Court Opinion

ID: 3021557
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:25:01.094259+00
Date Added: 2024-06-11T18:15:02.932255
License: Public Domain

United States Court of Appeals
                           FOR THE EIGHTH CIRCUIT

                                   ___________

                                   No. 97-3355
                                   ___________

Calico Trailer Manufacturing            *
Company, Inc.,                          *
                                        *
      Plaintiff - Appellant,            *
                                        * Appeal from the United States
      v.                                * District Court for the
                                        * Eastern District of Arkansas.
Insurance Company of North America; *
Loss Control Services, Inc.; National   *
Council on Compensation Insurance,      *
                                        *
      Defendants - Appellees.           *
                                   ___________

                                Submitted: April 17, 1998
                                    Filed: September 9, 1998
                                  ___________

Before RICHARD S. ARNOLD,* Chief Judge, LOKEN, Circuit Judge, and PRATT,**
      District Judge.
                            ___________

LOKEN, Circuit Judge.

      *
       The Honorable Richard S. Arnold stepped down as Chief Judge at the close of
business on April 17, 1998, succeeded by the Honorable Pasco M. Bowman, II.
      **
         The Honorable Robert W. Pratt, United States District Judge for the Southern
District of Iowa, sitting by designation.
       Like other States, Arkansas requires employers to obtain workers’ compensation
insurance. That insurance is comprehensively regulated by means of the statutory
Arkansas Workers’ Compensation Insurance Plan administered by the Insurance
Commissioner. See Ark. Code §§ 23-67-219, 23-67-303 to -313. The Commissioner
has fleshed out the statutory Plan in Insurance Rule and Regulation 54.

       In 1989, the Plan Administrator involuntarily placed Calico Trailer
Manufacturing Company, Inc., an Arkansas manufacturer, in the “assigned risk pool”
for eligible employers who cannot obtain workers’ compensation insurance in the
voluntary market. Assigned risk employers are insured by participating insurers at rates
established by the Administrator. Unhappy with the premiums it has paid and the
insurance services it received as an assigned risk insured, Calico commenced this
action in state court against Insurance Company of North America (INA), the
Pennsylvania insurer that serves as Calico’s “servicing carrier”; CIGNA Loss Control
Services, Inc., a Texas company that provides loss control services; and the National
Council on Compensation Insurance (NCCI), a workers’ compensation insurance
ratings organization licensed by the Commissioner under Ark. Code § 23-67-214.
Asserting causes of action for breach of contract, breach of fiduciary duty, bad faith,
violation of public policy, and negligence, Calico alleges that defendants conspired to
“increas[e Calico’s] premiums to [an] unlawful and unregulated rate level” by failing
to provide cost-containing services such as proper claims investigations, proper defense
of false and fraudulent claims, on site safety investigations, the recommending of safety
improvements, and the distribution of safety materials to employees. Defendants
removed the diversity case, the district court1 dismissed Calico’s claims, and Calico
appeals. We modify the dismissal to be without prejudice and affirm.

      1
       The Honorable Garnett Thomas Eisele, United States District Judge for the
Eastern District of Arkansas.

                                          -2-
        The district court concluded Calico’s claims are barred by the filed rate doctrine,
a doctrine that “prohibits a party from recovering damages measured by comparing the
filed rate and the rate that might have been approved absent the conduct in issue.” H.J.
Inc. v. Northwestern Bell Tel. Co., 954 F.2d 485, 488 (8th Cir. 1992), cert. denied, 504
U.S. 957 (1992). On appeal, Calico concedes the doctrine applies to workers’
compensation insurance rates filed and approved by the Commissioner for Arkansas
employers in the assigned risk pool. But Calico argues its claims are not barred by the
doctrine because it is not challenging the filed rates, only defendants’ failure to provide
services that resulted in Calico being required to pay retroactive premium increases
under the filed rates. We need not consider the applicability of the filed rate doctrine
because Calico’s diversity suit suffers from a threshold flaw, Calico’s failure to exhaust
administrative remedies made available to workers’ compensation insureds under
Arkansas law.

       Insurance Rule and Regulation 54 includes detailed provisions (i) authorizing the
Plan Administrator to establish written performance requirements for servicing carriers,
such as INA, regarding premium audit and collection, claims services, loss control and
safety services, and resolution of complaints, § 8.D(5); (ii) requiring servicing carriers
to “manage losses in compliance with the performance standards,” provide service
comparable to that given voluntary insureds, consult with insureds about joint
settlement of claims, comply with approved rate filings and rating plans, and meet
“such other service or performance standards . . . as may be specifically required by the
Commissioner,” §§ 9(3) & (4); and (iii) permitting servicing carriers to contract with
third parties, such as CIGNA Loss Control Services, “for the purpose of satisfying
other duties as servicing carriers,” including loss control, subject to the Commissioner’s
approval, § 9(5). In other words, all the insurer services about which Calico complains
are comprehensively regulated under Insurance Rule and Regulation 54.

      In addition to these substantive regulations, Insurance Rule and Regulation 54
provides dispute resolution procedures. An insured “who may have a dispute with

                                           -3-
respect to any aspect of the Plan” may complain to the Plan Administrator, whose
decision may be appealed to the Commissioner. For employer disputes, the
proceedings before the Plan Administrator and the Commissioner are subject to “all
requirements of due process” and the notice and hearing requirements of Ark. Code §
23-67-219(3)(B). See Rule 54, § 13. Another section of the Rule, § 4.K, provides for
hearings regarding “premium[s] in dispute.” Finally, the Commissioner’s decisions
regarding such disputes are apparently subject to judicial review under Ark. Code § 23-
61-307. See Rule 54, § 13(1); cf. Douglas v. Dynamic Enters., Inc., 869 S.W.2d 14,
15 (Ark. 1994).

       “Where relief is available from an administrative agency, the plaintiff is
ordinarily required to pursue that avenue of redress before proceeding to the courts; and
until that recourse is exhausted, suit is premature and must be dismissed.” Reiter v.
Cooper, 507 U.S. 258, 269 (1993). The Arkansas Supreme Court requires exhaustion
of an available administrative remedy unless it would be futile to do so. See Hankins
v. McElroy, 855 S.W.2d 310, 312 (Ark. 1993); Arkansas Motor Vehicle Comm’n v.
Cantrell Marine, Inc., 808 S.W.2d 765, 766 (Ark. 1991). Calico has made no showing
that its unexhausted remedies under the Plan are unavailable or would be futile.
Accordingly, its diversity lawsuit is premature and must be dismissed. Consistent with
exhaustion principles, we modify the dismissal to be without prejudice and affirm.

      A true copy.

             Attest:

                     CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.

                                          -4-