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Liberty Mutual Insurance Co. v. Muskin Leisure Products Inc.

August 21, 2007


The opinion of the court was delivered by: Thomas I. Vanaskie United States District Judge



Plaintiff Liberty Mutual Insurance Company ("Liberty") commenced this action to recover "retrospective premiums" allegedly owed by Defendant Muskin Leisure Products Inc. ("Muskin") under a series of workers' compensation policies. (Dkt. Entry 1.) Liberty has moved for summary judgment, asserting that the undisputed material facts compel the conclusion that Muskin breached the policies by refusing to pay retrospective premiums due. (Dkt. Entry 62.) Liberty asserts that the undisputed facts show that it is owed $149,574. Muskin counters by asserting that summary judgment is inappropriate because the material provisions of the workers' compensation policies are ambiguous. (Dkt. Entry 69.) Muskin also argues that Liberty has failed to present competent evidence sufficient to support its claim that the amount owed is $149,574. Muskin's latter contention is persuasive. Although it is apparent that Liberty may make "retrospective premium" charges on the policies in question, Liberty has not presented competent evidence to support its claim for the damages it seeks under the policies.

Accordingly, Liberty's motion for summary judgment will be denied.


A. Factual Background*fn1

Liberty provided workers' compensation insurance coverage to Muskin from October 1994 until October 2000 pursuant to eight insurance policies. (Def.'s Response to Unfiled Statement of Undisputed Material Facts ("Def's S.M.F.") (Dkt. Entry 68) at 1.) Seven of the eight insurance policies operated on a retrospective premium basis.*fn2 (Id.) The basic premise of a retrospective premium policy is that an insured's premium is calculated after coverage is completed using actual claim information. As explained by Our Court of Appeals:

A retrospective premium policy, unlike a standard insurance policy, provides for retrospective determination of the insured's premium obligations according to a formula based on the cost of claims actually paid by the insurer under the policy. A standard workmen's compensation policy requires payment of a fixed premium, which may be calculated in part with reference to the insured's past losses; under a retrospective premium policy, the premium varies according to current, rather than historical, experience. The retrospective policy establishes minimum and maximum premiums to be paid, and it states the standard premium that would be charged under an equivalent standard policy. The minimum is computed as a fraction of the standard premium.

Alexander & Alexander, Inc. v. Rose, 671 F.2d 771, 773 (3d Cir. 1982).

According to Liberty, Muskin owes $149,574 in retrospective premiums.*fn3 The majority of this amount is related to annual retrospective premium and dividend adjustments made in 2003, 2004, and 2005 to the policy that provided Muskin with workers' compensation insurance and employers' liability insurance from October 29, 1994 to October 29, 1995 (policy number WC2-131-454679-014) (the "1994 Policy"). (See Aff. of Colette Viola Ex. 2 (Dkt. Entry 63-3).*fn4

The adjustments to the 1994 Policy appear to be primarily related to a workers' compensation claim by an employee for a back injury in 1995.*fn5 (See Aff. of Howard French (Dkt. Entry 66-2) at 34-36.) Other than providing a summary account statement, however, Liberty has not presented any competent evidence as to how the retrospective premium adjustments were calculated. Muskin denies it owes Liberty money under the policies.

B. Procedural Background

Liberty initiated this action by filing a complaint on February 4, 2005. (Dkt. Entry 1.) Liberty amended the complaint on June 2, 2005, asserting claims for breach of contract (Count I) and quantum meruit (Count II). (Dkt. Entry 35.) Muskin filed a two-count counterclaim, seeking declaratory judgment (Count I) and claiming Liberty acted in bad faith under 43 Pa. Cons. Stat. § 8371 (Count II). (Dkt. Entry 28.) The Court dismissed Liberty's bad faith counterclaim on September 13, 2006. (Dkt. Entry 72.)

On May 31, 2006, Liberty moved for summary judgment on its breach of contract claim. (Dkt. Entry 62). Muskin contends that summary judgment is inappropriate because Liberty has failed to present sufficient evidence that Liberty: (1) may retrospectively adjust premiums and dividends indefinitely under the 1994 Policy, and (2) is due the amount it seeks. (Def.'s Br. Opp. (Dkt. Entry 69) at 4-9.) Liberty claims that Muskin is precluded from challenging the 1994 Policy's retrospective premium because Muskin did not ask the Pennsylvania's ...

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