JSM Management Inc v. Brickstreet Mutual Insurance Company et al
Filing
149
OPINION: Counter-Defendant JSM Management's Motion for Summary Judgment on BrickStreet's Counterclaim (d/e 46 ) is GRANTED. See written Opinion. Entered by Judge Sue E. Myerscough on 09/08/2021. (SKN)
2:18-cv-02154-SEM-EIL # 149
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E-FILED
Thursday, 09 September, 2021 02:17:44 PM
Clerk, U.S. District Court, ILCD
IN THE UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF ILLINOIS
SPRINGFIELD DIVISION
JSM MANAGEMENT, INC.,
An Illinois corporation,
)
)
)
Plaintiff/Counter-Defendant,
)
)
v.
)
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BRICKSTREET MUTUAL
)
INSURANCE COMPANY, a Mutual )
Company,
)
)
Defendant/Counter-Plaintiff,
)
)
and
)
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MONROE GUARANTY
)
INSURANCE COMPANY, a member )
Of the FCCI INSURANCE GROUP, )
)
Defendant.
)
No. 18-cv-2154
OPINION
SUE E. MYERSCOUGH, U.S. District Judge.
This cause is before the Court on the Amended Motion for
Summary Judgment (d/e 146) filed by Counter-Defendant JSM
Management, Inc. (JSM) in response to the Counterclaim (d/e 108)
filed by Counter-Plaintiff BrickStreet Mutual Insurance Company
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(BrickStreet). For the reasons stated below, JSM’s Motion for
Summary Judgment (d/e 146) is GRANTED.
I. BACKGROUND
The lawsuit underlying the instant Counterclaim arose from a
dispute between JSM, a property management company based in
Champaign, Illinois, and the insurance carriers from which JSM
purchased workers’ compensation insurance between 2008 and
2016. JSM filed its Complaint in Illinois state court on May 2, 2018,
claiming that the insurance carriers had overcharged JSM for
insurance coverage between 2008 and 2015. See d/e 1, exh. A. The
case was removed to federal court on June 1, 2018. See d/e 1.
On September 20, 2019, BrickStreet filed the instant
Counterclaim (d/e 108) asserting that JSM had breached the terms
of the 2015-2016 insurance policy (the “Policy”) JSM had purchased
from BrickStreet by refusing to pay the full amount due as a “final
premium.” See d/e 108. JSM moved to dismiss the Counterclaim
pursuant to Fed. R. Civ. P. 12(b)(6), arguing that it had already paid
a final premium on the Policy in 2016 and that Illinois law and the
terms of the Policy prohibited BrickStreet from retroactively
assessing a revised final premium. On December 21, 2020, the
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Court denied JSM’s motion to dismiss, reasoning that BrickStreet’s
upwardly revised final premium would have been permissible if, as
BrickStreet alleged, JSM had caused BrickStreet to mistakenly
assess an unreasonably low final premium in 2016 by concealing
information from BrickStreet or knowingly submitting false
information to BrickStreet.
JSM filed the instant Motion for Summary Judgment (d/e 146)
on February 16, 2021. JSM argues that the undisputed facts in this
case show that JSM did not conceal information or submit false
information to BrickStreet and that JSM is consequently entitled to
summary judgment. BrickStreet filed a Response (d/e 147) on
March 9, 2021, arguing that Illinois law did not prohibit BrickStreet
from issuing a revised final premium regardless of whether JSM
concealed or misrepresented information. JSM filed a Reply
(d/e 148) to BrickStreet’s Response on March 22, 2021.
II. FACTS
As an initial matter, the Court notes that BrickStreet’s
Response does not comply with the requirements set forth in Local
Rule 7.1(D)(2)(b) for responding to the facts asserted by JSM and
asserting BrickStreet’s own additional facts in separate subsections.
