Associated Indem. Corp. v. Oil Well Drilling Co.

• Decision Date: 17 April 1953
• Docket Number: No. 14605,14605
• Citation: 258 S.W.2d 523
• Parties: ASSOCIATED INDEMNITY CORP. et al. v. OIL WELL DRILLING CO.
• Court: Texas Court of Appeals

Page 523

258 S.W.2d 523

ASSOCIATED INDEMNITY CORP. et al. v. OIL WELL DRILLING CO.

No. 14605.

Court of Civil Appeals of Texas, Dallas.

April 17, 1953.

Rehearing Denied May 29, 1953.

Price Daniel, Atty. Gen., Edward Reichelt, Asst. Atty. Gen., and Looney, Clark & Moorhead, and Ned McDaniel, all of Austin, Strasburger, Price, Kelton, Miller & Martin, and Margaret A. Brand, all of Dallas, for appellants.

Burford, Ryburn, Hincks & Ford and Clarence A. Guittard, all of Dallas, for appellee.

DIXON, Chief Justice.

This is an appeal from a summary judgment in which the trial court held invalid on constitutional and statutory grounds an order of the Board of Insurance Commissioners promulgated in 1943 authorizing the use in this State of the 'retrospective rating plan' in computing premiums due on workmen's compensation insurance.

The litigation began when Associated Indemnity Corporation (hereinafter called Associated) as plaintiff sued Oil Well Drilling Company (hereinafter called Oil Well), defendant, to collect $8,494.00 alleged to be due as a penalty premium on a policy of workmen's compensation insurance. It is undisputed that Associated used the 'retrospective plan' in computing the premium. Before answering in the suit, Oil Well instituted proceedings before the Board of Insurance Commissioners (hereinafter called the Board) to set aside the Board's order (not the 1943 order) fixing the amount of premium due under the policy. The Board refused to do so. Oil Well, as plaintiff, then filed a separate suit against the Board and Associated as defendants, seeking to have the Board's 1943 order declared invalid and seeking to recover from Associated an alleged overpayment in premium. The National Council on Workmen's Compensation (hereinafter called the Council) intervened in the second suit, alleging an interest in the attack on the validity of the retrospective plan. Meantime Oil Well had filed an answer in the first suit, including a cross-action for the alleged overpayment. Thereafter the two suits were consolidated by agreement of the parties. From a judgment for defendant, Associated, the Board, and the Council have appealed.

When the Workmen's Compensation Statute was first passed in 1913 it provided only for 'manual' rate making. By this method employers are divided into classifications according to the nature of their business. The average prior loss experience of all employers in the same classification is then determined. This average prior loss is used as a basis for establishing rates which are applicable to each $100 of an employer's pay roll.

The 'manual' method did not take into consideration the individual loss experience of employers. An individual employer whose loss experience was less than the average within his classification thus was penalized; an employer whose losses were greater than average was favored. To remedy this defect, in 1917 the statute was amended to authorize what came to be known as 'experience rating.' Under this plan as now modified, a 'manual' rate is first determined. In addition, the prior individual loss of each particular employer covering a three-year period is given consideration. If an employer's loss experience is better than the average within his classification, the employer obtains a credit; if his prior experience is worse than the average, he incurs a debit. Thus his final rate may be somewhat less or somewhat more than the 'manual' rate. The rate thus arrived at determines the premium to be paid-a premium sometimes called a 'Standard Premium.'

In recent years recognition has been taken of the fact that the expense incurred in handling risks with large premiums is proportionately less than the expense incurred in handling small risks. Consequently if the 'Standard Premium' is sufficiently large it will be reduced in order to give the employer credit for the smaller proportionate expense which is involved in handling a risk of large size. This reduction of the 'Standard Premium' is called the 'Guaranteed Cost Premium Discount.'

The retrospective rating plan, authorized by the Board of Insurance Commissioners in 1943, goes a step further than the plan last mentioned. The significant feature of restrospective rate planning is that it involves consideration of an employer's loss experience during the actual term of his policy, as well as consideration of his experience prior thereto. During his policy term an employer pays the same premiums that he would pay under the 'Experience Rating Plan.' However at the end of his policy term an examination is made to determine what his actual loss experience was during the term. This added element is taken into consideration in computing his final premium. Within maximum and minimum limits he may then be allowed a debit or credit on his premium, depending on whether his loss was large or small during the term of his policy.

