trust, the Deputy Liquidators identified errors in the prеmium structure that contributed to the deficit. The errors identified included mistakes in job classification and improper credits, all of which resulted in impermissible premium deductions. As a consequence of these errors, the gross revenues of the Trust were inadequate to fund its financial obligations and some members were paying more and other members were paying less than their fair share of the financial obligations of the Trust.
After correcting the erroneous job classifications and credits, the Deputy Liquidators established an assessment methodology to cure what the Deputy Liquidators deemed to be inequities in the existing premium structure. The methodology was based upon procedures and guidelines established by the National Council on Compensation
At the hearing, the Commissioner established that she had the authority, and indeed was required to make assessments pursuant to
Over the objection of some members of the Trust, the trial court concluded the Commissioner had the authority to make assessments to remedy a deficit, and the statutes and regulаtions placed no limitations on how the Commissioner should make assessments other than the methodology employed must be equitable. Further, the trial court found that the methodology employed was equitable because it complied with procedures and guidelines established by the National Council on Compensation Insurance and corrected errors that should not be perpetuated, resulting in the members being responsible for an equitable proportion of the deficit.
Seven of the fifty members of the trust have appealed.8 They set forth several issues but the principal contention is that the Commissioner did not have the authority to alter the proportionate share of each member‘s obligation.9
STANDARD OF REVIEW
The standard of review of a trial court‘s findings of fact is de novo, and we presume that the findings of fact are correct unless the preponderance of the evidence is otherwise.
A mixed question of law and fact arises where the construction of a written agreement depends on extrinsic facts as to which there is a dispute. Hibernia Bank & Trust Co. v. Boyd, 48 S.W.2d 1084 1086-1087 (Tenn. 1932); see State ex rel. Moretz v. City of Johnson City, 581 S.W.2d 628, 631 (Tenn. 1979) (holding that the interpretation of a written instrument, usually a question of law, may become a mixed question of law and fact, and that the question of “reаsonableness” is a mixed question of law and fact); Abdur‘Rahman v. Bredesen, 181 S.W.3d 292, 305 (Tenn. 2005) (holding a constitutional claim that is resolved after an evidentiary hearing generally presents a mixed question of law and fact).
A presumption of correctness does not attach to mixed questions of fact and law. Aaron v. Aaron, 909 S.W.2d 408, 410 (Tenn. 1995) (citing Murdock Acceptance Corp. v. Jones, 362 S.W.2d 266, 268 (Tenn. Ct. App. 1961)). Although a presumption of correctness attaches to the trial court‘s findings of fact, we are not bound by the trial court‘s determination as to the legal effect of its factual findings, nor by its determination of a mixed question of law and fact. Travelers Insurance Co. v. Evans, 425 S.W.2d 611, 616 (Tenn. 1968); Sullivan v. Green, 331 S.W.2d 686, 692-93 (Tenn. 1959). Our standard of review of rulings on mixed questions of fact and law is de novo with a presumption of correctness extended only to the trial court‘s findings of fact. Abdur‘Rahman, 181 S.W.3d at 305 (citing Carpenter v. State, 126 S.W.3d 879, 886 (Tenn. 2004)).
ASSESSMENT
The Tennessee Trucking Association Self-Insurance Group Trust could not exist but for
The same statutory scheme empowers the Commissioner to promulgate rules and regulations “to provide for the solvency, administration and enforcement of such pooling agreements.”
If the assets of a group are at any time insufficient to enable the group to discharge its legal liabilities and other obligations and to maintain the reserves required of it under this Act, it shall forthwith make up the deficiency or levy an assessment upon its members for the amount needed to make up the deficiency.
In addition to the foregoing, the agreements entered into by the members of the Trust further empower the Commissioner to assess the membership. One of the relevant agreements is the indemnity agreement entered into by the members.11 In addition to holding each and every member jointly and severally liable for any contributions and/or assessments made against the Trust, the indemnity agreement provides:
In the event of a loss fund deficit and depletion of all available excess insurance, the Board may adopt any plan it deems equitable for the elimination of such deficit, including, without limitation, the assessment of all Members in the proportion which the contribution of each Member bears to the total contributions of all Members in the year in which such deficit occurs. (emphasis added).