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Rather, BrickStreet’s response to JSM’s statement of facts includes
multiple argumentative paragraphs in which BrickStreet
ambiguously and/or partially denies the truth of JSM’s asserted
facts and then sets forth BrickStreet’s own facts. See d/e 147,
¶¶ 3, 6–7, 9, 10, 14, 17. Additionally, some of the additional facts
asserted in BrickStreet’s Response are insufficiently supported by
references to the record. See id., ¶ 9 (asserting that JSM removed
certain words from a document submitted to BrickStreet but citing
an e-mail actually discussing removal of the specified words from a
document submitted to a carrier other than BrickStreet for an audit
of a separate general liability insurance policy). Accordingly, the
Court deems admitted all facts asserted by JSM which BrickStreet
has not specifically and adequately denied. See Ciomber v. Coop.
Plus, Inc., 527 F.3d 635, 644 (7th Cir. 2008) (affirming district
court’s refusal to consider plaintiff’s response to defendant’s
statement of facts where response “contained several extremely
long, argumentative paragraphs” in which plaintiff “simultaneously
denied the veracity of [defendant’s] proposed material facts and
presented additional facts of his own”).
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The following facts are taken from the parties’ statements of
undisputed material facts and from the evidence submitted.
BrickStreet began providing workers’ compensation insurance
coverage to JSM in 2011. JSM purchased five insurance policies
from BrickStreet, each of which provided coverage for a period of
one year beginning on August 30 and ending on August 30 of the
subsequent year. JSM paid an “estimated premium” in
installments at the beginning of each policy period. D/e 146, ¶ 3.
After the end of each policy period, BrickStreet performed an audit
of JSM’s payroll records for the expired policy period and “used
those actual payroll amounts to calculate the actual final
premium.” Id., ¶ 4. If the final premium for a policy period was
higher than the estimated premium, JSM was obligated under the
terms of each policy to pay BrickStreet the difference between the
actual and the estimated premium. If the final premium was less
than the estimated premium, BrickStreet was obligated to refund
JSM the difference between the premiums.
JSM’s premiums were calculated using the National Council
on Compensation Insurance (NCCI) classification system. Under
this system, each employee of a company is assigned one or more
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four-digit classification codes according to the type of work that the
employee does. Each NCCI classification code is associated with a
rate reflecting the cost of workers’ compensation insurance per
$100 of payroll. Higher-risk codes carry higher rates. For example,
code 5645 applies to carpenters working on the construction of
residential dwellings not exceeding three stories in height. This
kind of construction work carries a relatively high risk of workplace
injury, so code 5645 carried a rate of 27.4 during the 2015-2016
policy period, meaning that for every $100 paid to code 5645
employees an employer would pay $27.40 in premiums. See
d/e 108, exh. 1, p. 2. Code 9012, on the other hand, applies to
property management leasing agents and clerical workers and
carried a rate of 1.51 in 2015-2016, meaning that insuring a 9012
employee during that time period was much less expensive than
insuring a 5645 employee who earned similar wages. See id.
On August 19, 2015, BrickStreet issued the Policy to JSM.
Id., p. 1. The Policy period was August 30, 2015 to August 30,
2016. Id. Attached to the Policy was an estimated premium
calculation that included a list of NCCI classification codes along
with an estimate of the amount of payroll anticipated under each
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code. Id., p. 2. The Policy estimated that JSM’s payroll would
include: (1) $360,000 paid to employees classified under NCCI
classification code 5606, which covers project managers working in
construction; (2) $400,000 under code 5645, which covers
carpenters working on the construction of residential dwellings
three or fewer stories in height; (3) $1,240,000 under code 9012,
which covers property management company employees who are
property managers, leasing agents, salespeople, or clerical workers;
and (4) $1,340,000 under code 9015, which covers “all other
employees” of a property management company. Id. The estimated
exposure amounts and the rate associated with each classification
code were used to calculate an estimated annual premium of
$129,871.00. Id. After applicable surcharges and discounts, the
total amount due on the Policy was $131,183.00. Id. JSM paid
this total amount to BrickStreet in several installments.
