thank you honorable judges or officer counsel please this court my name is charles philbrick i represent the plaintiff appellant wire co world group here in this case liberty mutual wire co's worker's compensation insurance carrier overcharged wire co a total of five hundred forty five thousand dollars over the course of three renewal policies here's how while here's how liberty mutual did it workers compensation is a highly regulated and required insurance product that employers like wire co have to buy the pricing structure for the policies are designed so that equally suited employers are being charged  same amount because they all have to get one employer shouldn't enjoy a competitive advantage over another simply because they have to buy workers compensation insurance all the factors in the premium calculation are essentially outside of liberty mutual control except one the schedule rating factor but even in that context the schedule rating factor is specifically tailored to certain type of the rich aspect of the risk in this particular instance wire code experience rating modification factor it's called the x mas experience model improved year to year as the policies renewed significantly so much so that by the third year the change in the inexperience model which is calculated by a third party the end c c i national co reduced wire coast premium over two hundred forty thousand dollars but with respect to each renewal liberty mutual changed the schedule rating factor and instead doing so offset the premium benefit from the change of the experience modification factor and that is strictly prohibited by the experience rating plan manual and by the schedule rating plan that was submitted by liberty and approved by the regulators the schedule rating factor is limited only to characteristics of the risk that do not include the insureds experience both plans say that categor department of insurance for missouri has issued two bulletins about schedule rating there in the submissions they make it clear schedule rating is not supposed to change year to year on renewal unless the risk characteristics of the operations change the only way liberty mutual was allowed under its schedule rating plan to change the schedule rating factors was if there was a change in wire bret risk characteristics that would be safety equipment training of employees and other characteristics laid out in their plan that has to change and then the underwriter has to have documentation of the there is a civil procedure issue she found that wire coast complaint only pled the concept of breach by failure of documentation as to the texas risk but not as to the missouri risk and she's wrong about that for i believe that's true i believe that's true also would basically what she said was why are co you only pled lack of notice as to the missouri risk as your basis for breach and so that's what you're stuck with  and lack of documentation the documentation is a key requirement no she acknowledged that we do know is that we pled that as to texas but not as to missouri but paragraph one of the complaints the wire seeks to recover premium over payments improperly charged by liberty mutual on three workers compensation insurance policies issued by liberty mutual to wire the overpayments were due to liberty mutual improperly increasing premiums by changing the schedule rating factor without providing wire co notice as required by the contracts and by failing to obtain required documentation opening statement of the complaint there's no holes that's that's entirely correct but as of a plaintive religion breach of contract need not articulate every theory of breach of the contract within the complaint that case authority where a plaintiff was a trying to avoid summary judgment by presenting a new theory one of her cases it was a tort base case and the plaintiff to avoid summary judgment articulated a breach of contract claim that's not the situation here at all we articulate in the complaint breach of contract failure to comply with the terms of the schedule rating plan that's more than sufficient to put them on notice that any violation of those schedule lighting plans is at issue we moved for summary judgment right at the get go and liberty said we need additional time we need discovery so the court postponed the summary judgment motion during discovery wire co propounded in iraq atory that said identify the documents that you're relying on to justify your schedule rating changes in the schedule writing factor and identify when those documents got into your file liberty mutual by the way refused to answer those questions or didn't answer those questions they said they would but they did not it wasn't an objection so the point is they knew perfectly well that the documentation issue was fully and play and was part of our affirmative motion for summary judgment so her conclusion that it had not been adequately plaid i think is inconsistent with the case  inconsistent with the federal rule of notice pleading even if we were held to that limitation we still win they're obligated to provide notice in missouri  of the notices detailed it's got to discuss it delineates what the old factor was what the new factor is and why there are changes and that's crucial because it gives the insured an opportunity to cure so as to preserve the old there is the carrier is obligated the underwriter is obligated to create a schedule rating worksheet the goes into the underwriting file and they're obligated to maintain it the liberty mutual underwriters never created those except for the very last policy they were essentially just changing the schedule rating factor to adjust for the experience modification change there's no documentation in the evidence of any risk did notice would underscore the fact that it was of legitimacy change do you see in order to send the notice the notice would delineate a legitimate change if you tried to delineate an illegitimate change my client could say that risk characteristic didn't change you can't change it because those machines always had those safety devices on him you cannot now say that the safety devices are inadequate good