Court Opinion

ID: 9829432
Source: CourtListenerOpinion
Date Created: 2023-09-01 19:18:28.747535+00
Date Added: 2024-06-11T07:43:01.150941
License: Public Domain

CODY, Justice.
The main action was brought by ap-pellee, a compensation insurance carrier, to collect from appellant the sum of $1,-585.01, alleged to be due as premiums on workmen’s compensation insurance policies, covering the period from January 1, 1935, to April 11, 1935. As there is no question but that the policies sued on by *535appellee were by it issued to appellant, and by the appellant duly accepted, and remained in force for the time specified, and as no question is made as to the amount of the premiums sued for, no further discussion of the main action is necessary. The question here involved, as indicated, grew out of appellant’s cross-action.
Appellant alleged in its cross-action that during the period from May 2, 1933, to May 2, 1935, it was insured by two policies of workmen’s compensation insurance issued by appellee, being WC-1529 and WC-2332. That in November, 1934, it discovered that the death of one Robert Dewey had been erroneously charged against its experience record, and on November 22, 1934, the Insurance Casualty Commissioner, upon proof of that fact, eliminated such loss from appellant’s experience record. By reason of such elimination the Insurance Casualty Company, by proper endorsement, reduced the rate from a debit of 34.2% to a debit of 27.8% on appellant’s compensation insurance, which modification was made retroactive to May 2, 1934, the normal anniversary-rate date of appellant on the records of said Commissioner. That although appellant demanded of said Commissioner, and of appellee, that such rate modification be made retroactive to May 2, 1933, such demand was refused. The ground of the refusal of said Commissioner to make the rate modification retroactive beyond May 2, 1934, and back to May 2, 1933, was a custom and practice of the Board of Insurance Commissioners and the Casualty Insurance Commissioner not to make rate-modifications retroactive beyond the insured’s next preceding anniversary-rate date. That the application of the rate credit of 6.4% retroactively from May 2, 1934, to May 2, 1933, would amount to an additional rebate to appellant of $1,751.80 (and to which appellant was as much entitled as it was to the rebate on the period back to May 2, 1934), and the failure of ap-pellee to make such rebate to appellant of such over-payment of $1,751.80, damaged appellant in such sum, the true amount lawfully due on a premium on said policy of insurance then in effect being $1,751.80 less than appellee actually collected. Appellant further pleaded that the over-payment was made by it because of the erroneous premium-rate fixed by the Board of Insurance Commissioners and the Casualty Insurance Commissioner, and this error was due to the mutual mistake of appellant, appellee, and said Insurance Commissioners, in including the Dewey death claim in appellant’s experience record. Appellant pled it had a right to have the policies of insurance reformed to call for such premium as was lawfully due thereon after the elimination of the Dewey death-claim from appellant’s experience record, effective back to May 2, 1933. Appellant alleged that the Insurance Commission declined to make the rate modification retroactive from May 2, 1934, to May 2, 1933, only because of the theory that said Commission had no power or jurisdiction to do so. This plea for reformation was made alternatively to a plea in a court whereby appellant sought to recover the said sum of $1,751.80 as money had and received. Appellant also set up the sum of $1,751.80 as a set-off and a counter-claim to any recovery had by appellee in the main suit.
Appellee answered appellant’s cross-action, aside from demurrers, exceptions, and general denial, by pleading the 2 and 4 years statutes of limitation, and by the special plea that the Dewey loss, charged against appellant’s experience record was reported to the Board of Commissioners and the Casualty Insurance Commissioner by the Lumberman’s Reciprocal Association, the insurer carrying appellant’s insurance at the time of the Dewey loss; that this occurred long prior to the issuance of a policy by appellee to appellant, and that if appellant did not actually know such loss had been charged to its experience record, it had constructive notice thereof, the same being a part of the public records of the Board of Insurance Commissioners and the Casualty Insurance Commissioner, and was guilty of negligence in failing to know its experience record, and is thus not entitled to equitable relief of reformation of contract. Appellee also pled estoppel; and denied any mutual mistake, but alleged that if any mistake occurred it was a mistake of the Casualty Insurance Commissioner, relating to a collateral matter occurring pri- or to the issuance of any policy by ap-pellee. Appellee pled that its policies were issued in reliance upon the premium experience rating established by the Casualty Insurance Commissioner and the Board of Insurance Commissioners as applicable to appellant, etc.
*536At the conclusion of the evidence both parties moved for a peremptory instruction. Appellee’s motion was granted, and judgment was rendered for it in the main action for the sum sued for with interest thereon at the legal rate from April 11, 1935, and appellant was denied any recovery on its cross-action.
