The Travelers Indemnity Company Vs. D.j. Franzen, Inc. ( 2010 )

IN THE SUPREME COURT OF IOWA
No. 09–0040
Filed October 29, 2010
THE TRAVELERS INDEMNITY COMPANY,
Appellant,
vs.
D.J. FRANZEN, INC.,
Appellee.
On review from the Iowa Court of Appeals.
Appeal from the Iowa District Court for Polk County, Douglas F.
Staskal, Judge.
Workers’ compensation assigned risk insurer seeks further review
of court of appeals’ decision affirming district court’s summary judgment
ruling for insured on insurer’s claim for additional premiums after
reclassification of insured’s workers. DECISION OF COURT OF
APPEALS VACATED; JUDGMENT OF DISTRICT COURT REVERSED
AND CASE REMANDED WITH INSTRUCTIONS.
CeCelia C. Ibson of Ibson Law Firm, Des Moines, for appellant.
Stanley J. Thompson of Davis Brown Law Firm, Des Moines, for
appellee.
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BAKER, Justice.
The Travelers Indemnity Company (Travelers), a workers’
compensation assigned risk insurer, seeks further review of the court of
appeals’ decision affirming the district court’s summary judgment ruling
for the insured on Travelers’ claim for payment of additional premiums
as a result of Travelers’ reclassification of the insured’s workers as
employees. Travelers asserts that the court of appeals erred in
(1) determining Travelers could not raise the doctrine of exhaustion of
administrative remedies to bar the insured from presenting a defense to
Travelers’ suit and (2) determining the employment status of the
insured’s workers, arguing the court of appeals’ decision conflicts with
case law supporting the administrative resolution of the underlying
premium rate dispute. We hold the administrative exhaustion doctrine
bars the insured from raising a defense to Travelers’ claim. Accordingly,
the decision of the court of appeals is vacated, and the district court
judgment reversed.
I. Background Facts and Proceedings.
In September 2003, D.J. Franzen, Inc. (Franzen), an over-the-road
trucking company, applied for workers’ compensation insurance through
the State of Iowa’s assigned risk plan. Iowa’s assigned risk plan is a
statutorily created program that matches insurance providers with
employers who are unable to obtain workers’ compensation insurance on
the open market. See Iowa Code § 515A.15 (2003) 1 (outlining Iowa’s
assigned risk plan). Under Iowa law, employers are required to carry
workers’ compensation insurance for certain employees. See id. § 87.14A
(“An employer subject to this chapter and chapters 85, 85A, 85B, and 86
1The legislature has made several nonrelevant changes to some of the applicable
provisions. Unless otherwise noted all references are to the 2003 Iowa Code.
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shall not engage in business without first obtaining insurance covering
compensation benefits or obtaining relief from insurance as provided in
this chapter . . . .”).
The National Council on Compensation Insurance, Inc. (NCCI) has
been licensed as an approved rating organization in Iowa. See id.
§ 515A.6 (providing authority for organizations to apply to the insurance
commissioner of Iowa to become licensed rating organizations for specific
types of insurance). NCCI administers Iowa’s assigned risk plan. See id.
§ 515A.15B (“An agreement among licensed insurers to offer workers’
compensation insurance for applicants unable to procure workers’
compensation insurance through ordinary methods shall be
administered by a rating organization licensed under this chapter.”).
NCCI selected Travelers to be Franzen’s workers’ compensation
insurance carrier.
Travelers’ contract with Franzen offered insurance coverage for one
year, starting September 15, 2003. At the time Travelers offered Franzen
the coverage, Travelers calculated Franzen’s deposit premium to be
$1775. This figure was computed using figures Franzen had provided on
its application to the assigned risk plan. On this application, Franzen
was required to identify its total number of employees, its estimated
annual payroll, and the class code of each employee that needed to be
covered under the policy. The cost of the insurance plan varies based on
the covered employees’ class code and total payroll. Franzen listed seven
clerical office employees with an estimated annual payroll of $230,000.
Franzen did not list drivers on its application because it considered its
drivers to be owner-operators, not employees.
As the administrator of Iowa’s assigned risk plan, NCCI prepares
reports for the insurers participating in the plan. These reports contain
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information concerning the insured’s workers’ compensation coverage
and claims for three years prior to the date of the report. NCCI prepared
a report for Travelers, revealing that in the previous three years Franzen
carried workers’ compensation insurance for its drivers in addition to its
clerical employees. After receiving this report and discovering that
Franzen owned Hartland Lease Inc., a truck lease company, a Travelers’
underwriter became concerned with the status of Franzen’s drivers.