the whole point of the scope of the schedule rating plan and its requirement to force the carrier to document and be objective evidence is to protect against the kind of abuse that happened here if you look at the department bulletins that we've submitted the department then did use of schedule rating between eighty nine and ninety three because of these kinds of abuses using schedule rating factor for things other than the risk characteristics schedule rating was allowed again in two thousand and two the department reaffirmed that it's crucial that the carrier honor  document its schedule rating factor and provide notice to the carrier of why it's changing the factor liberty mutual didn't do that because the reasons for its change in the factor had nothing to do with why or co's risk pretty and she did and we submit that the policy language is perfectly clear all premium for this policy will be determined by our manuals of rules rates rating plans and classifications that language is in the policy twice it's categorical there is no other way to calculate the premiums except by those government approved manuals and rating plants they obviously are a part of the contract and the carrier and the insured are both obviously compelled to comply with them as binding contractual provisions and her result that an insured has no right against no breach of contract claim against its insurance carrier when it gets overcharged premium in a way that's inconsistent with those binding contractual terms it's an absurd and an reasonable result clearly those things are incorporated into and part of these contracts and i reserve the rest of my time you think you're not in mourning and may please the court to put some context in this case it's not a case about somebody not getting what they paid for this is a case about an insured attempting to create a private right of action out of a regulatory requirement by bootstrapping it to a policy that was paid for and provided to the insured within that context i want to talk about three things absent the court have a different plan for me my plan is to talk about incorporation first and how the fact that these rating plans as a regulatory animal are not incorporated into the to the policies and we'll discuss that language and then want to talk about the damage side of it and how that provides the court with an alternative basis to grant summary judgment regardless of the incorporation issue and then third give enough time will talk about the dismissal of a vexatious refusal collect and first on the corporation side i don't think there's any disagreement on what the missouri standard is for incorporation of one document into another the intent to incorporate must be clear and this comes from that versus kerr case which is a mo and bach to two thousand and fifteen that's cited by the plaintiffs the mere mention of a document does not incorporate the terms of that document that's the done industrial group case which is also a mo and from two thousand and three the reference must be such that the terms  and given time all run absolutely absolutely and and there are multiple doc dr and swirling around this we have the obvious one of incorporation into missouri law and i've got examples of what constitutes incorporation think if the cases cited by the district court are directly on point and the true x case the court cited actually distinguishes seeburg and the type of provision that's in this policy  is a common provision that is give me another example for example contracts and statutes often refer to interest rates that will apply based upon for example the prime rate as set out in the wall street journal plus one percent as of the date of the breach so you then have a contract to write if there's a breach to pluck that interest rate out of the wall street journal apply it as interest but it doesn't make the wall street journal part of the contract and that's exactly why the tricks court distinguish the seeburg case which is one sided by plaintiffs stands for the proposition that you if you say your contract i'm going to go to the wall street journal and i'm going to pluck that interest rate out then you have a contractual right to go to the journal and pluck that interest rate out again it doesn't make the journal the  it does that's exactly what it does it allows you know that no there's a dip their true literally is a difference it's the only way that you can reconcile the different cases for example like seeburg with the truax case i mean we have a hard and fast requirements for incorporation the schedule rating that we were going to apply to that policy we put it in the quote we put it in the policy they never objected to it so this isn't and again he discussed the experience modoc spirit is a third party  in this case it's determined by the end and is based upon the last history for the various insureds the claim information goes to n c i they calculate experience mot and then you're allowed to go to that experience ma which is part of your filings you pluck it out and then you apply it to the premium and but it doesn't make the whole n c i manual part of your contract you have a contractual right to plu that rate and your contractual right to pluck your scheduling rate and there's no allegation this case that we didn't pluck the right rate so if for example we didn't have a filed in that said our scheduling for  percent and we actually applied fifteen percent the policy we applied exactly what we were supposed to apply now these workers comp type disputes have often been through the years over whether or not you grab the right experience spot that you didn't use the right one that applied to this particular policy again it doesn't make n c i part of your policy just means you used the wrong number no allegation here that we used the wrong number th comply with the regulatory requirements created by the missouri department insurance and kind of segue into their oh well there's no it there's no evidence of the manual in this case of the manual have anything to do a schedule ra it is the it is a and it was described by the palace council at the oral argument as a phone book of