AMERICAN DRIVER SVC. v. Truck Ins. Exchange, A-00-319.

CourtCourt of Appeals of Nebraska
Writing for the CourtINBODY.
Citation631 N.W.2d 140,10 Neb. App. 318
Docket NumberNo. A-00-319.,A-00-319.
Decision Date03 July 2001

631 N.W.2d 140
10 Neb.
App. 318


No. A-00-319.

Court of Appeals of Nebraska.

July 3, 2001.

631 N.W.2d 142
Michael J. Mills and Jill A. Vinjamuri, of Kutak Rock, Omaha, for appellant

Michael D. Monette and Thomas F. Dowd, of Dowd & Dowd, Omaha, for appellee.

Scott A. Lautenbaugh, of Nolan, Olson, Hansen, Fieber, Lautenbaugh & Geren, Omaha, for amicus curiae Liberty Mutual Insurance Company and Employers Insurance of Wausau.

Gary J. Russo and John W. Kolwe, of Perret Doise, Lafayette, for amicus curiae National Council on Compensation Insurance.

IRWIN, Chief Judge, and SIEVERS and INBODY, Judges.

INBODY, Judge.


This action involves the petition of American Driver Service, Inc. (ADS), for an accounting with respect to overpayment of workers' compensation insurance premiums on policies issued from June 1, 1980, until January 1, 1986, by Truck Insurance Exchange (Truck).


ADS is a Nebraska corporation formed in 1973, which, among other things, leases commercial truckdrivers to its customers to enable the customers to transport their own goods and products. Beginning on June 1, 1980, and continuing until January 1, 1986, ADS purchased workers' compensation insurance from Truck.

Kenneth Laubhan, an underwriter for Truck, originally reviewed ADS' application for insurance in 1980. Upon receiving ADS' application, Laubhan was unsure of the correct risk classification code to use for ADS' business, so he contacted the National Council on Compensation Insurance (NCCI) to determine the appropriate code to apply to ADS' leased drivers.

631 N.W.2d 143
The NCCI served as the statutorily designated rating bureau for workers' compensation insurance in approximately 35 states, including Nebraska. As the statutorily designated rating bureau in this period, the NCCI, among other things, made premium rate filings and established a classification system to which all workers' compensation insurers were required to adhere. The NCCI advised Laubhan in 1980 that it had conducted an inspection of ADS 2 years earlier and that risk classification code 7219 applied. Although Laubhan knew that ADS was in the business of leasing drivers to other companies, Laubhan accepted the NCCI's determination that the correct code for ADS' leased drivers was 7219, and he did not request a new NCCI inspection or make further inquiry at that time

Approximately 1 year later, Ted Barbee, another Truck employee working with Laubhan on ADS' account, wrote letters dated August 20, 1981, and November 25, 1981, to separate NCCI offices stating that Barbee had received different answers from the NCCI as to how ADS should be rated and that Truck's home office in Los Angeles, California, had received still another answer. Barbee stated in both letters that "we don't know what the correct codes ... should be." Barbee sought clarification about what codes to apply to ADS, and the NCCI did not indicate to Truck that it was applying an incorrect code to ADS' drivers or that code 7380 should apply to ADS' drivers.

On December 4, 1981, the NCCI responded to Barbee by acknowledging receipt of his letter "requesting an inspection" and stating, "As soon as our inspection has been completed and our reports processed, you will be informed of our findings." However, neither the NCCI nor Truck had any record that an NCCI inspection of ADS' business was conducted between 1980 and 1982. Truck did not follow up on the NCCI's promise to perform the inspection and inform Truck of its findings because, in Laubhan's opinion, Truck had no responsibility to do so. Laubhan admitted that Truck continued to have a question from at least 1981 to 1986 as to whether code 7219 was the proper classification for ADS' leased drivers.