There seems to be no dispute about the facts between the parties. Appellee issued to appellant workmen’s compensation policy No. 1529, which covered the period from February 11, 1933, to February 11, 1934; and also the workmen’s compensation policy No. 2332, which covered the period from February 11, 1934, to February 11, 1935, Appellant paid the premiums on the policies in accordance with the existing rate promulgated by the Insurance Department, from February 11, 1933, to February 11, 1934. By the term Insurance Department we mean the Board of Insurance Commissioners and Casualty Insurance Commissioner.
The death of Robert Dewey occurred in 1929, at a time when some other insurance carrier carried appellant’s compensation insurance, and his death was charged against appellant’s experience record by such insurance carrier. Appellant had -no actual knowledge that such loss had been thus erroneously included -in its experience record until November, 1934. The records of the Insurance Department are public, and doubtless the holder of a compensation insurance policy is charged with knowledge of his experience record.
Under statutory authority (Arts. 4907-4916, Vernon’s Ann.Civ.St. arts. 4907-4916), the Insurance Department promulgates the rates on which the premiums applying to workmen’s compensation insurance are based, using, so the evidence indicates, these factors:
1. Workmen’s Compensation rates of premium are based on statistical data comprising pay rolls and losses filed by insurance companies over a five-year period.
2. The manual or base rate is the rate which is determined from the premiums and the losses for a given classification of all of the risks in that class by the Insurance Department. In the contractors’ classification, to which appellant belongs, the rate is based upon the losses and premiums of all contractors that have been reported to the Insurance Department during the rating period. Now the manual rating applies to all contractors who are not eligible for experience rating. Eligibility for experience rating is determined by the volume of premiums per year.
3. The experience rate is the variation of, or the plan for varying, the manual rates based on the experience of the individual risk. If the individual contractor’s losses are lower than the general experience, then his experience rate is lower than the manual rate, if higher, then his modification would raise rate above the manual rate. The experience rate is calculated on the basis of the premiums paid by the risk for the past five years, excluding the first year. The calculation of the experience is based on the premiums paid during the five years apportioned to the losses over the same period.
4. It is customary for the Department to accept statements of the individual’s risk’s experience certified to by a responsible officer over a four-year period. The insurance carrier furnishes the pay roll and loss data, including a history of claims upon which premium rates of individual risks are determined.
5. The Department requests re-reporting of the experience of each individual risk each year, and the data in these reports are assumed to be correct in the light of all information available at the time the rate is published.
6. Normal anniversary-rate date is the date on which rates are made effective for the particular insurance under consideration. Rates are promulgated for one year and remain in force one year from the normal anniversary-rate date. Such date does not necessarily coincide with the effective date of the policy in force.
Appellant’s anniversary-rate date was May 2, and the rate promulgated by the Department affecting the policies which are the subject matter of appellant’s cross-action covered the period of May 2, 1933, to May 2, 1934, on one, and the period of May 2, 1934, to May 2, 1935, on the other, though the effective date in each instance was February 11th, preceding the anniversary date.
7. Workmen’s Compensation premium-rate modifications are never made retroactive by the Department beyond the next preceding normal anniversary-rate date of the risk.
*5378. The Texas endorsement attached to the Workmen’s Compensation policy carries the provision that classification and rates of insurance are subject to modification in accordance with the Manual and Experience or Schedule Rating Plans. Rate Modifications are made retroactive by the Department when experience or schedule data has not been filed prior to the normal anniversary-rate date; and if error is discovered in statistical data within the 12-month period.
9. The refusal of the Department to make a premium rate or modification retroactive beyond the normal anniversary date is based on custom and practice. The Department construes its rate-making powers to be legislative and prospective, and rules that it has no power to modify an expired rate on an “expired contract”. By “expired contract” is meant those policy contracts, endorsements and rates promulgated, that have been completed and executed prior to the anniversary rate date of the policy then in force — that is, • the Department promulgates rate modifications and makes the same applicable only to the current policy in force, meaning the policy in force between the normal anniversary rate dates at the time when such rate modifications are put into effect.
10. The inclusion of the Dewey death claim in the experience record of appellant, filed with the Department, increased the premium rate of appellant.
