On appeal from the Superior Court of New Jersey, Law Division, Morris County, Docket No. L-1675-06.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Stern and Newman.
Defendant Kenvil Steel Products Inc. appeals from a judgment in the amount of $164,861 for earned premiums on workers' compensation insurance policies issued to defendant for the terms of August 1, 2002, to August 1, 2003; August 19, 2003 to August 1, 2004; and August 1, 2004, through February 11, 2005. We affirm.
By way of background, the New Jersey Compensation Rating and Inspection Bureau (CRIB), a Division of the Department of Banking and Insurance, establishes an experience modification for every workers' compensation policy issued as an assigned risk in this State based upon an insured's previous losses. The workers' compensation policy is initially issued with an estimated premium based on the insured's evaluation of their anticipated payroll and this premium is paid at the inception of the policy term. At the conclusion of the policy term, an audit is conducted of the insured's books and records to determine the actual payroll and the proper classifications for that payroll so that the actual premium can be determined. If the actual payroll is more than the estimated premium, the additional amounts owed to the insurance company is called the earned premium and are billed to the insured.
Under the policies at issue, Part Five -- premium "Section G. Audit," the following is provided: You will let us examine and audit all of your records that relate to this policy. These records include ledgers, journals, registers, vouchers, contracts, tax reports, payroll and disbursement records, and programs for storing and retrieving data . . . .
Plaintiff, Travelers Indemnity Company, (Travelers) made several attempts to conduct the audit as provided in the insurance contract in each of the policy years in question. Defendant consistently refused to cooperate and would not permit the audits to be conducted. Defendant does not dispute that it has not opened its books and records for the purpose of the audit and has breached the contract. During the time these policies were in effect, Travelers did not have the right to cancel or not renew the succeeding policy.
Based on defendant's failure to cooperate, Travelers estimated the amount due and owing for the three policy terms based upon an amount from a prior company known as United Companies located at the same address as defendant, which engaged in the same business of steel erection as defendant and was owned by the principals of defendant. United Companies was previously insured by Zurich Insurance Company. According to Lora Leyland, assistant director in Travelers residual markets division, defendant's premiums were calculated on the earned premium by way of a physical audit charged to United Companies by Zurich for whom Travelers was the administrator. In resorting to this method, Travelers relied on paragraphs thirty-six and thirty-seven of the CRIB manual because Travelers did not have its own manual for use in the assigned risk market.
Defendant did not offer any testimony even though one of its principals, John Fahy, was present throughout the proceeding.
Defendant asserted that there was a failure to prove that Kenvil was a successor company to United Companies in order to utilize their payroll experience and that the earned premium was based on an estimated premium charged to United Companies. In rejecting defendant's argument, the trial judge referred to the manual followed by Travelers in utilizing the last known information to calculate the earned premium in view of defendant's refusal to permit an audit. The trial judge quoted both paragraphs thirty-six and thirty-seven, which read as follows:
36. Estimated Payrolls. For each classification there shall be inserted in the policy an adequate estimate of payroll for the policy period, as hereinbefore defined. Estimated payroll shall approximate the actual expenditures as shown by previous records or by inspection.
37. Estimated Payrolls by a New Carrier. When a risk passes from one carrier to another the estimated payroll used by the new carrier shall in no case be less than the payroll shown on the expiring policy unless the carrier of the expiring policy shall concur upon such lesser estimate. The requirements of any ...