In May 2016, JSM engaged new insurance agents from the
InsureChampaign insurance agency. D/e 146, ¶ 8. One of the new
agents, Graham Tennant, reviewed JSM’s workers’ compensation
insurance records and then told Kuester that he thought that the
NCCI codes currently assigned to some of JSM’s employees were
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incorrect and that JSM was overpaying for workers’ compensation
insurance. Id., ¶ 9. Tennant requested that the NCCI perform an
inspection to determine the correct codes. D/e 147, ¶ 9. On
October 6, 2016, NCCI employee Genevieve Jobst performed an onsite inspection of JSM’s operations. D/e 147, exh. B, p. 10. Jobst’s
inspection consisted of an approximately one-hour long
conversation with JSM’s Director of Accounting, Deanna Kuester,
and JSM’s General Manager, Scott Kunkel. Id. On October 19,
Jobst sent an “Inspection & Classification Report” to JSM. See d/e
146, pp. 24–29. The Report classified all of JSM’s employees under
codes 9012 and 9015, and none under the construction-related
codes 5606 or 5645. Id. According to the Report, code 9015
applies “to the care, custody, and maintenance of premises or
facilities” and “encompasses all superintendents, custodial and
maintenance operations,” while code 9012 “is applied to the leasing
agents as well as the clerical employees who work in an office in
support of the property management services.” Id., p. 28.
During every year in which JSM purchased workers’
compensation insurance from BrickStreet, JSM maintained a
workers’ compensation payroll summary spreadsheet that listed
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JSM employees by name and also included each named employee’s
job title, a brief description of the employee’s duties, and the NCCI
classification code assigned to the worker. D/e 147, ¶ 7. Every
year, JSM sent this document along with other payroll documents
to BrickStreet for BrickStreet to use during the annual premium
audit. Id. One of these other documents was an “Income
Statement” 1 that in past years had included the words “Carpentry”
and “Painting” to describe the work done by some JSM employees.
See d/e 148, pp. 6–7.
In fall 2016, Kuester changed several of the NCCI classification
codes listed in JSM’s payroll summary spreadsheet. Specifically,
Kuester assigned each of the employees who had previously been
classified under code 5651 2 or code 5606 on the spreadsheet to
The e-mail relied on by BrickStreet to show that JSM removed the words “Carpenter” and
“Painter” from the Income Statement before sending it to BrickStreet’s auditor actually
discusses removing the words from an Income Statement that JSM planned to send to a
third-party insurance carrier that was performing an audit of JSM’s general liability policy.
See d/e 147, exh. A, pp. 8–9, 14. However, because both parties agree and assume that JSM
also sent the altered Income Statement to BrickStreet, the Court deems that fact admitted. See
d/e 147, ¶ 9; d/e 148, pp. 6–7.
2 NCCI classification code 5651, which bore the description “Carpentry—dwellings—three
stories or less” was assigned to some JSM employees during the 2011-2012 and 2012-2013
policy periods. At some point, however, the NCCI replaced code 5651 with code 5645,
described as “Carpentry—Construction of Residential Dwellings Not Exceeding Three Stories in
Height.” See d/e 146, p. 15 n.4. For the 2013-2014 and 2014-2015 policy periods, JSM’s
premiums were calculated using 5645 instead of 5651. See id. However, JSM’s payroll
summary spreadsheet was never updated to replace 5651 with 5645. See id. Therefore, when
Kuester replaced the construction-related codes from JSM’s payroll summary spreadsheet she
removed code 5651 rather than code 5645, even though the estimated premium on the Policy
and the final premiums from the two previous policy periods had used code 5645.
1
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either code 9015 or code 9012. D/e 146, ¶ 15. On October 10,
2016, Tennant sent Kuester an e-mail advising her to remove the
words “Carpentry” and “Painting” from the Income Statement before
sending it to JSM’s General Liability Insurer, Cincinnati Insurance,
because those terms would “confuse the auditor” and because “[p]er
NCCI, these are all maintenance people.” See d/e 147, exh. A, pp.
8–9, 14. Kuester removed the words from the Income Statement.