There are three types of Retrospective Rating Plans as authorized by the Board's order-Plan A, Plan B, and Plan C. They differ only as to the maximum and minimum debits and credits allowed. It is Plan B which is involved in this case.

In its answer, Oil Well alleged (1) that it had not contracted for a rating under the retrospective plan; (2) in the alternative, that it had been coerced into so contracting; and (3) that the retrospective rating plan is invalid because it violates both the Constitution and the statutes of this State.

The first two counts in Oil Well's answer have been denied and contested by Associated, so that they must be considered fact issues, but they are issues which the trial court did not attempt to determine in its summary judgment. The ground urged in appellee's motion for summary judgment, and the only basis upon which the summary judgment could have been rendered, is that the retrospective rating plan as promulgated by the Board is invalid. Obviously the court, having concluded that the retrospective rating plan is invalid, considered the two fact issues as immaterial to a rendition of judgment in favor of appellee. It was upon that basis, and on that basis alone, that the court on March 4, 1952 rendered summary judgment for Oil Well.

We must first consider appellants' contention that we should reverse and remand the judgment of the trial court because it involves a misuse of summary judgment procedure. The reasons advanced are, (1) the case involves fact issue, and (2) it is a case of far-reaching importance.

The appeal does not call for us to pass upon any fact issues. The rate-making powers of the Board, the sole issue with which we are concerned here, are legislative in character. The validity of a rate-making order is a question of law. Red Arrow Freight Lines v. American Fidelity & Casualty Co., Tex.Civ.App., 225 S.W.2d 240; Brown & Root v. Traders & General Ins. Co., Tex.Civ.App., 135 S.W.2d 534. Furthermore, in deciding whether the Board's order promulgating retrospective rate planning oversteps its legislative authority, we must construe the statutes empowering the Board to make rates.

We do not think the case of Gulbenkian v. Penn, Tex., 252 S.W.2d 929, cited by appellants, is in point. In that case the Court was asked to pass on a private contract between the parties. One party claimed the other was estopped as a matter of law. The Supreme Court said there were fact issues present involving the credibility of affiants, the weight of showings, and mere grounds of inference. The trial court in order to render summary judgment necessarily had to resolve fact issues. There was no question in the Gulbenkian case of the validity of a legislative order, or the interpretation of a statute, as there is in the case now before us. Whether a law is applicable is a fact question; whether it is valid is a law question.

In their briefs appellants in substance concede that the trial court did not pass on fact issues in this case. The Council says: '* * * the factual question of whether Oil Well Drilling Company contacted for a retrospective rating indorsement is not now involved in this case. Consequently, such question will not be covered in this brief. * * * However, the trial court in no way based its judgment upon any such coercion. Rather, it went ahead and struck down the retrospective rating plans. * * * in view of the action which the trial court actually took, the issue of the validity of the retrospective rating plans promulgated by the Board of Insurance Commissioners is now involved in this case.' Similar statements may be found in the brief of Associated.

Appellants even go so far as to assert that the interpretation of our statutes in this case involves a fact issue. The Board cites us Article 10(1) of our statutes concerning statutory construction, Vernon's Ann.Civ.St., and then in its brief says: While it is true that construction of a statute, * * *, is ordinarily the function of the court, the ultimate question in this case is whether the retrospective rating plan involved in this case is an 'experience rating' plan as that term is understood in the workmen's compensation insurance business. The question is at least a mixed question of law and fact which can be submitted to a jury if properly framed.' (Emphasis ours.)

We disagree with appellants. We think statutory interpretation is a law question analogous to constitutional interpretation as set out in this statement in 6 Ruling Case Law, § 112, pp. 112, 113:

'The constitutionality of a law is not to be determined on a question of fact to be ascertained by the court. * * * Accordingly the validity of an enactment cannot be made to depend on the facts found on the trial of the first case involving the validity of such statute. If the rule were otherwise, the trial of the main issue would necessarily be delayed until the preliminary fact on which the validity of the contested legislative act depended should be first tried and determined on testimony; and, since this testimony might be...