Aetna Ins. Co. v. Trans American Trucking Service, Inc.

• Decision Date: 14 January 1993
• Citation: 261 N.J.Super. 316,618 A.2d 906
• Parties: AETNA INSURANCE COMPANY, Plaintiff-Appellant, v. TRANS AMERICAN TRUCKING SERVICE, INC., Defendant-Respondent.
• Court: New Jersey Superior Court — Appellate Division

Page 316

261 N.J.Super. 316

618 A.2d 906

AETNA INSURANCE COMPANY, Plaintiff-Appellant, v. TRANS AMERICAN TRUCKING SERVICE, INC., Defendant-Respondent.

Superior Court of New Jersey,

Appellate Division.

Submitted Oct. 13, 1992.

Decided Jan. 14, 1993.

Staehle & DeSanto, Parsippany, for plaintiff-appellant (William E. Staehle, on the brief).

Giordano, Halleran & Ciesla, Middletown, for defendant-respondent (Michael J. Canning, of counsel and on the brief).

Before Judges PETRELLA, LONG and KEEFE.

The opinion of the court was delivered by

PETRELLA, P.J.A.D.

Aetna Insurance Company (Aetna) appeals from the denial of its motion for summary judgment and the grant of Trans American Trucking Service's (Trans American) cross-motion for summary judgment on its counterclaim. Aetna instituted suit in 1989 to recover for what it claimed as additional workers' compensation insurance premiums for Trans American's 1986-1987 policy period. ¹ Trans American denied owing additional premiums, and counterclaimed for reimbursement of $38,938.48 in contested additional premiums on the preceding year's policy.

Notwithstanding that it had moved for summary judgment, Aetna now takes the position on appeal that the record on which the motion judge dismissed its complaint and entered summary judgment in favor of Trans American "was totally inadequate." ² Aetna claims entitlement to additional premiums for the workers' compensation insurance policy because the yearly premium charged at the beginning of each policy period represents an estimate which is subject to adjustment at the end of the policy period based upon Aetna's actual exposure during that period. To assist Aetna in determining if potential liability was more or less than "estimated," its policy provides for an audit of its insured's records relating to risks covered by the policy. One such record Aetna examines is the insured's payroll for the policy period to determine the number of covered employees.

In the case of an insured which operates a trucking company, when Aetna cannot gain access to what it considers all payroll records for its audit, it adjusts the premium by a formula in § 3:3-46 of the New Jersey Workers' Compensation and Employers' Liability Insurance Manual, ³ (hereinafter "Workers' Compensation Manual") compiled by the Compensation Rating and Inspection Bureau (Bureau). ⁴ This section contains what is referred to by the parties as the "hired vehicle rule," and provides:

46. Hired Vehicles. If vehicles, including drivers, chauffeurs and helpers are employed under contract and if the owner of such vehicles has not insured its compensation obligation and furnished evidence of such insurance, the actual payroll of the drivers, chauffeurs and helpers shall be included in the payroll of the insured employer at the proper rate for the operations in which the insured employer is engaged. If such payroll cannot be obtained, one-third ( 1/3) of the total amount paid for the hire of such vehicles under contract shall be considered as the payroll of the drivers, chauffeurs and helpers. If the proprietor or partners ⁵ who own the vehicles are also drivers, one-third ( 1/3) of the contract amount for the vehicles operated by such proprietor or partners shall be included in the payroll of the insured employer. Such amounts shall exclude fuel surcharge costs, in accordance with Interstate Commerce Commission regulations provided the employer's books and records are maintained to show such costs separately and in summary. [Emphasis supplied].

The dispute giving rise to this case stems from Aetna's attempts to charge Trans American additional premiums (under the hired vehicle rule) based on Trans American's use of outside truckers or independent contractors in addition to its regular full-time drivers. ⁶

Aetna audited Trans American's books and records for the 1984-1985 policy period, including those relating to independent contractors, and did not charge any additional premiums for them for that period. ⁷

For the 1985-1986 policy period, Aetna again audited Trans American's records, but this time it billed Trans American $38,938.48 for coverage of the "independent contractors." Trans American paid that amount. ⁸ It says it objected to the additional charge, but paid under protest after Aetna threatened to cancel all of its insurance unless full payment of the disputed amount was made. Aetna contends that Trans American paid the sum without reservation and sought reimbursement only after being charged an additional premium for the next policy period.