In November 2016, BrickStreet conducted its annual audit.
While prior audits had been conducted “on-site,” the 2015-2016
audit was conducted via e-mail at BrickStreet’s request. D/e 146,
¶ 12. On November 10, 2016, a BrickStreet auditor e-mailed
Kuester to request documents and information for the premium
audit including the payroll summary spreadsheet, a “[s]ummary of
new construction completed during the [2015-2016] policy period,”
and “[d]etail regarding project managers (who they are, who they
supervise, daily activities, amount of time directly supervising
and/or doing construction work).” D/e 146, pp. 123–24. Kuester
sent the auditor the payroll summary spreadsheet in which all of
JSM’s payroll was classified under either 9012 or 9015 and
truthfully stated that JSM had not completed any new construction
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during the 2015–2016 policy period. Id.; see d/e 147, ¶ 14.
Kuester also stated that “JSM does not consider any employees [sic]
to be a project manager.” D/e 146, p. 124.
On November 15, 2016, a BrickStreet “Senior Premium
Auditor” named Michael Woolwine sent an e-mail to a BrickStreet
employee named Christopher Walz noting that JSM had “placed all
the maintenance employees in class code 9015” despite the fact
that a prior audit had classified several JSM employees under 5645
and 5606. Id., p. 129. Woolwine noted that one JSM maintenance
employee had “replac[ed] an old window with a new window” during
the policy period and asked Walz whether he should move the
employees who had been classified under 5645 in previous years
back into 5645. Id. Walz recommended “reaching out to the
insured to determine if they had any new construction projects” and
stated that “[i]f the new construction was limited to replacing
windows, I would consider this to be maintenance. However, if they
built and/or did any complete remodeling jobs, then I would use
5645." Id.
On November 28, 2016, BrickStreet completed its premium
audit and sent JSM an Audit Statement summarizing the results.
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D/e 146, p. 126. In the cover letter included along with the Audit
Statement BrickStreet stated that the initial premium previously
paid by JSM was “an estimate calculated using the job
classifications and estimated payroll information you or your agent
provided to us” but that the post-audit premium was “based on
actual wages paid and job classifications in effect during the policy
period.” D/e 132-29, p. 23. According to the 2016 audit
statement, the estimated payroll for the construction-related codes
5606 and 5645 had been listed at $360,000.00 and $400,000.00,
respectively, in the Policy, but the “Actual Payroll” for both 5606
and 5645 was $0.00. D/e 146, p. 126. Furthermore, the estimated
payroll for the non-construction property management codes 9012
and 9015 had been listed as $1,240,000.00 and $1,340,000.00,
respectively, in the Policy, but the 2016 audit statement listed the
“Actual Payroll” for 9012 as $1,572,368.00 and the “Actual Payroll”
for 9015 as $1,933,015.00. Id. The 2016 audit statement assessed
an audited premium of $76,567.00, $54,616.00 less than the
estimated premium that JSM had paid to BrickStreet during the
policy period. Id. In late 2016, BrickStreet issued a premium
refund to JSM in the amount of $54,616.00. D/e 147, ¶ 17.
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On May 2, 2018, JSM filed suit against BrickStreet, JSM’s
other former insurance carriers, and JSM’s previous insurance
broker, alleging that codes 5606 and 5645 should never have been
applied and that JSM had been wrongfully overcharged for
insurance coverage between 2008 and 2015. On August 27, 2019,
BrickStreet issued an additional audit statement that assessed a
revised final premium for the Policy in the amount of $344,236.00.
See d/e 108 exh. 2, p. 1. BrickStreet claims that this 2019 audit
statement was the result of a second audit conducted by
BrickStreet after BrickStreet acquired new information through
discovery conducted in JSM’s lawsuit against BrickStreet. See d/e
108, ¶ 17. The 2019 audit statement differed from the 2016 audit
statement in that the $1,933,015.00 in payroll that the 2016
statement had assigned to classification code 9015 was assigned to
code 5645 instead in the 2019 statement. D/e 108, exh. 2, p. 1.