The underwriter for Travelers, Joseph Pinto, attempted to perform
a preliminary audit of Franzen’s employment practices, but Franzen was
allegedly uncooperative. Travelers claims that Franzen refused to give
Travelers’ auditors access to any documentation regarding the company’s
relationship with its drivers. As a result, Travelers sent Franzen a letter
stating that Franzen’s policy would be cancelled on January 14, 2004.
The letter stated that the coverage would not be reinstated until Franzen
cooperated with the preliminary audit. Franzen then provided copies of
contracts that stated the drivers were in fact owner-operators and did not
need to be covered by the policy.
After reviewing the sample contract between Franzen and its
drivers, Pinto declared that “any trucker signing these documents would
be excluded from coverage under our policy.” Thus, Travelers would
consider any driver who had signed a contract to be an owner-operator,
but all other drivers would be deemed employees and included in the
workers’ compensation policy. Travelers, however, determined that it
needed to perform a second audit in early 2004. After performing this
second audit, which included a review of Franzen’s payroll documents for
drivers, Travelers determined that only eight of Franzen’s drivers were
owner-operators, but the rest of the drivers were employees and should
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be included under the insurance policy. This reclassification of drivers
significantly increased Franzen’s premium for the policy.
On April 16, 2004, Travelers sent Franzen a premium adjustment
notice showing that the company’s total premium had increased to
$580,601. Franzen refused to pay the increased premium, insisting it
had no employee drivers, only owner-operators that did not need to be
covered under the policy. Travelers refused to revise its audit. Travelers,
on several occasions, informed Franzen that if the company wished to
appeal the premium determination it must file a written request with the
NCCI. Franzen did not appeal the determination, nor did the company
pay the additional premium. The policy was cancelled on June 4, 2004.
After cancelling the policy, Travelers again adjusted Franzen’s premium.
The adjusted premium for the pre-cancellation term of the policy was
$552,436.
In June 2007, Travelers filed a petition seeking judgment against
Franzen for the increased premium. Franzen filed a motion for summary
judgment, arguing that its drivers were independent contractors and
should not have been included in the insurance policy. Travelers filed a
resistance to Franzen’s motion and a cross-motion for summary
judgment. Franzen also sought to strike Travelers’ cross-motion as
untimely. After a hearing on the motions, the district court denied
Travelers’ motion for summary judgment and granted Franzen’s motion.
The court did not address the motion to strike the cross-motion.
Travelers appealed and argued that as a matter of law, Travelers
alone was authorized to determine all matters related to the calculation
of premiums; the majority of Franzen’s drivers were correctly determined
to be employees; and Franzen’s failure to appeal Travelers’ decision to
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NCCI constitutes a failure to exhaust administrative remedies and bars
Franzen’s defense of any and all claims.
The court of appeals determined Franzen did not need to exhaust
its administrative remedies to defend Travelers’ claims, and Travelers did
not generate a fact question as to whether the drivers at issue were
employees or independent contractors. The court of appeals affirmed the
district court’s grant of Franzen’s motion for summary judgment.
Travelers filed an application for further review with this court,
which we accepted.
II. Scope of Review.
The scope of review on a district court’s grant of summary
judgment is well established. We review rulings on motions for summary
judgment for the correction of errors at law. Farm Bureau Life Ins. Co. v.
Chubb Custom Ins. Co., 780 N.W.2d 735, 739 (Iowa 2010). A grant of
summary judgment is only appropriate when the “ ‘moving party [has]
affirmatively establish[ed] the existence of undisputed facts entitling that
party to a particular result under controlling law.’ ” Id. (quoting
Interstate Power Co. v. Ins. Co. of N. Am., 603 N.W.2d 751, 756 (Iowa
1999)). In determining whether this standard has been met, the record
must be viewed in the light most favorable to the nonmoving party.
Schoff v. Combined Ins. Co. of Am., 604 N.W.2d 43, 45 (Iowa 1999).
When no extrinsic evidence is offered on the meaning
of language in a policy, “the interpretation and construction
of an insurance policy are questions of law for the court.”
“[W]e adhere to the rule ‘that the intent of the parties must
control’ ” when construing insurance contracts. Except in
cases of ambiguity, the intent of the parties is determined by
what the policy says.
