Hartford Acc. & Indem. Co. v. Pro-Football, Inc.

• Decision Date: 28 October 1997
• Docket Number: INC,No. 96-7222,PRO-FOOTBAL,No. 96-7215,96-7222,96-7215
• Citation: 127 F.3d 1111
• Parties: HARTFORD ACCIDENT & INDEMNITY COMPANY, Appellant/Cross-Appellee, v., d/b/a Washington Redskins, Appellee/Cross-Appellant. Consolidated Case
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 1111

127 F.3d 1111

326 U.S.App.D.C. 436

HARTFORD ACCIDENT & INDEMNITY COMPANY, Appellant/Cross-Appellee, v. PRO-FOOTBALL, INC., d/b/a Washington Redskins Appellee/Cross-Appellant.

Consolidated Case No. 96-7222.

No. 96-7215.

United States Court of Appeals District of Columbia Circuit

Argued Sept. 3, 1997.

Decided Oct. 28, 1997.

Appeals from the United States District Court for the District of Columbia (No. 94cv02266).

Mark E. Solomons, Washington, DC, argued the cause for appellant/cross-appellee. With him on the brief was Michael R. Goodstein, Washington, DC. Paul H. Friedman entered an appearance.

Barry W. Levine, Washington, DC, argued the cause for appellee/cross-appellant. With him on the brief was Mark A. Packman, Washington, DC.

Before: WALD, WILLIAMS and GINSBURG, Circuit Judges.

Opinion for the Court filed by Circuit Judge STEPHEN F. WILLIAMS.

Concurring opinion filed by Circuit Judge WALD.

STEPHEN F. WILLIAMS, Circuit Judge:

This case deals with a so-called "retrospective rating" insurance policy, evidently a type common for workers' compensation. The insured employer pays an estimated premium, which is typically based on data about the insured's payroll and the classifications of its employees for risk purposes, and which is subject to later correction. The classifications of course vary radically by activity; here, for example, the initial rate per $100 of payroll for "athletic team or park--contact sports"--the policy was issued to the owner of the Washington Redskins--was nearly 40 times the premium for "clerical office employees." The rates, fixed by law, also vary markedly according to the jurisdiction where employees may routinely seek compensation, depending on benefit levels and likelihood of recovery in the jurisdiction. They are, for example, far higher in the District of Columbia than in Virginia--more than double in this case. Both jurisdictions allow recovery by an employee who is injured within their respective borders or whose employment is principally located there.

The policy calls for initial payment of an estimated premium, to be followed by adjustments to reflect actual circumstances. Here, during the third of three successive one-year policies, the District of Columbia Court of Appeals affirmed the decision of the D.C. Department of Employment Services that the players performed "the principal services for which they were hired" in the District, where they played their home games (R.F.K. Stadium), rather than in Redskins Park in Virginia, where they spend a majority of their time at practice. Pro-Football, Inc. v. D.C. Department of Employment Services, 588 A.2d 275 (D.C.1991) ("Anderson"--so-called after one of the player claimants). The players were thus entitled to invoke D.C. law as a basis for recovery for injuries occurring anywhere (as the players had sought throughout the period of the three policies).

The parties agree that the provisions on premium adjustment allow the insurer to make a retrospective premium change to reflect changes in the employer's payroll or in the job classifications of particular employees. The question is whether the terms of the policy also permit a premium adjustment for a change in the jurisdiction whose law is available to employees, such as resulted from the Anderson decision. The district court read the policy as denying the insurer such a power. We reverse.

* * *

Hartford Accident and Indemnity Company provided the Washington Redskins' owner/operator, Pro-Football, Inc. ("PFI"), with a workers' compensation insurance policy for three successive annual policy periods, from July 14, 1988 to July 14, 1991. The policy was a standard form, assigned risk policy administered by the National Council on Compensation Insurance ("NCCI"), designed for employers like PFI who cannot purchase coverage on the voluntary workers' compensation market and who cannot or are not willing to self-insure. See generally 9 Arthur Larson & Lex K. Larson, Larson's Workers' Compensation Law §§ 92.53-92.65 (1997) (describing assigned risk, retrospective rating policies). Under the policy, PFI's premiums were initially based on the parties' use of Virginia as the expressly assumed principal location of the players' services.

Under both the District of Columbia and the Virginia workers' compensation insurance plans ("WCIPs"), the NCCI directs insurers in the state pool to issue coverage to employers eligible for assigned risk insurance. When PFI submitted an application for Virginia assigned risk coverage, NCCI assigned the application to Hartford, which was obligated to issue a policy. The policy issued by Hartford consisted of manuals (by reference), standard forms, an Information Page (actually several pages) of figures specific to PFI, and rates; the forms and manuals were approved, and the rates set, by NCCI. (The policy forms for the District and Virginia WCIPs are identical in all material respects.) The terms and rates for the policy were not negotiated; neither Hartford nor PFI could legally have altered them.