documents that all insurance companies have that lay out your grading plan but we're not talking about manual we're talking about the schedule rating plan only which again is this creature of regulation and again when you when you look at the language that's in there and it refers remember this policy applies to twelve states some states have schedule rating plans that you must file some states don't have skies or rating plans that you must file and the missouri plan requires the notice be given ninety days after the schedule ready to put into effect it has a documentation requirement it's different than the texas requirement the texas schedule rating plan does have a documentation requirement  no those are not contractual terms those are regulatory requirements that are in place for example we have missouri recognizes essentially the model act of the fair claims practices handling act and it lays out a litany of things that insurers must do and create a private right of action where you can say you're supposed to respond in thirty days you didn't respond in thirty days you only money automatically it's not the manual of rules you see it depends on where you're looking at the policy but under item four which is the decorations the premium for this policy will be determined by our manuals of rules classifications rates and rating plans so to the extent the schedule rating plan falls under anything it falls under a rating plan it doesn't fall under the manual of the rules so but there is no it does there's no reference in any of this to a schedule rating plan there's scepters references to rating plans there's no references to a state is it i'm sorry that's the experience modification that it's the you have to file those as well the interpretation of this policy is not complex so there are both the pole there are multiple radios and that and that and that actually that actually illustrates the whole issue here we're having a conversation back and forth where this court well prepared as it is doesn't know what these are referring to and under and under missouri but you can't that's the whole point under missouri law ought to be to incorporate you have to know exactly what they're talking about u homes but there's no there's no chapter that requires the exact language of what liberty mutual put into a schedule rating plan the existence of a plan is necessary but the statute doesn't dictate the exact language in fact the only notice language or there is a different dispatch it has a different notice requirement the statutory notice requirement is that if the insured contacts you a body schedule rating you have to provide them with information as to who they should contact that's what the statute requires which is a different obligation that what liberty mutual puts into its schedule rating plan but again the statute itself is not part of the the contract the statute is the statute and there's no you know it does not create an independent cause of action so i mean when you look at the cases that are cited in especially the cases that in the briefing as far as what constitutes incorporation versus what does not constitute incorporation these terms in this protest particular policies don't come anywhere near incorporation i mean  component of it the experience maad to schedule rating that we're talking about here today discounts the terrorism surcharge the classifications of employees the rate per employees the number of employees all of that is set forth expressly in the policy you do not have to go anywhere else to determine how a premium is calculated in fact immediately below item four that refers to our rates are calculated it refers you back to the additional information page and at that additional information page all of this information is laid out and that one of the examples is at j one hundred two in the record it's the extension of information page so all these terms are in the policy there's no reason to go outside the policy to find these terms all the languages doing that has been focused on by wire co in this case it is simply telling you where you pull those numbers from it's just like the wall street journal it exists it's a number and it may change over time so therefore the policy is recognized by the super case that language allows you to go get that number but it doesn't say anything about the whole thing is that incorporated  greenman so and so that's where i think we've gotten removed from what the missouri corporation standards are and we're looking at a and what's a hybrid or an exception but we're not incorporat collateral documents were simply using them to pull information in but the policy itself provides that information there's no reason to there's the those don't go in to me the numbers the number and you're either pull the right number not pull the right number and then if you don't comply with your plan as you've identified the deal why that's a deal why  argued we pulled in the wrong number but we did i mean that was the number that we intended that was the number but that does not create a private right of action the schedule rating is intended to buy the deal wide to influence insurers to act in a certain manner like many many regulatory schemes there are intended to motivate behavior but they don't create private rights of action a scheduling plan does not create a private right of action unless you somehow incorporated into the policy and there's no cases that would say that this vague language that we've struggled  it's not a theory it's a i guess it's a motive is what they're what they're claiming it's a motive for using an improper number it's not i guess a cause of action but then we flip back to liberty mutual lost money on every single one of these policies so if you want to look at it in the global picture did they get with the paid for didn't get what they paid for were these numbers right away these numbers wrong they did the policies all exceeded that the premiums every single one of them so these were to bargain for liberty mutual and so if you don't look at it globally the answer is these prices were fair in fact they were streaming fair  so we'll well the bargain