Harrison Western Corp. v. Gulf Oil Co., 80-1715

• Decision Date: 20 November 1981
• Docket Number: No. 80-1715,80-1715
• Citation: 662 F.2d 690
• Parties: HARRISON WESTERN CORPORATION, a Florida Corporation, Plaintiff-Appellee, v. GULF OIL COMPANY, a Pennsylvania Corporation, Defendant-Appellant.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 690

662 F.2d 690

HARRISON WESTERN CORPORATION, a Florida Corporation Plaintiff-Appellee, v. GULF OIL COMPANY, a Pennsylvania Corporation, Defendant-Appellant.

No. 80-1715.

United States Court of Appeals Tenth Circuit.

Argued and Submitted Sept. 28, 1981.

Decided Nov. 2, 1981.

Rehearing Denied Nov. 20, 1981.

James P. Cowley, Watkiss & Campbell, Salt Lake City, Utah, for plaintiff-appellee.

James G. DiZerega, II, Gulf Oil Corp., Denver, Colo., for defendant-appellant.

Before BARRETT, DOYLE and SEYMOUR, Circuit Judges.

WILLIAM E. DOYLE, Circuit Judge.

The dispute here pertains to the meaning to be given to a contract between Harrison Western Corp. and Gulf Oil Co. In this contract, Harrison Western Corp. agreed to construct an underground uranium mine for Gulf Oil Co. in Valencia County, New Mexico. The particular dispute arose surrounding the handling of the cost of workmen's compensation insurance under the contract. Harrison Western received certain adjustments to premiums based upon its favorable safety record. Due to the good record of Harrison, the adjustments resulted in decreases in premiums paid.

Under § 8.21(d) of the contract, Harrison Western was required to maintain workmen's compensation insurance. The construction contract generally is a cost plus arrangement. Harrison Western received reimbursable costs plus a monthly fee under the contract. Under the express terms of the contract, insurance (including workmen's compensation) purchased at Gulf's request to cover risks created by the project is reimbursable. The provision of the contract which is the center of the dispute is § 5.2, which reads as follows:

In addition to the monthly fee, Owner (Gulf) shall reimburse contractor (Harrison) as provided for below for all reimbursable costs paid or incurred by contractor while this contract is in effect, for work performed in accordance with this contract. The term "reimbursable" costs in this contract means only those items listed in Exhibit "V" which is attached hereto and made a part hereof. It is agreed that the term "reimbursable costs" shall not include any adjustments under retrospective rating or similar type insurance plans. Owner will not participate in any such adjustments, whether they increase or decrease the premiums of any insurance carried by contractor pursuant to the provisions of this contract. (emphasis added)

The dispute arose following the reduction by the insurance company of Harrison's workmen's compensation insurance premiums, based on a downward modification of its experience rating. Harrison nevertheless continued to bill Gulf for insurance charges without passing on the premium savings. Thereafter, Gulf deducted $206,190.44 for the workmen's compensation insurance premium adjustments realized by Harrison but not passed on to Gulf. This deduction was made from a bonus amounting to $300,000 that was due from Gulf to Harrison. Harrison filed suit, and cross motions for summary judgment were heard on the issue of the construction of § 5.2.

Both the parties agreed to submission and determination on summary judgment. Both parties represented to the trial court that the question was appropriate for summary judgment, there being no dispute as to questions of material fact. However, both parties, at different stages of this appeal, have suggested that inferences ought to be drawn from the facts which are in some instances contrary to statements contained in opposing affidavits. Further, Gulf has argued that if we do not reverse the trial court and enter summary judgment in favor of Gulf, there exists at least one dispute as to material facts which must be remanded for trial. We have recognized in our statement of facts some disputed areas. We do not, however, find it necessary to resolve these factual questions in this appeal.

