This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2004).
IN COURT OF APPEALS
Lumbermens Mutual Casualty Company, et al.,
Filed June 27, 2006
Ramsey County District Court
File No. C5-04-10001
H. Boyd, John A. Knapp, David M. Aafedt, Winthrop and Weinstine, P.A.,
Hatch, Attorney General, Thomas C. Vasaly, Assistant Attorney General,
Considered and decided by Hudson, Presiding Judge; Klaphake, Judge; and Peterson, Judge.
U N P U B L I S H E D O P I N I O N
Respondent insurers brought this action seeking a refund of assessments paid to the Minnesota Special Compensation Fund, and the district court granted respondents’ motion for summary judgment. In this appeal from the summary judgment, appellants Minnesota Special Compensation Fund and the Commissioner of the Minnesota Department of Labor and Industry argue that the district court incorrectly interpreted Minn. Stat. § 176.129 (2004) and erred in determining that respondents were denied due process of law when they were required to pay assessments without first being granted a hearing to determine whether appellants were correctly administering Minn. Stat. § 176.129. We conclude that the district court erred in interpreting Minn. Stat. § 176.129, subd. 2a (2004), and in determining that respondents were denied due process of law. But because we also conclude that the district court had authority under Minn. Stat. § 176.129, subd. 7 (2004), to grant equitable relief and that the district court did not abuse its discretion in granting equitable relief, we affirm.
employers and workers’-compensation insurers are assessed to pay for the fund’s
expenses. In 2002, the legislature
amended Minn. Stat. § 176.129 to change how self-insured employers and workers’-compensation
insurers are assessed to pay for the fund’s expenses. 2002
By June 30 of each year, the commissioner notifies each
self-insured employer and insurer of the amounts due and at least one half of
the amount due shall be paid to the commissioner for deposit into the fund by
August 1, and the remaining amount is due on February 1 of the following
are six affiliated insurance companies that are domiciled in
The 2002 legislation that changed the way that insurers are
assessed to pay for the fund’s expenses became effective on July 1, 2003. 2002
Respondents also disputed the method used to calculate their assessments. To understand this dispute, it is necessary to understand that “written premium” and “earned premium” are terms used in the insurance industry. “Written premium” means the total premium amount for a policy issued by an insurer for a specific period of time. For example, when a workers’-compensation insurer issues a one-year policy and charges a specific premium for the policy, the amount charged is the “written premium.” The insurer then earns 1/365th of the amount charged each day during the one-year policy period, and the portion of the written premium that belongs to the insurer based on the portion of the policy period that has passed is the “earned premium.”
Under the new assessment method, “[t]he portion of the total
assessment allocated to insured employers that is collected from each insured
employer must be based on standard workers’ compensation premium written in the
state during the preceding calendar year.”
Minn. Stat. § 176.129, subd. 2a(b).
The amended statute defined “standard workers’ compensation premium” to
mean “the data service organization’s designated statistical reporting pure premium after the
application of experience rating plan adjustments but prior to the application
of premium discounts, policyholder dividends, other premium adjustments,
expense constants, and other deviations from the designated statistical
reporting pure premium.” Minn. Stat.
§ 176.129, subd. 1b(c) (2004). The
only data service organization in
Respondents argued to the commissioner that assessments should be based on written premiums, rather than earned premiums, which would result in significant reductions in their assessments for 2003 and 2004 because, beginning in 2003, respondents were prohibited from issuing any new or renewal insurance contracts. The commissioner reviewed the matter with the department of labor and industry and the MWCIA and notified respondents that assessments were based on the designated statistical reporting pure premium as collected by the MWCIA, not on written premiums.
Respondents brought a declaratory-judgment action, and the parties filed cross-motions for summary judgment. The district court granted summary judgment in favor of respondents. The district court concluded that appellants exceeded their statutory authority by assessing respondents in 2003 and 2004
based upon [appellants’] mistaken and incorrect interpretation of the statute and where substantial justice requires a refund because [respondents] were unable to collect or recover said assessments from their insured employers by means of a surcharge based on premium because they were prohibited by law from issuing any new or renewal insurance policies.
The district court ordered appellants to refund the assessments that respondents paid in 2003 and 2004. The district court also determined that the assessments should have been based on written premiums, rather than earned premiums, and that respondents’ due-process rights were violated when they were ordered to pay the assessments without receiving an opportunity for a hearing where they could challenge the assessments. This appeal followed.
D E C I S I O N
an appeal from summary judgment, an appellate court will determine whether
there are any genuine issues of material fact and whether the district court
erred as a matter of law. State by Cooper v. French, 460 N.W.2d 2,
of all interpretation and construction of laws is to ascertain and effectuate
the intention of the legislature. Every
law shall be construed, if possible, to give effect to all its
Based on its interpretation of Minn. Stat. § 176.129, the district court determined that appellants exceeded their statutory authority by imposing assessments on respondents when respondents could not recover the assessments by collecting surcharges on premiums because they were prohibited from issuing new and renewal policies. The district court noted that under the assessment statute, insurers “shall collect the assessments from their insured employers through a surcharge based on premium.” Minn. Stat. § 176.129, subd. 2a(c) (2004). Citing Minn. Stat. § 645.44, subd. 16 (2004), the district court explained that “Minnesota law makes it clear that ‘shall’ contemplates a mandatory act, not a voluntary or permissive one,” and reasoned that, when insurers are prohibited by law from issuing any policies, it is impossible to collect surcharges, and imposing assessments on those insurers fails to effectuate the language of the entire statute.