In November 1993, ADS was informed by a prospective customer that ADS' bid on a job was too high because ADS' leased drivers were classified as code 7219 when they should have been classified as code 7380. ADS contacted the NCCI and requested that the NCCI conduct an inspection to determine the correct classification code for ADS' leased driver operation. As a result of the NCCI inspection, the NCCI confirmed by letter dated January 7, 1994, that code 7219 was not assignable to ADS' leased driver business; instead, ADS' drivers should be treated similarly to "temporary labor services," assignable to the codes of ADS' customers or code 7380. Based upon the January 7 letter, ADS sought a refund of overpaid premiums from Truck, until Truck's counsel stated in a letter, dated February 14, 1997, that ADS' claim was barred by the statute of limitations.

On November 5, 1997, ADS filed a petition seeking an accounting regarding premiums paid for workers' compensation insurance policies issued by Truck from 1980 through 1985. Based on an inspection conducted in 1993 by the NCCI, the entity charged by statute with filing and enforcing a uniform classification system for workers' compensation insurance to which all insurers must adhere, ADS alleged that Truck had applied an incorrect NCCI risk classification code to ADS' leased driver employees. Because the calculation of premiums was based in part on the NCCI

631 N.W.2d 144
code assigned to an insured's employees, ADS asserted that the alleged misclassification resulted in ADS' being overcharged for workers' compensation insurance in the period from June 1, 1980, until January 1, 1986. Further, ADS alleged that a "fiduciary relationship" existed between ADS and Truck and that Truck's alleged breach of its "fiduciary" duty constituted a "constructive fraud" which tolled the statute of limitations until ADS discovered its claim on November 15, 1993. As relief for Truck's alleged breach of fiduciary duty, ADS requested the equitable remedy of an accounting, contending that the amount of the alleged overcharge could not "be determined without an accounting."

Trial in the instant case was held on October 18 and 19, 1999. On October 25, an order was filed in which the district court found, inter alia:

1. That a fiduciary relationship did exist between [Truck] and [ADS];

2. That the Court agrees with [ADS] in their analysis of Braesch v. Union Ins. Co., 237 Neb. 44, 464 N.W.2d 769 (1991), that the insurance company's duty to its insured can be found in the reasonable expectations of the insured and the unequal bargaining positions of the contractants, i.e., [ADS] alleges that it relied on the expertise of [Truck] herein when they contracted with them;

3. That the Court agrees with [ADS'] analysis that a fiduciary relationship existed between [ADS] and [Truck] in that [Truck] had a fiduciary duty to correctly calculate [ADS'] workers' compensation premium; that [Truck] breached its duty to [ADS] by misclassifying [ADS'] driver payroll; that this breach was the sole cause of [ADS'], as yet, undetermined damages; that [Truck] had superior knowledge or bargaining power; that [ADS] imposed confidence in [Truck]; that [ADS] was dependant on [Truck] due to lack of knowledge of the facts involved; that a constructive fraud and/or trust resulted which tolled the applicable statute of limitations until [ADS'] discovery of its cause of action; that after discovery of its cause of action on November 15, 1993 ([ADS] notified that its driver payroll may have been misclassified), [ADS] timely filed this action.

The court found that Truck's fiduciary duty to ADS included (1) an affirmative obligation to follow up on letters to the NCCI indicating confusion over the correct code to apply to ADS; (2) an affirmative duty, once it was placed on notice that ADS' classification code was erroneous, to attempt to persuade the NCCI to change ADS' classification code; and (3) an affirmative duty to attempt to secure a lesser premium rate classification for its insured based upon ADS' actual business and what Truck knew of ADS' business. Thus, the court determined that from 1980 to 1986, Truck erroneously assigned code 7219 to ADS' business resulting in an overcharging on ADS' workers' compensation premiums and ordered an accounting with respect to a refund of premiums on workers' compensation policies issued by Truck to ADS.

On February 28, 2000, the court held a hearing on ADS' objections to Truck's accounting. On March 2, the court rejected Truck's accounting and entered judgment against Truck in the amount of $564,094.21, consisting of the...

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