Farm Bureau Life Ins. Co., 780 N.W.2d at 739 (quoting Lee v. Grinnell
Mut. Reins. Co., 646 N.W.2d 403, 406 (Iowa 2002) (first quote); Swainston
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v. Am. Family Mut. Ins. Co., 774 N.W.2d 478, 481 (Iowa 2009) (second
quote)). “We review questions of statutory construction for the correction
of errors at law.” Zimmer v. Vander Waal, 780 N.W.2d 730, 733 (Iowa
2010).
III. Discussion and Analysis.
A. Failure to Exhaust Administrative Remedies. Travelers first
claim of error is that the court of appeals erred in determining Travelers
could not use the doctrine of exhaustion of administrative remedies to
bar Franzen from presenting a defense in a suit for damages. Travelers
appears to be making two separate arguments for why the district court
erred in this determination.
First, Travelers argues that the language of the insurance contract
signed by Franzen incorporated the entirety of the NCCI Basic Manual’s
policies and procedures into the contract, and the dispute resolution
section of the Manual requires exhaustion of NCCI’s offered
administrative procedures.
Section IX of the Manual outlines NCCI’s dispute resolution
procedures. The pertinent provisions of this section provide:
Any person affected by the operation of the Plan
including, but not limited to, participating companies,
insureds . . . and assigned carriers, who may have a dispute
with respect to any aspect of the Plan . . . may seek a review
of the matter by the Plan Administrator by setting forth in
writing with particularity the nature of the dispute, the
parties to the dispute, the relief sought, and the basis
thereof. . . .
Appeals from employers and insurers on Plan matters
. . . shall be within the jurisdiction of the mechanism
established to handle such appeals under the applicable
rating law.
While the language of this section does provide the insured with an
administrative remedy to challenge the provider’s rate determinations,
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there is nothing in this section that makes exhaustion of this remedy
mandatory.
Further, we are unable to find any language within Travelers’ and
Franzen’s insurance contract that incorporates the entirety of the NCCI
Basic Manual’s policies and procedures into the contract. At two
separate locations in the contract the contract states that “[t]he premium
for this policy will be determined by our Manuals of Rules,
Classifications, Rates and Rating Plans.” The NCCI Manual contains
specific sections with the titles “Premium Basis and Payroll Allocation,”
“Rules,” and “Rating Definitions and Application of Premium Elements.”
It is these Manual sections that are incorporated into Franzen’s contract,
not the section outlining NCCI’s dispute resolution procedures. We find
that the language of the insurance contract signed by Franzen did not
incorporate NCCI’s dispute resolution procedures into the contract.
Further, even if the dispute resolution section of the Manual had been
incorporated into the contract, there is no language in that section
making exhaustion of NCCI’s offered administrative procedure
mandatory.
Alternatively, Travelers argues that exhaustion of NCCI’s
administrative remedy was required by statute and case law. Travelers
asserts that under Iowa Code section 515A.9, use of the administrative
procedure offered by NCCI is required. This Code section provides:
Every rating organization and every insurer which makes its
own rates shall provide within this state reasonable means
whereby any person aggrieved by the application of its rating
system may be heard, in person or by the person’s
authorized representative, on the person’s written request to
review the manner in which such rating system has been
applied in connection with the insurance afforded the
person. If the rating organization or insurer fails to grant or
reject such request within thirty days after it is made, the
applicant may proceed in the same manner as if the
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application had been rejected. Any party affected by the
action of such rating organization or such insurer on such
request may, within thirty days after written notice of such
action, appeal to the commissioner, who, after a hearing held
upon not less than ten days’ written notice to the appellant
and to such rating organization or insurer, may affirm or
reverse such action.
Iowa Code § 515A.9.
As a threshold matter, we must determine if section 515A.9 applies
to the dispute at issue here, premium disputes. Section 515A.9 provides
that Travelers and NCCI have the ability to set its own rates. “Rates” and
“rating systems” refer to overall rates applicable to classes of insurance
based on
past and prospective loss experience within and outside this
state; to the conflagration and catastrophe hazards, to a
reasonable margin for underwriting profit and contingencies,
to dividends, savings, or unabsorbed premium deposits
allowed or returned by insurers to their policyholders,
members, or subscribers, to past and prospective expenses
both countrywide and those specially applicable to this state,
and to all other relevant factors within and outside this
state.
