W.R. Allison Enters., Inc. v. Oklahoma

• Decision Date: 09 April 2013
• Docket Number: No. 111,118.,111,118.
• Citation: 301 P.3d 407
• Parties: W.R. ALLISON ENTERPRISES, INC., a corporation, on Behalf of Itself and All Others Similarly Situated, Plaintiffs/Respondents, v. COMPSOURCE OKLAHOMA, Defendant/Petitioner.
• Court: Oklahoma Supreme Court

301 P.3d 407

W.R. ALLISON ENTERPRISES, INC., a corporation, on Behalf of Itself and All Others Similarly Situated, Plaintiffs/Respondents,

v.COMPSOURCE OKLAHOMA, Defendant/Petitioner.

No. 111,118.

Supreme Court of Oklahoma.

April 9, 2013.

CERTIORARI REVIEW OF CERTIFIED INTERLOCUTORY ORDER

¶ 0 The trial court granted partial summary judgment in favor of plaintiff and certified the interlocutory order for immediate review. The certified interlocutory order decided that, when an insured employer requests that a workers' compensation insurance policy be canceled, the insurer must refund the prepaid premium on a pro rata basis pursuant to 85 O.S.2001, § 67.1. The insurer filed a petition for certiorari review arguing that the pro rata refund provisions in the statute apply only when the insurer initiates the cancellation. We granted the petition for certiorari review. We find 1) the statute is ambiguous as to insured-initiated cancellations of workers' compensation insurance policies; 2) the state insurance department has, for many years, applied the statute only to insurer-initiated cancellations; and 3) the plaintiff/respondent did not establish any cogent reason why this Court should not defer to the department's longstanding application. We reverse the trial court.

CERTIFIED INTERLOCUTORY ORDER REVERSED; CAUSE REMANDED TO THE DISTRICT COURT FOR FURTHER PROCEEDINGS CONSISTENT WITH THIS OPINION.

George W. Dahnke, Patricia L. Franz, Oklahoma City, Oklahoma, for defendant/petitioner.

Duke Halley, John Walkup, Oklahoma City, Oklahoma, for plaintiffs/respondents.

TAYLOR, J.

¶ 1 We previously granted the defendant/petitioner's, CompSource Oklahoma's (CompSource), petition for certiorari review of a first impression question of law: Whether 85 O.S.2001, § 67.1¹ applied to all cancellations of workers' compensation insurance, both insured-initiated and insurer-initiated. We conclude the longstanding construction and application of § 67.1 of Title 85 of the Oklahoma Statutes by the Oklahoma Insurance Department required CompSource to make a pro rata refund of unearned premium only if CompSource initiated the cancellation of a workers' compensation insurance policy, and we find the appellate record does not establish any cogent reason why this Court should not defer to that longstanding application. We hold that § 67.1 of Title 85 of the Oklahoma Statutes did not require CompSource to make a pro rata refund of unearned prepaid premium to W.R. Allison Enterprises, Inc. (Allison).

I. Facts and Procedural Background

¶ 2 The material facts are not disputed. Allison is a small business Oklahoma corporation operated by its sole owner. Allison hired an employee in early 2009 and secured workers' compensation and employers' liabilityinsurance from CompSource. The policy provided workers' compensation and employers' liability coverage for Allison's employee for a period from February 3, 2009, to February 1, 2010. Allison prepaid the estimated annual premium in the amount of $801.00.

¶ 3 The employee worked for Allison until March 19, 2009. Allison asked its insurance agent to cancel the workers' compensation insurance policy. By letter dated April 8, 2009, CompSource acknowledged the cancellation request and advised that it would issue a ten-day notice of cancellation ² on a short rate basis ³ in conformance with the insurance policy. CompSource prepared a final audit report for the pay period from February 3, 2009 to April 22, 2009, calculating the gross premium to be $491.00, the short rate cancellation penalty to be $244.00, and a catastrophe premium to be $45.00 for a total of $780.00. CompSource subtracted the $780.00 from the estimated prepaid $801.00 annual premium and refunded the remainder as the unearned premium calculated on a short rate basis.

¶ 4 The insurance policy, at Part 6(D)(1), expressly permitted Allison's cancellation: “You may cancel this policy. You must mail or deliver advance written notice to us stating when the cancellation is to take effect.” At Part 5(F)(2), it provided for a short rate penalty charge if Allison cancels the policy:

If you cancel, final premium will be more than pro rata: it will be based on the time this policy was in force, and increased by our short rate cancellation table and procedure. Final premium will not be less than the minimum premium.