Trans American took the position when Aetna conducted the 1986-1987 policy period audit that Aetna could not examine records pertaining to truckers used under its independent contractor program because it did not have to provide workers' compensation coverage for them. As a result, Aetna used the amount from the previous policy period and applied the formula for hired vehicles to arrive at an additional premium for that policy period of $47,714. ⁹ Trans American refused payment and suit by Aetna ensued.

During pretrial discovery, Trans American propounded certain interrogatories upon Aetna concerning the independent contractor issue. The relevant questions and Aetna's responses were:

42. Whether Aetna contends that Trans American Trucking Services, Inc. is required to pay premiums for independent owner operators. If so,

a) Set forth the factual and legal basis for Aetna's position.

[Aetna's response] See policy manual attached and case law attached.[ ¹⁰ Aetna contends that the defendant is required to pay premiums for independent owner operators if they do not have their own insurance coverage. Same is pursuant to the New Jersey Workers' Compensation and Employers' Liability Insurance Manual Part Three, Section 3, page 9, effective January 1, 1982. See copy attached. 43. Whether Aetna contends that Trans American Trucking Services, Inc. is required to pay premiums for its worker's compensation policy for independent contractors. If so,

a) Set forth the legal and factual basis for Aetna's contention.

[Aetna's response] Aetna contends that the defendant is required to pay premiums for independent owner operators if they do not have their own insurance coverage. Same is pursuant to the New Jersey Workers' Compensation and Employers' Liability Insurance Manual Part Three, Section 3, page 9, effective January 1, 1982. See copy attached.

44. Set forth whether Aetna contends that the independent owner operators used by Trans American Trucking Services are independent contractors.

[Aetna's response] They are treated as independent contractors because they are not listed on Trans American payroll as employees and since the review of Trans American's records indicates that they are independent contractors.

* * * * * *

50. Set forth whether the claimed premium to be due and owing includes independent owner operators.

[Aetna's response] Yes. The predominant amount of money sued for stems from premiums due for independent contractors on the workers compensation policies ($44,141.32 out of the total outstanding of $49,275.06). The balance due is on other various policies.

51. Set forth what amount of the premium claimed to be due and owing is attributed to independent owner operators.

[Aetna's response] Almost the entire amount due and owing for workers compensation insurance stems from charges for independent contractors. This amount is an approximate since an audit has not been conducted. [Emphasis supplied].

Aetna contends that these "outside truckers," the majority of whom are unincorporated sole proprietors (who would not otherwise be required to have workers' compensation coverage, see N.J.S.A. 34:15-1, 34:15-36 and 34:15-71), ¹¹ qualify as Trans American employees who must be covered by its workers' compensation policy essentially because it says the Workers' Compensation Manual says so. Hence, Aetna adjusted the premium upward to reflect the higher number of covered persons which resulted when it included "outside truckers" as Trans American employees.

We recognize that the insurance policy here provides that Aetna can rely on its manuals to set rates and classifications. Some manual is relied on in the policy, but the record does not indicate specifically what Aetna's manual is, or as the motion judge noted, the actual basis and method of calculation of Aetna's claimed rate charges. It appears that the manual Aetna relied on is the Workers' Compensation Manual discussed above.

Trans American considers these outside truckers to be independent contractors for whom it has no obligation to provide workers' compensation coverage. It hires outside truckers using its Independent Contractors Agreement which provides, among other things: Trans American assumes no responsibility for the leased equipment; the "[c]ontractor shall direct its operation in all respects including, but not limited to, such matters as rejection and selection of any loads, days and time of operation, routes to travel, repair of equipment, trip leasing, selection, discipline and discharge of its employee drivers"; the contractor has the duty to repair the equipment at his or her own cost, as well as pay for all fuel and oil; the contractor bears the responsibility for paying the wages of drivers, "who shall not be considered as an employee of" Trans American; the contractor must pay for the costs of "unemployment insurance and the withholding of employment taxes, social security taxes and insurance or other benefits as required by any federal, state or local government on account of driver, driver's helpers, or other workers ..."; that the contractor and its employees shall not for any purpose be deemed to be agents or employees of Trans American, "but the contractor is and shall be an independent contractor and is subject to [Trans American] ... merely as to the results to be accomplished and not as to the means and methods for...