for issue i think is key because ultimately if you get to the damage side of this i don't think we ever get to the damage side i don't think we ever get to the issue of whether those other claims should have been ignored are absolutely there was a quote in advance and all of this is part of the record there was a quote in advance and they and the policy itself sets forth in detail the schedule ratings that are used from year to year to year so you have to do is compare them to the prior year and obviously you can see that they've changed over time there's also expressed we set out the policy exactly how the schedule rating affects the premium the insured has the right to cancel the the policy at any time without notice all you got to do is send a letter says cancel and any premiums that you're owed could be refunded so as soon as that policy shows up they've got a dispute with the schedule rating they can say i don't want to pay that and please cancel the policy and go on somewhere else so that and that kind of flips back to the remedy side of it the course there remedies don't buy the policy if you don't like the schedule rating cancel and go somewhere else administrative remedies if we're not following our scheduling plan and then ultimately the policy also provides for an audit which wasn't  asked for by wire co so it's not a situation where they're left without a right that's actually referenced in the first and if in the first as a court's aware why are co contacting to missouri department of insurance and raise this issue and they didn't just raise the issue they demanded that the department of insurance order liberty mutual to refund certain amounts premiums that yeah and the response back to the missouri department insurance was if the the the measure of damages they've had is changed over time when they went to deal why they said one thing and they said a different thing and then by the time this lawsuit came they've created this proxy of damages that is we're going to go back to two thousand and nine we're go grab a a schedule rating that was in the a different ensures a related but a different policy and we're going to say you have to stick with that throughout these three years there they can never explain nor is there any case law that would support that that's the proxy for damages damages or damages and as the court was asking questions of my opposing counsel you know what's the downside of not receiving that notice is immaterial is it not material that's the question as far as damages ok so if somehow this notice provision and this document for vision is part of the policy and if we breach those provisions then what other damages they received the policy that their own broker in two thousand and eleven said one of his best renewals ever  liberty mutual lost money on these policies and they have no evidence of alternative or cheaper policies so had that notice been provided again we're not saying it wasn't provided we just don't have any evidence of it but had that notice been provided there's no evidence that this would have worked out any differently and they did have actual notice of what the schedule ratings were they knew exactly what they were and they knew exactly how the impact of the premiums then any point in time they could have said no we don't want to buy  none none and in fact based upon what evidence is there that these policies were at a large loss to liberty mutual even if you read further to that that there were no such options that could have been said we should get a four hundred thousand dollars refund so no no going back to the four point eight they just simply said we should get a refund the schedule really should have been zero when they went back to the department insurance they went back to the one point eight rate which was in the two thousand and ten policy and they said well we think it should be one point eight for two years and not that deficient and not the twenty five so they calculated it at one point eight and then they asked the department insurance for that number and asked them to force loaded mutual to provide it when the suit was filed they then went back to this four point eight from the two thousand and nine policy and said no it should have been a four point eight credit and not debits that it was so they added a policy and they changed their whole damage model between three different times and what and what i think  that's right but they can't even be consistent on what they consider to be the over charged that he's absolutely is it's that what's missing is any any term in the policy that would trigger that and what they've essentially said in their briefing as well as the oral argument in from the district court is if you don't follow your schedule rating plan to the tee you forfeit the right to have a schedule rating change i mean that's their theory of damages that doesn't it doesn't come from anywhere it doesn't come from regulation doesn't come from statute it certainly doesn't come from the policy so that being the case we resort back to well if these are terms and if they were breached then what are your damages what anything different have happened if the answer is of course not they would still bought this policy know because as the evidence was is in the record liberty mutual would not have sold it at the lower rate so if they would have said we're not paying that schedule rating we want to go back to be a four point eight credit we were said we're not sell it to you so it's not an overpayment this is what the amount was we applied to the schedule rating that we calculated there's no dispute about that it is the right rate and if the scheduling planned was not strictly adhered to that's a case where insurance policy made reference to an experience rating plan as something that is referenced and the court said clearly that is a part of the contract and  the schedule rating plan delineates or in constraints what schedule rating factor the insurance carrier may use they've used liberty use four point two percent in the first and the the schedule rating plan and the department of insurance are very clear that four point two percent check