Once the order was entered to place the Trust in liquidation, the Commissioner was empowered by the trial court to administer the Trust. Pursuant to that order, the Commissioner supplanted the Board. Accordingly, the Commissioner wаs not only empowered to act pursuant to her statutory authority, which included the authority arising from departmental rules and regulations, she was empowered with the authority afforded the Board by agreement of the members.
Appellants concede the Commissioner could assess the members to fund the deficit; nevertheless, they contend the Commissioner was restrained to assess the members in the proportion which the contribution of each member bears to the total contributions of all members in the year in which the deficit occurred. The trial court made the determination that the only limitation on the Commissioner, or the Liquidators action on her behalf, was that the assessment be equitable. Being in agreement with this conclusion, we must then ascertain whether the methodology employed is equitable.
Mark Jaquish, Special Deputy Liquidator, was responsible for the assessment determination. He testified at length at the hearing before the trial court. The substance of his testimony can be divided into two general components. One was his evaluation of the 2002 and 2003 premiums paid by the members of the Trust, which was established by individual agreement between each member and the Trust prior to liquidation. The other was the assessment methodology employed by the Liquidator to fund the deficit.
He further explained that the errors produced the inequity of some members paying a smaller premium than they should have paid while others were paying a larger premium than they should have paid. As a consequence of these errors, a significant number of the members were paying a disproportionate share of the financial obligation of the Trust and if he were to base the assessments on the flawed premium structure previously employed, it would perpetuate and exacerbate an inequitable burden on some members.
After explaining the significance of the errors found and the necessity of making corrections, Mr. Jaquish explained the methodology he employed to assess the members to fund the deficit.
The method I used, which was recommеnded in my examination report, in determining what the assessment was for each member makes adjustments for the errors that the trust made in calculating their premium in accordance with NCCI procedures.
I felt that it was important – if I was in a position to recommend to the commissioner to order an assessment of its members, then that assessment needed to be made in an objective manner that was fair and equitable to all membеrs, and should not be based on the premium as originally charged by the trust because, in my opinion, we found that to be – the procedures to be inconsistent and arbitrarily applied, and some members were given preferential treatment, some members, I feel, may have been discriminated against, and in an effort to be fair and equitable to all, I thought it important to rely solely on the premium calculation procedures аs outlined in the NCCI manual, which is the manual the department requires all trusts to use in calculating the workers’ compensation premium.
In explaining his belief that some members were discriminated against, Mr. Jaquish testified:
When we reviewed each member‘s – what‘s called an underwriting file, it has the basic information of each employer‘s operations. In many of the members’ files we reviewed, there were numerous documents in the files of the еmployers that received scheduled credits or discounts where the information in the file suggested that not only credits should not have been given, but they didn‘t even meet the underwriting qualifications for being admitted to the trust as a member.
Appellants contend the Commissioner was without authority to “correct” the premiums because the premiums were established by agreement between each member and the Trust. Second, the Appellants contend the Commissioner erred by assessing the members in proportionate amounts based upon the “corrected” premiums. We find both contentions without merit.
The Appellants argue the court must give effect to the parties’ intentions as reflected in the written contracts of insurance, citing Black v. Aetna Ins Co., 909 S.W.2d 1, 3 (Tenn. Ct. App. 1995), and contending such contracts cannot be modified absent fraud, overreaching or unconscionability, citing Quintana v. Tenn. Farmers Mut. Ins. Co., 774 S.W.2d 630, 632 (Tenn. Ct. App. 1989). The fallacy in this argument is that the authorities are inapplicable. Black and Quintana pertain to agreements between an insured and an insurance company, which is not the case here. That is because Appellants are self-insured and they, along with all members of the Trust, are jointly and severally liable for the obligations of the trust. Appellants’ joint and several obligations arise from two sources. One is the Indemnity Agreement among the members of the Trust. The other is
Finding no prоhibition against the Liquidator correcting errors in the premiums to be paid by members of the Trust, we affirm the trial court‘s conclusion that the assessment of the members proportionate to the corrected premium obligation of each member was equitable.
The judgment of the trial court is affirmed in all respects and this matter is remanded with costs of appeal assessed against the Appellants, for which each shаll be jointly and severally liable.
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FRANK G. CLEMENT, JR., JUDGE