This change resulted in a total revised premium of $344,236.00. Id.
The revised premium amount was $213,053.00 greater than the
estimated premium paid by JSM in 2015 and 2016, see d/e 108,
exh. 1, p. 2, and $267,669.00 greater than the first final premium
paid by JSM after BrickStreet’s initial audit in November 2016. See
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d/e 108, ¶ 27. JSM refused to pay the additional $267,669.00 that
BrickStreet claimed was due under the Policy, and BrickStreet filed
the instant Counterclaim alleging breach of contract. See id.
III. LEGAL STANDARD
Summary judgment is proper if the movant shows that no
genuine dispute exists as to any material fact and that the movant
is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a).
The movant bears the initial responsibility of informing the Court of
the basis for the motion and identifying the evidence the movant
believes demonstrates the absence of any genuine dispute of
material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). A
genuine dispute of material fact exists if a reasonable trier of fact
could find in favor of the nonmoving party. Marnocha v. St. Vincent
Hosp. & Health Care Ctr., Inc., 986 F.3d 711, 718 (7th Cir. 2021).
When ruling on a motion for summary judgment, the Court must
construe all facts in the light most favorable to the non-moving
party and draw all reasonable inferences in that party’s favor. King
v. Hendricks Cty. Commissioners, 954 F.3d 981, 984 (7th Cir.
2020).
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IV. ANALYSIS
JSM argues that summary judgment is appropriate unless
BrickStreet can demonstrate that a material issue of fact exists with
respect to whether JSM concealed information from or knowingly
submitted false information to BrickStreet. BrickStreet argues that
summary judgment is inappropriate even if JSM did not conceal
information because there is a material factual dispute as to
whether the class codes assigned in BrickStreet’s 2019 audit
statement are correct.
The question of which set of classification codes correctly
describe JSM’s 2015-2016 payroll is both disputed and factual. In
deciding JSM’s summary judgment motion, therefore, the Court
assumes that the codes BrickStreet applied after the 2019 audit
were correct and that the codes suggested by JSM and applied by
BrickStreet during the 2016 audit were incorrect. The classification
dispute is not material, however, if JSM is entitled to summary
judgment regardless of which set of codes is correct. Because
Illinois law prohibited BrickStreet from issuing the revised final
premium in 2019, the classification dispute is immaterial and JSM
is entitled to summary judgment.
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A.
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215 ILCS 5/143.17a Prohibits Insurance Carriers from
Raising Premiums After Audit Without Notice, Where
the Insured Party Has Not Concealed or Falsified
Information.
JSM argues that a provision of the Illinois Insurance Code
codified at 215 ILCS 5/143.17a prohibits insurance carriers from
increasing premiums by changing the applicable classification
codes after the end of a coverage period. BrickStreet denies that
this interpretation of § 143.17a is correct and suggests that
§ 143.17a provides notice requirements for renewal of insurance
policies and does not prevent the assessment of increased
premiums after audit. In denying JSM’s Motion to Dismiss, the
Court accepted JSM’s interpretation of § 143.17a but ruled in favor
of BrickStreet because BrickStreet alleged that JSM caused
BrickStreet to initially apply incorrect codes by concealing
classification information and submitting false information. See
d/e 142.
In the Court’s Opinion (d/e 142) denying JSM’s Motion to
Dismiss, the Court deferred to the construction of § 143.17a
adopted by the Illinois Department of Insurance (IDOI) in Company
Bulletin 2013-09 (CB 2013-09). Now, BrickStreet has brought to
the Court’s attention a second IDOI Company Bulletin, CB 2018-08,
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that removed CB 2013-09 from the IDOI website along with 180
other IDOI Bulletins.