We are fully aware of the fundamental principle that summary judgment is not to be granted unless the pleadings, depositions, answers to interrogatories and admissions As will be apparent, our resolution of the questions presented does not require resolution of any of the factual disputes in the case. Our conclusion is that no disputed material facts remain and summary judgment was appropriate.

on file, together with the affidavits, if any, show that there exists no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. Cayce v. Carter Oil Company, 618 F.2d 669, 672 (10th Cir. 1980); Rule 56(c), Fed.R.Civ.P. It is also settled doctrine that the fact that both parties have moved for summary judgment does not permit the entry of a summary judgment if disputes remain as to material facts. Buell Cabinet Co., Inc. v. Sudduth, 608 F.2d 431 (10th Cir. 1979); Securities & Exchange Commission v. American Commodity Exchange, Inc., 546 F.2d 1361 (10th Cir. 1976); Rains v. Cascade Industries, Inc., 402 F.2d 241 (3rd Cir. 1968). However, cross motions for summary judgments do authorize the court to assume that there is no evidence which needs to be considered other than that which has been filed by the parties. Securities & Exchange Commission v. American Commodity Exchange, Inc., supra; H. B. Zachry Co. v. O'Brien, 378 F.2d 423 (10th Cir. 1967).

The trial court granted the motion of Harrison for summary judgment. It held that although the workmen's compensation rating plan in question is "prospective" rather than "retrospective," it is similar to a retrospective rating plan within the meaning of § 5.2 and for that reason a summary judgment for Harrison should be granted. The contract provision excluded from reimbursable costs adjustments under not only "retrospective rating" but also "similar type insurance plans." The trial court concluded that under either a prospective or retrospective rating scheme, premiums "are adjusted by an experience or rating plan for the industrial risk." The court concluded as follows:

It is inconceivable why Gulf would have desired to shift the risk of premium changes to Harrison under a retrospective plan but not under a prospective plan. Especially given the similar purposes, goals and methods of those plans, it seems highly unlikely that Gulf's participation in such adjustments would hinge upon mere labels. If indeed Gulf wanted Harrison to bear the risk or reap the benefit of adjustable premiums only if a retrospective plan were utilized, it would have been simple for those who drafted the contract for Gulf to so state. The fact that the word "similar" was employed indicates clearly an intent to shift the risk to Harrison, not only under retrospective plans but under all other plans having like purposes and attributes.

The court went on to say that the goal of an adjustable premium plan is to encourage the party paying the premiums to incur fewer losses through development of safety practices. The court said that that goal could not be best achieved by placing the actual risks and benefits on Gulf, for it had no real control over Harrison's employees or the condition of their tools and machinery, or their safety practices.

The court continued:

A review of the contract leaves the impression that Gulf did not wish to expose itself to the risk of fluctuating premiums. By fixing its premium expense at a definite amount, Gulf shifted to Harrison the risk of higher premiums. Gulf, therefore, should not be permitted to reap the benefit of lower premiums occasioned by Harrison's improved safety record.

The trial court thus bottomed its decision on the fact that the premiums at issue were based upon a plan similar to a retrospective rating plan.

I. THE FACTUAL BACKGROUND

We have already mentioned the terms of § 5.2 of the contract. As originally drafted, the contract did not contain the language excluding certain insurance costs according to § 5.2. The contract, including the language added to § 5.2, was drafted by Gulf. Employers are required under the laws of the several states to provide workmen's compensation protection to their employees. Injured employees are entitled to the benefits as fixed by statute. The state also establishes certain standard insurance rates, according to job classifications, for workmen's compensation coverage. These established rates are referred to as "manual" rates. They reflect the average loss experience in the job classification among all employers of the state.

Affidavits of persons expert in the insurance field were filed by both parties. It appears from these affidavits that there are basically two types of workmen's compensation insurance. Under a "fixed," "guaranteed" or "prospective" rating plan, the manual rate is applied to the employer's payroll and multiplied by an experience modification factor to arrive at a standard premium. A premium discount may be subtracted from the standard premium to reflect reduction in administrative cost based on premium size, and an assigned risk surcharge may be added.

The experience risk factor is determined based upon the employer's actual loss experience in the first three of the four years immediately preceding the premium period. If the loss experience is worse than average, the experience factor will exceed 1.0, resulting in a higher than average standard premium; the opposite is true if the loss experience is more favorable than average.

Under some prospective plans, however, the experience modification factor is not used. In such cases, the premium is based on the manual rate and is not affected by the employer's actual loss experience.

Under retrospective rating plans, the premium for a policy period is estimated by use of the manual rate, the employer's payroll and an experience modification factor. At the end of the premium period, an adjustment to the premium for the past period is made based on the actual loss experience during the period. Under the insurance policy, adjustments may be made periodically for several years after a policy period based on payments made on...