Retrospective rating plans of the sort embodied in this policy are used when the size of the insured's risks is difficult to measure at the beginning of the policy period, see Lee R. Russ & Thomas F. Segalla, 5 Couch on Insurance § 69.15 (3d ed.1996) ("Couch"). Courts routinely enforce the retrospective provisions in such plans. See, e.g., L.C. Worley v. Travelers Indemnity Co., 124 Ga.App. 64, 183 S.E.2d 91 (1971); Great American Ins. Co. v. Nova-Frost, Inc., 362 N.W.2d 358 (Minn.Ct.App.1985); Texas Soap Mfg. Co. v. American Auto. Ins. Co., 227 S.W.2d 376 (Tex.Civ.App.1950). Workers' compensation in general, and professional football in particular, present the kind of uncertainty that makes retrospective rating appropriate, because the insured's activities and the size of its payroll are likely to vary considerably over the course of the policy term.

Premiums under the policy are calculated as the product of the work classification rate for a specific jurisdiction and the amount of payroll allocated to employees in that classification and jurisdiction (the "premium basis") up to a regulated maximum amount. Initial premiums (at least for years other than the first one) also incorporate an "experience modification factor" (or "mod"), a prospective adjustment to take account of prior years' claims experience for the particular employer. All the factors other than actual payroll--the rates, classifications, premium basis maxima, and mod--are set by NCCI.

Following attempts by several injured Redskin players to collect the higher District benefits for injuries received outside the District, the Director of the District of Columbia Department of Employment Services ruled on or about July 10, 1989, just before the end of the first policy year, that the players' place of principal employment was the District rather than Virginia. The D.C. Court of Appeals issued its decision in Anderson, affirming the Director, in March 1991.

Hartford, relying upon the policy provision that allowed calculation of the "final premium" after the policy's expiration, then wrote PFI that it had reclassified Redskin players and coaches as District of Columbia employees for all three policy years. For the then - current policy year, 1990-91, Hartford issued an endorsement, or formal amendment, implementing the reclassification. Hartford then billed PFI for the difference in premium levels--a difference, after adjustments, of $5,350,762. PFI refused to pay, and Hartford filed suit under the federal courts' diversity jurisdiction. PFI counterclaimed for breach of contract and fiduciary duty, fraud, bad faith, and negligent misrepresentation.

On cross-motions for summary judgment the district court granted summary judgment for PFI, ruling that the policy did not permit Hartford to change the jurisdictional basis of the premium calculation retroactively. Hartford Accident & Indemnity Co. v. Pro-Football, Inc., d/b/a The Washington Redskins, No. 94-2266 (D.D.C. Aug. 21, 1996) ("Mem. Op."). The district court also suggested that any reclassification might have to be by formal endorsement, which Hartford had failed to issue except for the final policy year at issue. Finally, the district court struck the affidavit of a Hartford expert because it was submitted after the close of discovery, and rejected PFI's counterclaims as time-barred under the District's statute of limitations. All of these decisions are on appeal.

I.

The district court noted, and the parties agree, that the task in contract interpretation is to decide "what a reasonable person in the position of the parties would believe the language meant." Mem. Op. at 8 (citing 1010 Potomac Assoc. v. Grocery Mfrs. of America, Inc., 485 A.2d 199, 205 (D.C.1984)). In the particular context of insurance, under District of Columbia law,

[s]ince insurance contracts are written exclusively by insurers, courts generally interpret any ambiguous provisions in a manner consistent with the reasonable expectations of the purchaser of the policy. However, when such contracts are clear and unambiguous, they will be enforced by the courts as written, so long as they do not 'violate a statute or public policy.'

Smalls v. State Farm Mut. Auto. Ins. Co., 678 A.2d 32, 35 (D.C.1996) (citations omitted). See also GEICO v. Fetisoff, 958 F.2d 1137, 1141 (D.C.Cir.1992) ("Under District of Columbia law, '[c]lear and unambiguous language [in an insurance policy] should be construed according to its everyday meaning.' ") (quoting Continental Casualty Co. v. Cole, 809 F.2d 891, 896 (D.C.Cir.1987)). Thus, as we understand District law, no preference for the insured's reading arises unless the contract is ambiguous, and even then the preference involves no more than accepting what the insured might reasonably believe over an alternative reasonable interpretation offered by the insurer.

The parties also wrestle with the issue of...