CB 2018-08 states that the IDOI “intends for Company
Bulletins to provide timely, relevant, and helpful guidance to
insurance companies” and that the IDOI was removing 180
Company Bulletins that no longer provided such guidance from its
website. D/e 147, exh. F. CB 2018-08 did not give any specific
reason for the removal of CB 2013-09. Id. The language of §
143.17a has been changed once since 2013, but that change did
not affect the subsections relied upon by JSM and by the IDOI in
CB 2013-09.3 See Illinois Public Act 100-0475 (effective January 1,
2018). Accordingly, the Court interprets CB 2018-08 as nullifying
CB 2013-09 without either endorsing or rejecting CB 2013-09’s
interpretation of 215 ILCS 5/143.17a. The Court will, therefore,
interpret § 143.17a anew without deferring to the IDOI’s 2013
interpretation of the statute.
Public Act 100-475 replaced a sentence in in § 143.17a that read “In all notices of intention
not to renew any policy of insurance, as defined in Section 143.11, the company shall provide a
specific explanation of the reasons for nonrenewal” with language stating “the notice to the
named insured shall provide a specific explanation for nonrenewal.” Illinois Public Act 1000475. Section 143.17a still provides that “[a] company intending to nonrenew any policy of
insurance to which Section 143.11 applies . . . must mail written notice to the named insured
at least 60 days prior to the expiration date of the current policy.” Id.
3
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The plain language of § 143.17a prohibits insurance carriers
who mistakenly classify an insured company’s employees in an
initial audit from later increasing the insured’s annual premium by
more than 30% without notice based on a revision of the initial
audit. Subsection 143.17a(a) states that an insurance carrier that
intends to nonrenew an insurance policy must give notice to the
insured party 60 days prior to the expiration date of the current
policy. 215 ILCS 5/143.17a(a). Subsection 143.17a(b) states that
an insurance carrier that intends to renew a policy “with an
increase in premium of 30% or more or with changes in deductibles
or coverage that materially alter the policy” must similarly give
notice 60 days prior to the renewal date. 215 ILCS 5/143.17a(b).
Subsection 143.17a(c) states that a company that has failed to
provide notice of its intention to nonrenew or renew with material
changes may not increase the renewal premium by more than 30%
from the previous year. 215 ILCS 5/143.17a(c). Taken together,
these three subsections establish that an insurance carrier may not
increase an insured party’s premium by more than 30% without
first giving notice. BrickStreet’s 2019 revised final premium for the
2015-2016 Policy is $344,236.00, significantly more than 30%
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higher than the $124,961.00 premium that JSM paid BrickStreet
for JSM’s 2014-2015 worker’s compensation policy. See d/e 108,
exh. 1, p. 2; d/e 132-22, p. 10. BrickStreet did not provide notice
to JSM of its intention to more than double JSM’s premium until
more than three years after the renewal date. Section 143.17a
prohibits this kind of retroactive rate adjustment.
This construction of § 143.17a is consistent with the statutory
context of § 143.17a within the Illinois Insurance Code. See Hosey
v. City of Joliet, 124 N.E.3d 1075, 1079 (Ill. App. 2019) (“A
fundamental principle of statutory construction is to view all
provisions of a statutory enactment as a whole.”). Another
provision of the Code, 215 ILCS 5/462b, places the burden of
applying correct classifications on insurance companies rather than
on insured parties. See 215 ILCS 5/462b (stating that “[i]nsurance
companies shall apply correct classifications . . . to compute
premiums” and that if application of incorrect classifications results
in an insured party overpaying for a premium, “the insurer shall
refund to the insured the excessive premium”). Section 462b does
not provide any remedy for when a carrier’s application of incorrect
classifications results in underpayment by the insured. Id.
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B.
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JSM Did Not Conceal or Falsify Classification
Information.