credit and means it reduces the premium is not supposed to change unless the insurance risk criteria changes and if the risk criteria changes then the underwriter has to have documentation of the change in  delineate to safeguard the abuse of the factor i mean we're sort of getting ahead of ourselves in the sense that the correct factor was four point two percent credit on the first policy and liberty is not allowed to change that unless it drop unless it demonstrates a change in the risk criteria the  they they did offer a policy using a four percent four point two percent credit originally and end and the policy the manuals of rules the rates the rating plans and the classifications delineate how premium is determined the schedule rating plan determines the schedule rating factor they can't change the schedule rating factor off of the four point two unless there's a change in the risk characteristics they've got documentation that the change in their file and with missouri they provide notice of that of the change in risk characteristics none of those things happened in the evidence is on contradicted that the risk characteristics never changed now i want to get to rules ok that would be the experience rating plan manual the manual the delineates classifications their liberty mutual's manuals they are incorporated into the policy rate classifications and rating plants that would include the schedule rating plan which they admitted in the pleadings the braiding plans refers to their schedule rate plan no issue there then the policy says the information required below this is the calculation of the estimated premium that's laid out in detail the information required below is subject to verification and change by audit that audit that comes at the end of the policy period that's not something liberty chooses to do they're obligated within six months of policy expiration to audit and then calculate a final premium using actual payroll and corrected factors all of the factors in the estimated premium could change even the schedule rating plan schedule rating factor could change but again only under certain limited circumstances  the my client was aware of the schedule rating factors as they were set forth in the estimated premium no question about that but did my contract client appreciate the fact that those changes year to year were illegal and improper based on the contracting documents no the record indicates that they retained an outside auditing firm to come in and audit their premiums and audit the premium calculations and it was the audit firm that said they've been changing your schedule rating factor year to year and that's prohibited unless they have documentation of changes of the risk characteristics so in january of two thousand and fourteen wire co asked for documentation evidencing the change in the risk characteristics liberty refused to provide any my client then complained to the department of insurance ultimately the department of insurance looked at the situation and said you've got fact issues you need to go see a court of law that's what they said that's plainly in the record with respect to incorporation submitted some additional case authority after the completion of briefing including a case called the danfoss case in florida which is a collection case that liberty the same party here brought against another insured in florida to collect unpaid workers compensation premiums in that case liberty mutual said in their summary judgment motion to the court and c c i's rate rating system classifications and rules are all incorporated into the policies by operation of law and the policies language example policies general section part five premium paragraph a our manuals and relevant part all premium for this policy will be determined by our manuals of rules rates rating plans and classifications that was a year before that was after the filing of this court case a year before they filed their briefs here every time a worker's compensation carrier brings a collection action against its insurer it must by definition advocate incorporation otherwise there is no way to measure whether the premium has been calculated correctly a couple more things that were address damages the schedule rating factor was not supposed to change and it did change and they didn't have the required documentation of any changes in the risk characteristics therefore it was an incorrect factor the question then becomes what was the correct factor let me just stop for a moment and use a hypothetical if during the policy period the experience modification changed from the one that was used in the estimated premium when calculating the final premium liberty would have been obligated to use the new different factor based on the manual rules it would have to do that same with the schedule rating factor here we have a factor that was misapplied my client had three years to contest it we did so within the three years and then the question becomes what was the correct factor for the correct factor was a four point two percent credit that would continue each year to year that was the correct factor that should have been used or the carrier could have chose not to renew or the carrier could have chose not to use a schedule rating factor at all to the audit provision that's here in the standard form policy and that amended it's in the full copy of the policies indicates that the insured has up to three years after policy expiration to challenge the audit that has been performed by the carrier and i'm talaga eyes but i can't put you on the specific record reference of that policy language t we're asking this court to reverse the district court its finding that this policy language does not incorporate the manuals of rules rates rating plans and classifications such that  violation of the provisions of those documents would give rise to a private right of action for breach of contract by the insured standard review here is to novo as if for the first time we're asking  evaluate the fact that there is no genuine issue that wire co's risk characteristics never changed and therefore its schedule rating factor was not supposed to change