Id. § 515A.3(1)(b); see also Iowa Admin. Code r. 191—60.4.
Pursuant to Travelers’ policy, premiums are then determined based
on “rates, rating plans, and classifications.” Section 515A.9 authorizes
dispute resolution procedures not only for both rates and rating systems
but also for those “aggrieved by the application of its rating system.”
Iowa Code § 515A.9. Since premiums are derived from rates and rating
plans, entities paying premiums “are aggrieved by the application” of the
rating system. Therefore, section 515A.9 provides a procedure for
premium disputes. Next, we turn to whether section 515A.9 requires
administrative exhaustion.
Administrative exhaustion is only imposed when two conditions
are present: (1) “an administrative remedy must exist for the claimed
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wrong,” and (2) “the statutes must expressly or impliedly require that
remedy to be exhausted before resort to the courts.” N. River Ins. Co. v.
Iowa Div. of Ins., 501 N.W.2d 542, 545 (Iowa 1993). We address each
requirement in turn.
NCCI is a rating agency organization licensed to do business in the
State of Iowa under chapter 515A. However, this Court has noted that
“[t]he legislature has delegated to the commissioner of insurance
authority to determine whether rates charged by companies providing
workers’ compensation insurance are excessive.” Travelers Indem. Co. v.
Comm’r of Ins., 767 N.W.2d 646, 650 (Iowa 2009) (citing Iowa Code
section 515A.1 for the proposition that chapter 515A’s purpose “is to
promote the public welfare by regulating insurance rates to the end that
they shall not be excessive”). The Commissioner of Insurance has
exercised this statutory authority by delegating a portion of its charged
task to NCCI. See Iowa Code § 515A.15B (stating Iowa’s assigned risk
plan for workers’ compensation insurance “shall be administered by a
rating organization licensed under this chapter”). NCCI is acting, at least
when offering these dispute resolution procedures, as an arm of the
Commissioner of Insurance and in an administrative manner.
Furthermore, the statutory scheme spells out a remedial
administrative process for premium disputes. Iowa Code section 515A.9
clearly outlines the process to be followed and allows for appeals of NCCI
decisions to the commissioner. Id. § 515A.9 (“Any party affected by the
action of such rating organization or such insurer on such request may,
within thirty days after written notice of such action, appeal to the
commissioner, who, after a hearing held upon not less than ten days’
written notice to the appellant and to such rating organization or insurer,
may affirm or reverse such action.”). These procedures are coupled with
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Iowa Code section 515A.18, which provides that judicial review of the
commissioner’s decisions must be done in accordance with Iowa Code
chapter 17A. See id. § 515A.18(3) (“Judicial review of the actions of the
commissioner may be sought in accordance with the terms of the Iowa
administrative procedure Act.”). Because NCCI is acting pursuant to the
commissioner’s delegation of authority and the statutory scheme
expresses a clear administrative remedial process an administrative
remedy exists for the claimed wrong in this case.
With respect to the second requirement, we must determine
whether Iowa Code section 515A.9 expressly or implicitly requires
administrative exhaustion. Travelers has not provided us with any
statutory language that expressly requires NCCI’s dispute resolution
procedures be exhausted before the parties may resort to the courts, nor
have we found any.
Iowa Code section 515A.9 states that rating organizations licensed
under chapter 515A, “shall provide . . . reasonable means whereby any
person aggrieved by the application of its rating system may be heard.”
The statute does not explicitly require that the aggrieved individual
utilize those means. There is also nothing in the administrative rules
which requires parties to exhaust the dispute resolution procedures
offered by NCCI before resorting to judicial review. See generally Iowa
Admin. Code r. 191—60.4 (detailing the rate or manual filing
procedures). Finally, the language contained in NCCI’s Basic Manual is
permissive. It states that any aggrieved party “may seek a review of the
matter by the Plan Administrator.” (Emphasis added.) Since section
515A.9 does not expressly require administrative exhaustion we consider
whether the section’s remedial scheme impliedly requires exhaustion.
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We look to the intent of the legislature in determining whether to
imply a requirement that administrative remedies be exhausted. Keokuk
County v. H.B., 593 N.W.2d 118, 125 (1999).
We consider the objectives the legislature sought to
accomplish and construe the statute to best affect legislative
intent. Where no explicit statutory direction exists, we
consider whether the exhaustion requirement would be
consistent with the statutory scheme, so that any implied
exhaustion requirement is tailored to fit the role the
legislature assigned to the agency.