Appellant’s main contention here is that the Insurance Department has construed its rate-making power as being capable of being exercised prospectively only, and incapable of being exercised retroactively, so that, consequently, in making the correction .or modification of the rate, November 22, 1934, effective as of the next preceding normal anniversary date, May 2, 1934, the Insurance Department had exhausted its jurisdiction to award appellant reparations against appellee; and that appellant is therefore without any adequate remedy at law for full and complete relief. The various remedies which appellant principally urges that it was entitled to, and was deprived of below, relate to the right of a litigant to invoke the aid of a court of equity when without any adequate remedy at law.
A carrier of workmen’s compensation insurance and its policy-holder necessarily contract with each other that the premium rate shall be the duly and lawfully prescribed rate for the risk involved, and none other. They are without power by contract, or otherwise, to alter such prescribed rate. ’ So, if the parties may not consciously and intentionally change the lawfully prescribed rate, their knowledge, ignorance, or negligence is equally incompetent to work any such change. Therefore, the collection by the insurer of a higher or lower rate than that which is duly and lawfully prescribed for the risk involved constitutes a breach of the insurance contract for such insurer to collect only the duly prescribed rate. And, of course, a suit for reparation for overcharges or undercharges is simply and purely a legal action, with no question of reformation of contract, or other equity involved in it. In other words, if a carrier of workmen’s compensation, for instance, had collected a lower premium rate than was lawfully prescribed for carrying the risk involved, and later discovered such error, it would certainly not have to prove that it was not negligent in collecting the unlawful rate, in order to entitle it to collect the only rate which the law authorized or permitted it to collect; neither would it be necessary for such insurer to have the policy of insurance reformed to specify such lawful rate, for the contract by force of law intends that the premium rate, and only the premium rate, which applies to carrying the risk involved is agreed rate. Premium rates are prescribed with the view of being “adequate to the risks to which they apply and consistent with the maintenance of solvency and the creation of adequate reserves and a reasonable surplus”. Art. 4911. And, of course, the samé sanction of law which requires that an insurer collect the lawful rate, excludes the lawfulness of overcharging equally with undercharging. The controlling question in this case, therefore, is whether the premium rate collected by appellee covering the period from May 2, 1933, to May 2, 1934, was greater than the rate prescribed by the system of schedule and experience rating of the Department as applied to actual facts which made up appellant’s true experience record.
As disclosed by the record in this case, the Department determined that the Dewey death loss was erroneously included in appellant’s experience record, and ■ determined that the inclusion of such loss to *538that extent falsified appellant’s experience record; and so, eliminated it. And on November 22, 1934, ordered the premium rate that was applied to the policies modified, and required app'ellee to refund the excess premium which it had collected covering the period from November 22, 1934, to the preceding May 2. In making such modification order, the Department could not have considered that it was promulgating a new rate, or a change in rate, for it did hot publish notice thereof for 15 days before the effective date of such modification. Art. 4907. Indeed, as indicated, the Department consciously and intentionally made such correction effective retroactively to the preceding May 2. And the record here affirmatively discloses that the Department disclaims not merely the intention but the power to exercise its rate-making powers retroactively. As recognized by the Department, it is beyond the power of a rate-making body to issue an order fixing a certain rate, and then later set such order aside and declare it to have been unreasonable or otherwise unlawful, and then award reparation for the period such previous order had been in effect. Gulf C. & S. F. R. Co. v. American Sugar Refining Co., Tex.Civ.App., 130 S.W.2d 1030, 1034, writ refused.
The fact, that in making such modification order, and in requiring appellee to maíce reparation to appellant for overcharges collected back to May 2, 1934, the Department did not consider that it was exercising its rate-making powers, would not, in any case, be binding on the court as to the nature of the power which was exercised in making the modification. But the construction which the Department puts on the nature of powers which have been granted to it, or of the powers which it has exercised on occasion, is entitled to be considered by the court, when subsequently reviewing an exercise by the Department of its powers.
It is clear, we believe, that the exercise of its rate-making powers by the Department in so far as the true rate, lawfully applying to the carrying of appellant’s ■risk, occurred when the “system of schedule and experience rating” (which determined the rate to be applied to the peculiar hazard of appellant’s risk) was adopted. Art. 4911. The correction or modification in rate was the result'of an’ exercise of the Department’s fact-finding powers. A policy-holder’s classification, or the premium rate applying to his risk, is subject to change to conform to any factual change which would determine that he belonged to a different class, or which would determine that the hazard of his risk was actually greater than indicated by either an erroneous or a superannuated experience record. Clearly, no action changing rates, which is made necessary to conform to a change in the policyholder’s class or experience record, would constitute the making of new rates. ' For any such change has been brought about by the policy-holder in changing his class or changing his experience record to a class or record to which other rates are attached. Here we are not concerned with a change made in a premium rate to conform to a corresponding change in the policy-holder’s classification or experience record, but are concerned with an instance where the Commission has determined that an error occurred in compiling the data of a policy-holder’s experience record which resulted in the application of an overcharge. The inclusion of the erroneous data in appellant’s experience record had automatically operated, under the Department’s “system of schedule and experience rating”, to raise appellant’s premium rate to 6.4 above what the data in appellant’s true experience record prescribed.
