JSM Mgmt. v. BrickStreet Mut. Ins. Co.

JSM MANAGEMENT, INC., An Illinois corporation, Plaintiff/Counter-Defendant, v. BRICKSTREET MUTUAL INSURANCE COMPANY, a Mutual Company, Defendant/Counter-Plaintiff, and MONROE GUARANTY INSURANCE COMPANY, a member Of the FCCI INSURANCE GROUP, Defendant.

No. 18-cv-2154

United States District Court, C.D. Illinois, Springfield Division

September 9, 2021

OPINION

SUE E MYERSCOUGH UNITED STATES 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 (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 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. 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”).

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 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 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 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 on-site 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 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,...