Opinion
C.A. No. 95C-07-210-JOH.
Non-Jury Trial: December 17, 1999. Additional Submissions: January 31, 2000.
Decided: February 4, 2000.
Decision After Non-Jury Trial
Edward T. Ciconte, of Ciconte, Roseman Wasserman
David P. Cline, Esq.
Counsel:
The Court conducted a bench trial of this case on December 17, 1999. Several witnesses testified in Court and various exhibits were introduced. Among those exhibits were transcriptions of deposition testimony of two witnesses who did not appear at trial and one who did. The Court has now had time to read those transcripts and review the other exhibits submitted at trial. The Court thanks counsel for their concise and straight-forward presentation of the legal and factual issues in the case.
The following constitutes the Court's findings of fact and conclusions of law.
FINDINGS OF FACT
1. Defendant Regnier's Refrigerated Express, Inc., a Delaware corporation, is a tractor-trailer company hauling goods in interstate commerce. Its principal place of business is on Frenchtown Road in New Castle, Delaware. It has been in business since 1984.
2. On October 12, 1992, Regnier applied for insurance coverage under the Delaware Commercial Automobile Insurance Plan [CAIP, alternatively know as the Plan or the Delaware Plan]. Coverage was initially to be for one year commencing October 12, 1992.
3. Above the signature of Regnier' s president on the application form is stated, "PREMIUM DETERMINATION: I understand that the premium shown on this application is an estimated premium. The company reserves the right to adjust the premium either prior to or after the issuance of the Policy, whenever applicable."
Plaintiff's Exhibit 1.
4. The CAIP is basically an assigned risk plan covering commercial vehicles. The Plan is governed by a series of rules. The Plan operates by finding and assigning insurers and, in this case, Regnier's application was assigned to plaintiff, Progressive Insurance.
5. Progressive directed Equifax to conduct an audit of Regnier's business for purposes of premium determination. The results of that audit are contained in a report dated June 8, 1992. It was performed prior to Progressive's coverage.
Defendant's Exhibit 4.
The record presented is incomplete in this regard as the application in evidence is dated October 1992 but the audit was conducted four months previously. Since that timing is not in dispute, the Court simply notes the anomaly.
6. Equifax noted Regnier operated seventeen trucks. It noted that Regnier "will share general commodities along the East Coast." The audit did not recommend any change in premium.
Defendant's Exhibit 4.
7. In 1993, Regnier renewed its coverage with Progressive for another year, ending October 12, 1994.
8. Progressive caused another audit to be done of Regnier's operations. The audit was performed by a Progressive employee on August 18, 1994, who submitted it in a report of the same date.
Plaintiff's Exhibit 2.
9. Among the findings of that audit was:
Radius of Operations
I reviewed a sample of the August 1994 driver logs for each vehicle in order to establish an area of operations (see attached). Per Betsy, office worker, vehicle #19 runs a regular route from New Castle, DE to Livingston, N.J. (131 miles). All other vehicles run irregular long distance routes
Plaintiff's Exhibit 2.
10. The audit included samples from drivers' logs over a three-month period, May, July and August, 1994.
11. The audit was submitted to Daniel Sutyak at Progressive for review. At the time he was assigned to work on Delaware CAIP policies. Among his review comments are:
The sample of May, July and August 1994 driver logs for 19 vehicles shows the New York City zone (26) to be the highest rated zone in which the vehicles operate. Make changes effective 10-13-93 for current term and 10-13-94 for quote.
No other changes.
If the above is disputed, a detailed driver log for all vehicles for an entire month will be required (preferably May, June, or July 1994).
Sales of $1,597,137 for the 31 power units appears low — but OK.