Id. (citation omitted).
We find the comprehensive nature of the statute’s remedial scheme
implies that section 515A.9 is mandatory. The section provides detailed
procedures as well as means for an appeal to the commissioner of NCCI’s
determination. Iowa Code § 515A.9. In addition, Iowa Code section
515A.18 specifically provides that “[j]udicial review of the actions of the
commissioner may be sought in accordance with the terms of the Iowa
administrative procedure Act, chapter 17A.” The comprehensive
statutory scheme suggests exhaustion is implied under section 515A.9.
The purposes of the exhaustion doctrine further support a finding
that Franzen exhaust all available administrative remedies. The doctrine
is a highly utilitarian principle of administrative law both as
an expression of administrative autonomy and a rule of
sound judicial administration. The agency has been
legislatively created as an entity vested with its own powers
and duties. It should be free to work out its own problems,
and courts should not interfere with its work until the
agency has completed its task.
Pro Farmer Grain, Inc. v. Iowa Dep’t of Agric. & Land Stewardship, 427
N.W.2d 466, 469 (Iowa 1988). The exhaustion requirement is intended
to honor agency expertise by mandating that most matters be handled
within the agency. See IES Utils. Inc. v. Iowa Dep’t of Revenue & Fin., 545
13
N.W.2d 536, 538 (Iowa 1996). It is also intended to preserve judicial
resources. Id.
The exhaustion rule serves a legitimate state interest
in requiring parties to exhaust administrative remedies
before proceeding to court, thereby preventing an
overworked court from considering issues and remedies that
were available through administrative channels. It also
encourages the use of more economical and less formal
means of resolving disputes and is credited with promoting
accuracy, efficiency, agency autonomy, and judicial
economy.
2 Am. Jur. 2d Administrative Law § 474, at 402 (2004).
Mandating that Franzen exhaust its available administrative
remedies furthers these purposes. NCCI has expertise on how premiums
for workers’ compensation insurance should be calculated, as well as
how an employee’s status is determined. In addition, a determination by
NCCI may have finally resolved this controversy—thus preserving judicial
resources. The clear implication of this statutory scheme is that
individuals must exhaust the administrative remedies provided for in
Iowa Code chapter 515A before seeking review by the courts.
Franzen argues Travelers, as plaintiff, cannot use the exhaustion
doctrine offensively to bar Franzen from raising a defense to Travelers’
claim. Franzen cites attenuated authority for this position, and Travelers
does not argue the issue. We find two Supreme Court cases arising in
the Vietnam War and Selective Service System setting to be instructive.
See McGee v. United States, 402 U.S. 479, 91 S. Ct. 1565, 29 L. Ed. 2d
47 (1971); McKart v. United States, 395 U.S. 185, 89 S. Ct. 1657, 23 L.
Ed. 2d 194 (1969). In these cases the Court considered whether the
government could offensively use the exhaustion doctrine to bar the
defendants from raising a defense to their respective criminal charges.
In McKart, the defendant alleged he was exempt from service as a matter
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of statutory construction, and in McGee the defendant sought to raise a
conscientious objector defense; both defendants failed to exhaust these
defenses during the Selective Service’s administrative classification
process. McGee, 402 U.S. at 489, 91 S. Ct. at 1571, 29 L. Ed. 2d at 56;
McKart, 395 U.S. at 189–190, 193, 89 S. Ct. at 1660, 1662, 23 L. Ed. 2d
at 201.
The Court weighed the interests of the defendants against the
government’s interests that underlie the exhaustion doctrine. McGee,
402 U.S. at 484–86, 91 S. Ct. at 1569–70, 29 L. Ed. 2d at 53–54; McKart,
395 U.S. at 198–99, 89 S. Ct. at 1665, 23 L. Ed. 2d at 205–06. The
Court conceded “the harsh impact of the doctrine when it is invoked to
bar any judicial review” of the defendants’ claims. McGee, 402 U.S. at
484, 91 S. Ct. at 1569, 29 L. Ed. 2d at 53. Application of the exhaustion
doctrine to the defendants would ensure criminal convictions against the
defendants and bar them from raising potentially viable legal defenses.