But when interpreting “shall” as
mandatory in the statutory provision that states that insurers “shall collect
the assessments from their insured employers,” the district court failed to
recognize that the assessment statute also states that after determining the
amount needed to pay the estimated liabilities of the fund for the following
fiscal year, “[t]he commissioner shall
assess this amount against self-insured employers and insurers.”
But there is an exception from the
definition of “shall” provided in Minn. Stat. § 645.44, subd. 16. All of the words, terms, and phrases defined
in Minn. Stat. § 645.44 have the meanings given them in that section,
“unless another intention clearly appears.”
Minn. Stat. § 645.44, subd. 1 (2004). As part of the assessment process under
Respondents sought refunds under Minn. Stat. § 176.129, subd. 7, and although the district court determined that under the plain language of Minn. Stat. § 176.129, subd. 2a, assessments could not be imposed on respondents, it also determined that “substantial justice requires a refund because [respondents] were unable to collect or recover said assessments from their insured employers by means of a surcharge based on premium because they were prohibited by law from issuing any new or renewal insurance policies.” We disagree with the district court’s determination that under the plain language of Minn. Stat. § 176.129, subd. 2a, assessments could not be imposed; under the plain language of subdivision 2a, there are conflicting provisions, and one of these provisions required the commissioner to impose assessments. But under the plain language of subdivision 7, the district court has equitable power to order refunds, and the district court’s memorandum demonstrates that it exercised this equitable power.
Appellants argue that equitable
factors weigh against granting respondents relief because respondents had
already charged their policyholders to pay the anticipated assessments and had
accumulated almost $7.2 million in reserves for anticipated assessments. The record indicates that respondents had
accumulated reserves to pay assessments under the old assessment system, which
required insurers to pay into the fund a fixed percentage of certain
compensation benefits that the insurers paid to injured workers or their
Appellants also argue that if
respondents’ assessments are refunded, the refund amounts “will have to be paid
for by the insurers who still do business in
insurers, which is what the new assessment method requires.
It is true that if a portion of the
assessments for the fund’s expenses could be paid using reserves that
respondents accumulated under the old assessment method, the surcharges to pay
the remaining assessments could be reduced.
But this is true with respect to the accumulated reserves of every
insurer. When the legislature changed
the basis for assessments from benefits paid to premiums paid, reserves that
insurers had accumulated to pay assessments under the old system were no longer
needed for that purpose, and insurers that continued issuing policies were not
required to use their accumulated reserves to pay assessments. As the vice president and treasurer of State
Fund Mutual Insurance Company,
The 2002 amendment to Minn. Stat. § 176.129 was a sizeable benefit to the insurance industry because it allowed insurers to free up millions of dollars in reserves. Although the 2002 amendment resulted in an increase in [the fund] assessment obligation of State Fund Mutual, my company supported the 2002 amendment because it allowed us [to] reduce our reserves.
Appellants do not explain why it is equitable to require respondents to use their accumulated reserves to pay assessments when other insurers are not required to use their accumulated reserves for this purpose.
Finally, appellants argue that respondents delayed in bringing their claims until after the 2002 amendment was implemented. But the 2002 amendment became effective on July 1, 2003, and respondents were ordered to stop issuing any new or renewal insurance contracts on July 25, 2003. Appellants acknowledge that respondents notified the fund in September 2003 that they were seeking relief. It is not apparent how respondents could have brought their claims before the 2002 amendment was implemented.
Although the plain language of Minn. Stat. § 176.129 did not require that the district court grant respondents relief from the assessments imposed for 2003 and 2004, it was not a clear abuse of the district court’s discretion to order a refund of the assessments under Minn. Stat. § 176.129, subd. 7, because respondents were unable to collect the assessments from insured employers. Because we have concluded that the district court did not abuse its discretion in ordering a refund of the assessments paid, it is not necessary for us to determine whether respondents should have been assessed a smaller amount.
The district court determined that respondents
were deprived of the $4.7 million they paid in assessments without due process
of law because when respondents requested a hearing to determine whether
appellants were administering Minn. Stat. § 176.129 properly, no hearing was
provided. The basic requirements of due
process are notice and an opportunity for a hearing appropriate to the
case. Sisson v. Triplett, 428 N.W.2d 565, 568 (
Respondents met with the commissioner and received extensions of time to pay assessments. Respondents and the commissioner disagreed about the interpretation of Minn. Stat. § 176.129, and it is not apparent what kind of administrative hearing was appropriate for resolving this disagreement. Without a judicial resolution of the statutory-interpretation issue that respondents raised in this action, appellants administered Minn. Stat. § 176.129 according to their interpretation of the statute, and respondents did not bring this action challenging appellants’ interpretation of Minn. Stat. § 176.129 until after they paid the assessments. We find no basis to conclude that respondents’ due-process rights were violated.
 The order contains exceptions for certain types of insurance policies, but the exceptions are not relevant to the issues in this action.
A data service
organization is any entity that has ten or more members or is controlled
directly or indirectly by ten or more insurers licensed to transact the
business of workers’ compensation in
 The employers that respondents previously insured will need to obtain insurance from a different insurer or become self-insured, and they will pay surcharges to their new insurers or be assessed as self-insured employers. The surcharges or assessments that they pay might be different from the surcharges that they would have paid respondents, but they will continue to be part of the group of all employers who either directly or indirectly pay the assessments for the fund’s expenses.