The initial change to zone territory 26 resulted in an increase of $59,762. I further analyzed the audit and noticed that 3 tractors were not listed on the policy. I also reviewed the zone rating and changed my original thinking in rating all vehicles to the New York zone (26). I did not feel that it was correct to rate all vehicles to New York since my limited driver logs for each vehicle did not show all vehicles going to New York City. In fact, the driver logs showed many different cities for each vehicle. Thus, I decided to use the highest rated cited that each vehicle travelled [sic] into. Some vehicles did remain in zone 26, while others were changed to such zones as 47, 26, 30, 02 + 12.
Once again, I felt that per my driver's logs I could only rate a vehicle to a zone that was actually listed for each particular vehicle. I did not want to place all vehicles into a zone (New York) when I did not have proof that they all went to New York.
This second change (the adjustments of the zone ratings and the addition of 3 tractors) resulted in an additional increase of $847. The total increase due to the 8-18-94 audit now stands at $60,609 which has been manually billed to the insured. The quote will receive an increase of $55,073 due to the above changes.
Plaintiff's Exhibit 2.
12. In a letter dated October 13, 1994, Sutyak sent Regnier amended policy declarations for the year October 1993 to October 1994 reflecting a premium increase of $847 for three trucks not listed on the coverage and $59,762 for trucks Progressive claimed were used for hauling into a zone where the premium rating is higher. The $847 charge is not in dispute.
13. The zone causing Progressive to retroactively increase Regnier's 1993-94 premium was the New York City zone. Progressive told Regnier that the audit revealed that six of its trucks traveled to various destinations in that zone. According to Progressive, that is a zone which, if traveled to, requires a higher premium.
14. In reaching this conclusion, Sutyak said he relied upon Rule 34 of the CAIP. The pertinent portions of that rule provide:
Rule 34. Premium Development — Zone Rated Automobiles
A. Except for light trucks and trailers used with light trucks, this Rule applies to trucks, tractors and trailers regularly operated beyond a 200 mile radius from the street address of principal garaging.
B. Determine the zone or zone combination for each automobile as follows:
1. The zone combination is the zone of principal garaging and the highest rated zone in which a terminal included in the automobile's operations is located.
2. A terminal is any point at which an automobile regularly loads or unloads. It is not limited to a terminal facility which the insured owns and operates.
* * *
D. Long Distance Zone Definitions Metropolitan Zones
* * *
26. NEW YORK CITY Zone includes all of New York City, Nassau and Westchester, New York Counties, all of Bergen, Essex and Hudson Counties, Elizabeth, New Brunswick, Perth Amboy and Plainfield, New Jersey territories; and Darian — Greenwich and Stamford, Connecticut territories.
Delaware Automobile Insurance Plan Manual at 19-20. Progressive Ins. v. Regnier's Refrigerated Express, Inc. C.A. No. 95C-07-210-JOH.
15. It is undisputed that each of the six trucks listed in the audit for which the premium was increased traveled in the period covered by the audit to terminals in the New York City zone and to destinations other than that zone but which were more than 200 miles (truck numbers 357, 375, 425, 722, 750 and 928) The number of 200-mile-plus trips during the audit for each truck was: truck 357 — 3 trips; truck 375 — 2 trips; truck 425 — 2 trips; truck 722 — 3 trips; truck 750 — 3 trips; and truck 928 — 4 trips.
Plaintiff's Exhibit 2.
Id.
16. Sutyak explained the reasoning behind his rating conclusion about these six trucks.
A. Because that Vehicle Number 357 is primarily operating outside of 200 miles for principal garaging. Therefore, the zone combination is the highest rated zone that that vehicle travels to. And it doesn't have to be up 200 miles to attach that zone to it.
A. If the vehicle regularly operates outside of 200 miles, which that's a difference between Vehicle 357 and Vehicle 19, then the zone rating combination that is used is the highest rated zone that that vehicle travels to. It doesn't necessarily have to be outside of 200 miles.
A. If the vehicle goes outside the 200 miles, that's when zone rating principles apply.
Q. Now, let's go back to the Rule 34(A). It says this rule applies to trucks, tractors and trailers regularly operated beyond a 200-mile radius from the street address of principal garaging; correct?