However, the Court noted several important government interests
support the exhaustion doctrine such as permitting the development of
an administrative record, utilizing agency expertise, and deterring
deliberate flouting of the administrative process. Id. (citing McKart, 395
U.S. at 194–95, 89 S. Ct. at 1663, 23 L. Ed. 2d at 204).
In McKart the issue was one of pure statutory interpretation and
the court concluded the government’s interest in exhaustion did not
outweigh the harsh burden imposed on the defendant because statutory
interpretation does not require agency fact finding or expertise. McKart,
395 U.S. at 197–99, 89 S. Ct. at 1665, 23 L. Ed. 2d at 205–06. In
McGee, however, the primary issue was whether the defendant was in
fact a conscientious objector, an issue of fact. McGee, 402 U.S. at 490,
91 S. Ct. at 1571–72, 29 L. Ed. 2d at 56. The Court held the
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government’s interest in agency fact finding, agency expertise, and
deterrence of deliberate refusal to participate in the administrative
process outweighed the harm to the defendant. Id. at 489–91, 91 S. Ct.
at 1571–72, 29 L. Ed. 2d at 56–57. The Court held the defendant in
McGee could not argue he was a conscientious objector as a defense to
his criminal charges. Id. at 491, 91 S. Ct. at 1572, 29 L. Ed. 2d at 57.
Using these balancing principles as a guide, we believe on these
facts the policies that underlie the exhaustion doctrine require us to
permit Travelers to offensively use the exhaustion doctrine. First, we
believe the “harsh impact” faced by Franzen if it is barred from asserting
its defenses is less than the impact imposed upon the defendant in
McGee. McGee is a criminal case, whereas here only a money judgment
is at issue. Id. at 480, 91 S. Ct. at 1567, 29 L. Ed. 2d at 51. We also
find these facts implicate the governmental interests that support the
exhaustion doctrine. The Commissioner of Insurance is charged with
setting applicable rates and the commissioner and, at times through
delegation, NCCI have the duty to resolve premium disputes. Franzen,
by refusing to utilize available administrative remedies, has inhibited the
opportunity for the input of agency expertise. Franzen also prevented
the development of an administrative record despite Franzen’s defense
requiring a factual analysis. Finally, Franzen made a deliberate decision
not to exercise its administrative remedies for at least three years despite
being notified in writing at least twice of its right to appeal to NCCI. As
the Supreme Court stated in McGee, “it is not fanciful to think that
‘frequent and deliberate flouting of administrative processes’ might occur
if [Franzen] and others similarly situated were allowed to press their
claims in court despite . . . failure to exhaust.” Id. at 491, 91 S. Ct. at
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1572, 29 L. Ed. 2d at 57 (quoting McKart, 395 U.S. at 195, 89 S. Ct. at
1663, 23 L. Ed. 2d at 204).
Thus we hold that Franzen was required to exhaust the remedy in
section 515A.9 before asserting its defense in the courts. Franzen had
the ability to contest both the rate and the employment status of its
drivers. Having failed to do so, Franzen may not now litigate that which
could have been dealt with three years before this action was
commenced.
B. Motions for Summary Judgment. Because we hold that
Franzen was required to exhaust its remedy before NCCI, it may not now
contest either Travelers’ determination that the drivers were employees or
the premium charged. We need not address Franzen’s motion to strike
Travelers’ motion for summary judgment for lack of timeliness. The
district court summarily denied Franzen’s motion. Franzen has not
asserted the timeliness issue on appeal. It is therefore waived. Pierce v.
Staley, 587 N.W.2d 484, 486 (Iowa 1998) (“When a party, in an appellate
brief, fails to state, argue, or cite authority in support of an issue, the
issue may be deemed waived.).
Therefore, it must be taken as undisputed that the drivers were
employees and the appropriate premium was $550,661 which is
computed by the amount of the adjusted premium of $552,436 less the
$1775 previously paid. Because of this determination, the district court
erred in granting Franzen’s motion for summary judgment. It further
erred in determining that the drivers were not employees. Travelers’
cross-motion for summary judgment should have been granted and
judgment entered accordingly.
IV. Disposition. We therefore vacate the decision of the court of
appeals. We further reverse the decision of the district court granting
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summary judgment to Franzen and remand with instructions to enter
summary judgment in favor of Travelers in the amount of $550,661.
DECISION OF COURT OF APPEALS VACATED; JUDGMENT OF
DISTRICT COURT REVERSED AND CASE REMANDED WITH
INSTRUCTIONS.