In denying JSM’s Motion to Dismiss, the Court acknowledged
that workers’ compensation insurance carriers are generally
prohibited from retroactively increasing premiums after audit. See
d/e 142, pp. 12–13. The Court also recognized an exception to the
general rule. See id. This exception applies when an insured
employer causes its insurance carrier to apply incorrect
classifications by concealing information or knowingly submitting
false information. See id., p. 13. BrickStreet alleged in its
Counterclaim that JSM “withheld or failed to disclose” pertinent
classification information, and at the motion to dismiss stage this
allegation was sufficient. D/e 108, ¶ 17. Summary judgment,
however, “is the proverbial put up or shut up moment in a lawsuit,
when a party must show what evidence it has that would convince
a trier of fact to accept its version of events.” Weaver v. Champion
Petfoods USA Inc., 3 F.4th 927, 938 (7th Cir. 2021). BrickStreet
has not introduced evidence showing that JSM caused BrickStreet
to apply incorrect classifications by lying or concealing classification
information.
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BrickStreet points to three alleged misrepresentations by JSM:
(1) Kuester’s substitution of the 9015 code for the 5645 code on the
JSM payroll summary spreadsheet; (2) Kuester’s removal of the
words “Carpentry” and “Painting” from JSM’s Income Statement;
and (3) JSM’s alleged failure to disclose to the NCCI Inspector,
Genevieve Jobst, that some of the employees JSM placed in 9015
were “carpenters” whose job duties included replacing windows and
repairing roofs.
However, the undisputed evidence shows that BrickStreet was
not deceived by these actions. BrickStreet’s auditors became aware
of the classification code changes made by JSM during the
November 2016 audit. See d/e 146, p. 129. A BrickStreet auditor
considered switching the JSM “carpenters” back to code 5645
during the 2016 audit process, but BrickStreet elected not to do so.
See id. BrickStreet’s auditors were aware that at least one of the
reclassified employees had performed carpentry work such as
replacing windows during the policy period. See id. Nevertheless,
BrickStreet agreed with the classification codes suggested by JSM
after the conclusion of a full audit and assessed a post-audit
premium “based on actual wages paid and job classifications in
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effect” of $76,567.00. See d/e 133-29, pp. 23–24. BrickStreet has
not offered any explanation for how JSM’s decision to change the
rating codes or descriptions in its documents could have deceived
BrickStreet, given that BrickStreet was aware of the suggested
classification changes and the basis therefor. In the absence of
fraudulent behavior by the insured party, Illinois law places the
burden of determining the correct classification codes on the
insurance carrier and does not permit carriers to remedy an initial
misclassification by retroactively increasing a former client’s
premiums without notice.
C.
The Undisputed Facts Show That Not All of the JSM
Employees Formerly Classified Under NCCI Code 9015
Employees Belonged in Code 5645 in 2016.
BrickStreet also claims that “while Plaintiff changed it [sic]
designation of Class Codes to be applied to employees for the
2015/2016 audit, the employees’ actual job duties did not change,
and in fact still included work duties that are correctly classified as
‘Carpenter’ and assigned Class Code 5615 [sic].” Id., p. 15. The
admission that “employees’ actual job duties did not change” is fatal
to BrickStreet’s Counterclaim because the 2019 revised final
premium includes $0 in payroll under code 9015 and
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$1,933,015.00 in payroll under code 5645 despite the fact that each
of the four previous final premiums paid by JSM included between
$475,000 and $925,000 in 9015 payroll and not more than
$310,000 in 5645 payroll. See d/e 132-22, pp. 7–11. To survive
summary judgment, BrickStreet must produce evidence that could
persuade a trier of fact not only that the employees who were
reclassified from 5645 to 9015 in 2016 should have remained in
5645 but also that all of the other JSM employees who were
classified under 9015 in previous years should have been classified
under 5645 during the 2015-2016 policy period. BrickStreet has
not produced any evidence to contradict JSM’s assertion that at
least some of the employees classified under code 9015 in previous
years did not belong in 5645 in 2015-2016.
VI. CONCLUSION
For the reasons stated, Counter-Defendant JSM
Management’s Motion for Summary Judgment on BrickStreet’s
Counterclaim (d/e 146) is GRANTED.
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ENTERED: September 8, 2021
FOR THE COURT:
s/Sue E. Myerscough
SUE E. MYERSCOUGH
UNITED STATES DISTRICT JUDGE
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