At Part 5(F)(1), the insurance policy provided for a pro rata refund of the prepaid premium if CompSource cancelled the policy,⁴ and at Part 6(D)(4), it provided that “any conflict with a law that controls the cancellation of the insurance in this policy is changed by this statement to comply with that law.”

¶ 5 Allison took the position that the short rate penalty charge conflicted with 85 O.S.2001, § 67.1 which expressly required the insurance company to refund a pro rata share of the prepaid premium if it canceled a policy and that the policy's short rate penalty provision was changed, by operation of law, to comply with § 67.1. Allison filed suit against CompSource on behalf of itself and other similarly situated employers to recover the short rate penalties charged by CompSource. In its third amended petition, Allison alleged CompSource's refusal to return the $244.00 short rate penalty charge constituted a breach of the insurance policy as impliedly amended by § 67.1. Allison also alleged that when § 67.1 was enacted in 1949, insurance companies routinely charged the short rate penalty upon an insured-initiated cancellation but not upon an insurer-initiated cancellation in violation of the mutuality of obligation between insured and insurer; that the purpose of § 67.1 was to forbid the short rate penalty charge; and that § 67.1 accomplished nothing if the short rate penalty continued. Allison further alleged that the class of insured employers which have been charged the short rate penalty is so numerous that joinder of all class members is impracticable and asked that the class be certified.

¶ 6 Allison asserted that insurance policies are canceled by CompSource whether the cancellations were insured-initiated or insurer-initiated, and that § 67.1 applied to all cancellations by CompSource. Allison moved for summary judgment on the issue of whether the short rate penalty charged by CompSource when it canceled policies was unlawful under § 67.1.

¶ 7 CompSource filed a response to Allison's motion for summary judgment and a counter-motion for summary judgment. CompSource took the position that the short rate penalty calculation of the amount of prepaid premium to be refunded when an insured requested cancellation of an insurance policy is a longstanding industry practice historically approved by the State Insurance Commissioner, and that the courts should defer to the longstanding application of a statute by the state agency vested with its enforcement. In support of its position, CompSource alleged that it is a member of the National Council on Compensation Insurance (NCCI), a licensed advisory and rating organization in the State of Oklahoma; that it utilizes the Basic Manual for Workers' Compensation and Employers' Liability Insurance published by NCCI; that NCCI submits its short rate cancellation computation tables and procedure to the Oklahoma Insurance Department for approval; and that, for at least the past thirty years, CompSource has utilized a standard insurance policy form developed by NCCI which contains a provision for prepaid premium refunds calculated on a short rate basis upon insured-initiated cancellations. CompSource submitted documentary evidence to show the truth of these allegations, and Allison did not dispute the allegations. CompSource also argued that, on its face, § 67.1 applied only to insurer-initiated cancellations.

¶ 8 The trial court granted partial summary judgment in favor of Allison, ruling:

that 85 O.S. § 67.1 applies to all cancellations, whether instituted by the insured or the insurer and, therefore, that CompSource Oklahoma was required to make a pro rata refund of unearned premium in connection with all cancellations while the statute was in effect, including the cancellation requested by Plaintiff W.R. Allison.

The trial court overruled CompSource's counter motion for summary judgment. The trial court certified the interlocutory partial summary judgment for appeal, finding there is no existing Oklahoma authority resolving this question of law and concluding an immediate appeal will best serve the goal of efficient administration of justice and materially advance the ultimate determination of the litigation. 12 O.S.2011, § 952(B)(3). Allison filed a motion for class action certification, and the trial court stayed ruling on the motion pending disposition of this appeal.

¶ 9 CompSource timely petitioned this Court for review of the interlocutory partial summary judgment order,⁵ arguing that for more than a century, contracts of insurance have drawn a distinction between cancellations by insurers and cancellations by insureds, citing Taylor v. Insurance Co. of North America, 1909 OK 298, 105 P. 354, 138 Am.St.Rep. 906; that the plain language in 85 O.S.2001, § 67.1 extends that section to cancellations initiated by insurers only, citing Matter of Protest Against Tax Levy of Ardmore Ind. School No. 19, 1998 OK 43, ¶ 14, 959 P.2d 580, 584; and that the courts must give deference to the Insurance Commissioner's approval of use of the short rate calculations, citing United Airlines, Inc. v. State Bd. of Equalization, 1990 OK 29, 789 P.2d 1305, 1311. Allison responded to the petition for certiorari, urging that it be denied until the trial court rules on the class certification. We granted the petition for certiorari review.

II. Standard of Review

¶ 10 At issue here is the meaning of language in 85 O.S.2001, § 67.1. The meaning of statutory language presents a pure question of law that stands before us for de novo review without deference to the lower court. Arrow Tool & Gauge v. Mead, ...