A. Correct.
Q. Now, regularly, do you interpret that as — how do you interpret regularly? If a vehicle, one time, makes a 300-mile trip and stops in the Bronx, New York, but other than that, doesn't make that trip, would you interpret that as regularly?
A. Yes, we did. I did.
Q. You did in this case?
A. Yes.
Q. Even though the rule says regularly, you interpreted that as one time was good enough?
A. I did. And I followed that up in my letter. It's indicated that this wasn't the case. They weren't regularly operating there for the producer to forward driver logs indicating that information.
Q. The trips to New York are basically one trip. I mean, we are not talking about a regular route of sending a fleet of vehicles up there. And the interpretation that you're giving here is such that, even though Regnier's only needed one vehicle to go to New York, that if by sheer random chance, you know, a different vehicle is available and they use it, that under your definition, all of those vehicles be rated in the New York zone; correct?
A. I have to point out that this is only a sample of the driver information log — the driver log. It's a small sample. Any regularly, we definitely felt that given a larger sample would show more trips to New York. And that was communicated to the producer of record at that time, to show if it's different.
Q. Now, are you saying that because on two days earlier Vehicle Number 357 went to Burlington, North Carolina, a distance of 357 miles, and then two days later, went to South Plainfield, New Jersey and returned, which is under 200 miles, that it would be rated in the New York zone because earlier it had gone beyond 200 miles?
A. Correct. Precisely.
Sutyak Deposition (October 22, 1998) at 66, 67, 68, 69 and 71-72.
17. The written audit report is dated August 18, 1994. Sutyak sent notice of the increase of premium due in a letter dated October 13, 1994, but did not enclose a copy of the audit until December 9, 1994.
18. Regnier placed its insurance, effective October 12, 1994, with another carrier, but one not writing insurance under the Delaware Plan.
19. Progressive's October 13th letter to Regnier, the basis for the premium change, was noted. The letter ended by saying, "If you have reason to believe that this premium should be amended, please submit a detailed written notice to my attention within 30 days of this letter. Upon receipt, I will be happy to discuss the audit results with you."
Plaintiff's Exhibit 7.
20. William Matthews, the agent who had helped Regnier apply for insurance, responded in a letter dated October 24, 1994. His letter cited the New Jersey Plan language and requested a copy of the audit. No copy was sent. In a letter dated November 24, 1994, Matthews again requested a copy.
21. As noted in Paragraph 17, Progressive sent a copy of the audit to Matthews (Regnier) on December 9, 1994. Progressive invited a response to the letter and audit.
22. Progressive (Sutyak) and Matthews continued to exchange letters stating their positions about the interpretation of Rule 34. In March 6 and April 7, 1995 letters, Sutyak again invited Matthews to state why there should be any change in the premium.
23. Other than stating why it disagreed with Progressive's interpretation of Rule 34, Regnier did not provide any factual basis to challenge the audit/premium increase.
24. Gregory Kroger testified for Regnier. He has over seven years' experience dealing with tractor-trailer insurance issues. He is licensed in Delaware and other states to write insurance and has been Regnier's broker since 1994. His testimony in favor of Regnier was that the 1994 audit was insufficient for not seeking out additional information, primarily what was each truck's ultimate destination. He did not look, however, beyond the audit for additional information, such as, he said, should have been examined, or otherwise determine if there were inaccuracies in the 1994 audit.
CONCLUSIONS OF LAW
The essential facts necessary to decide this case are not in dispute. There are six trucks identified in Progressive's August 1994 audit which traveled both more than 200 miles on some trips and to locations in the New York City zone. Regnier sought to raise doubts about the audit's findings by suggesting that the auditor should have sought out more information. It also attempted to challenge the 1994 audit by pointing to the 1992 Equifax audit which did not come to the same conclusion.