There is nothing very unusual about errors being made in the application of rates, where rates are prescribed by law. The instance most familiar to all is that of freight rates. The occasion for most suits to recover reparation for overcharges or undercharges on shipments of freight, is the claim that some one wrongfully classified the commodity which was the subject-matter of the shipment, and that there was, as a consequence, the wrong rate applied and collected. If the claimant in such a suit succeeds in proving that the commodity shipped was wrongfully classified, and succeeds in proving that it belonged to a classification carrying a lower rate, he will, of course, recover reparation for overcharges. There are, of. course, inherent differences in the modus operandi of carriers of freight and carriers of insurance with respect to the determination of the rate lawfully applying to their respective services. A rate clerk of a freight carrier determines from inspection, or from a way bill, the com*539modity and its class; he determines from the tariffs then in force what rates the commodity and the classification calls for. If he was mistaken in his classification of the commodity, the corresponding mistake was made in the rate which was applied. But it would occur to no one at this late date to justify the collection of an illegal rate just because the mistake wasn’t sooner discovered, or was innocently made. From the evidence before us it would appear that a correct determination of the classification of a policy-holder and a true report of the data making up his experience record would make it a mere clerical function to determine the lawful premium rate to be charged. Neither the policy-holder nor the insurance carrier can claim any vested right in an error in the policy-holder’s experience record, or classification, and thus defeat the law prescribing the correct rate to be applied thereto. Under the facts here disclosed .appellee has simply collected an excessive premium rate on the period from May 2, 1933, to May 2, 1934. Since it does business under the rates prescribed by the Department, it would be no hardship on appellee to be required to carry the risk at the lawful rate to say the least.
Now, while the finding of the Commissioner, to the effect that appellee was collecting a premium rate from appellant in excess of what appellant’s true experience record indicated, is conclusive and binding in the state of the record before us, this cannot be taken -to mean that the Commissioner had authority to limit the effect that' such determination should have on the rights of the parties. Nor did ■ he assume any such authority. It is evident to us that the Department considers it essential to the proper discharge of its duties to treat a policy of insurance. as being currently before it for the exercise of its regulatory powers over the parties to it during the period between the policyholder’s anniversary-rate dates. Having corrected the rate, it seems entirely proper to us that the Department, in so far as, and. for the period that the parties were subject to its regulatory powers, should make effective such correction. It would have amounted to a usurpation of power on its part had the Department undertaken to have itself enforced such correction beyond the scope of the operation of its regulatory powers — i. e., beyond the current period embraced between the policyholder’s anniversary dates. As regards the enforcement of the right of the policyholder to recover the overcharges on the “expired contract” portion of the policy, there was neither occasion nor excuse for the Department to undertake to award reparation.
From the record in this case it is clear that appellee collected $1,751.80 in excess of the lawful rate for the period between May 2, 1933, to May 2, 1934. The cross-action was instituted October 10, 1936. For the same reason that a<suit for .reparation on a railroad overcharge or undercharge is not barred for four years next preceding the filing of the suit therefor, a suit for overcharges on premiums on an insurance policy is not barred for any time during the period of four years next preceding the filing of a suit therefor. No overcharges made to appellee from appellant subsequent to October 10, 1932, are barred by the statute of limitations.
While it does not readily occur to us that any basis to resist recovery of the reparation for the overcharges sued for by appellant can be shown to exist, it does seem clear that the court below tried the case on the wrong theory, on the theory that in order for appellant to .recover it must be shown that it was entitled to reformation of contract or some other equitable relief. As the case was tried on the wrong theory, and under that theory the court rendered judgment for appellee, we believe that in reversing the judgment we should, under the authority of Waldo v. Galveston, H. & S. A. Ry. Co., Tex.Com.App., 50 S.W,2d 274, 276, remand the cause for a new trial, and not here render judgment for appellant. The trial court will render judgment on the main action as heretofore, re-trying only the cross-action, and if appellant recovers judgment the amount will be set off against the judgment awarded in the main action.
Reversed and remanded.