The Court deems these efforts as insufficient. First, despite years within which to provide to Progressive or this Court specific information showing where the 1994 audit was wrong, Regnier has not done so. Progressive requested over a period of more than half a year that Regnier provide it with reasons why the audit was incorrect. Regnier' s response was to repeat its disagreement with Progressive's interpretation of Rule 34. Second, the Court sees no basis to disregard what the audit found regarding the six trucks at issue. The 1994 audit was more thorough than Equifax's 1992 audit. The two cannot be compared and the lack of the same findings on the 1992 audit do not undercut the separate, more detailed findings of the 1994 audit.
While the foregoing discussion may seem more in the nature of an ultimate factual finding, which it is, that finding is a necessary predicate to the legal issue at the heart of this case. The 1994 audit covering three months of Regnier's operations revealed there were six trucks which traveled to destinations over 200 miles away and to destinations in the New York City zone. Regnier's implications to the contrary, such is the finding of the 1994 audit and this Court.
Rule 34 is part of a series of Rules for the Delaware Plan promulgated by the Insurance Commissioner to set out how premiums are to be determined for trucks, such as these six, and other situations. At one time earlier in the pretrial phase of this case, the Court suggested counsel seek an interpretation of Rule 34 from the Insurance Department. This suggestion was made, in part, since the Insurance Department had not interpreted the Rule. Such an interpretation may have resolved this case short of trial. Counsel apparently tried but no interpretation was forthcoming.
The Court, therefore, is interpreting Rule 34 without guidance from the Insurance Department. There is, under these circumstances, no weight to be accorded to any agency interpretation.
Public Water Supply Co. v. DiPasquale, Del.Supr., 735 A.2d 378, 382 (1999).
Rule 34 is used to determine premiums and has several parts. First is its applicability. With an exception not relevant here, it applies to trucks, tractors and trailers regularly operated beyond a 200-mile radius from their principal garage facility. The Court concludes each of these six trucks regularly traveled to terminals more than 200 miles from Regnier's Delaware facility. The audit covering three months shows, for each of the six trucks, a pattern of trips of over a 200-mile radius. This pattern satisfies the applicability provision. Regnier has not shown that during the 1993-94 premium year there was no such regular pattern for any of these six trucks.
Once Rule 34 applies, the next premium determination step is straightforward. For each truck, there must be a determination of the zone combination. That means, determining the zone of Regnier's principal garage, which is New Castle, Delaware (Philadelphia zone), and the highest-rated zone in which there is a terminal to which the truck goes. Those zones under Rule 34 are classified as long-distance zones which are broken down into metropolitan and regional zones.
There is no disagreement that the New York City zone is among those considered a high-rate zone. It is the highest rated zone to which each of these six trucks traveled. Contrary to Regnier's argument, even though the New York City zone is less than a 200-mile radius from its garage, it still is the highest-rated zone to which these trucks traveled. Rule 34, in other words, does not require that the highest-rated zone must be more than 200 miles away.
Regnier argued also that it needed only one tractor trailer to travel to New York, not six. But, it did not provide proof of that to Progressive nor at the trial, four and one-half years after suit was filed. It has not pointed to any information in the audit to substantiate that statement. By the same token, the Court does not agree with Sutyak's interpretation that one 200-mile-plus trip means Rule 34 applies if that truck also goes to the New York City zone. In addition, none of the trucks here had only one such trip.
Therefore, the Court concludes that Rule 34 was properly applied to each of these six trucks. Liability for a possible additional premium was an accepted condition of obtaining the insurance. There is an additional premium due Progressive as a result of three additional trucks which were used but not listed. That premium increase of $847 is undisputed. The total additional premium due is $60,609, of which $59,762 represents the increase for the six trucks.
CONCLUSION
For the reasons stated herein, the Court awards judgment to plaintiff Progressive Insurance in the amount of $60,609, plus costs, interest and fees. Counsel for Progressive shall prepare an order itemizing each of these awards, submit it to Regnier' s counsel for review, and approval as to form, and forward it to the Court.
IT IS SO ORDERED.