                IN THE COURT OF APPEALS OF TENNESSEE
                            AT NASHVILLE
                                 March 6, 2012 Session

          AMERICAN ZURICH INSURANCE COMPANY
                                v.
  MVT SERVICES, INC., D/B/A MESILLA VALLEY TRANSPORTATION

              An Appeal from the Chancery Court for Davidson County
                  No. 08-6161     Claudia Bonnyman, Chancellor

                         _________________________________

                 No. M2011-01266-COA-R3-CV - Filed July 27, 2012


This appeal involves retrospective insurance premiums on a workers’ compensation
insurance policy. The defendant trucking company operates in several states, including
Texas and Tennessee. Tennessee requires employers to maintain worker’s compensation
insurance for certain employees, but Texas does not. The defendant trucking company
purchased workers’ compensation insurance for its Tennessee employees from the plaintiff
insurance company. The trucking company employed over-the-road truck drivers who were
Tennessee residents. The trucking company decided to classify its Tennessee-resident over-
the-road drivers as Texas employees whose on-the-job injuries would not be covered by the
Tennessee workers’ compensation insurance policy. Consequently, the trucking company
did not pay insurance premiums to cover those employees. The plaintiff insurance company
conducted a retrospective premium audit; in the audit, it determined that the Tennessee-
resident over-the-road drivers presented a risk of loss to the insurance company.
Consequently, the insurance company notified the trucking company that it owed
retrospective premiums based on those drivers. The trucking company refused to pay, so the
insurance company canceled the insurance policy and filed this lawsuit for the retrospective
premiums. The trial court granted summary judgment in favor of the insurance company, and
the trucking company now appeals. We affirm, finding under the undisputed facts that the
Tennessee-resident over-the-road employees presented a risk of loss to the insurer under the
workers’ compensation insurance policy during the relevant policy periods.

Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court is Affirmed

H OLLY M. K IRBY, J., delivered the Opinion of the Court, in which D AVID R. F ARMER, J., and
J. S TEVEN S TAFFORD, J., joined.
Donald Capparella and Candi Henry, Nashville, Tennessee, for the Defendant/Appellant
MVT Services, Inc., d/b/a Mesilla Valley Transportation 1

Ben M. Rose and J. Matthew Blackburn, Nashville, Tennessee, for the Plaintiff/Appellee
American Zurich Insurance Company

                                                OPINION

                                  F ACTS AND P ROCEEDINGS B ELOW

Defendant/Appellant MVT Services, Inc., d/b/a Mesilla Valley Transportation (“MVT”), is
a large trucking company. Created in 1981, MVT provides transportation services over a
broad geographical area in the United States, Mexico, and Canada. MVT’s corporate
headquarters is in Las Cruces, New Mexico, and its main transportation terminal is located
in El Paso, Texas. In 2003, MVT expanded its operations to Middle Tennessee.2

During the relevant time period, MVT’s Tennessee business location was on a six-acre tract
on Centennial Boulevard in Nashville, Tennessee.3 MVT employs several different types of
workers in Tennessee, including clerical workers, a fleet manager, mechanics, and drivers.
The drivers who live in Tennessee are characterized as either “local” drivers or “over-the-
road” drivers. Local drivers pick up and haul loads only within Tennessee; over-the-road
drivers handle long distance hauls across state lines and travel for extended periods of time.
Evidence in the record suggests that, during the relevant time period, MVT’s Tennessee
business employed as many as 143 over-the-road drivers who resided in Tennessee. In this
Opinion, we refer to these drivers as “Tennessee-resident over-the-road drivers.”

                              The American Zurich Insurance Policy

Tennessee’s Workers’ Compensation Act requires MVT to maintain workers’ compensation
insurance for its Tennessee employees or, alternatively, to meet Tennessee’s self-insurance




1
 Counsel for MVT Services, Inc., d/b/a Mesilla Valley Transportation, in this appeal did not represent this
party in the trial court below.
2
 MVT’s expansion into Tennessee was based in large part on its contractual obligation to make deliveries
for customer A.O. Smith, a large residential and commercial water heater manufacturer.
3
    MVT has since moved to a larger location in Nashville.

                                                     -2-
requirements. Tenn. Code Ann. § 50-6-405.4 For this reason, in March 2004, MVT
purchased a workers’ compensation insurance policy (“Zurich Policy”) from
Plaintiff/Appellee American Zurich Insurance Company (“Zurich Insurance”) for its
Tennessee employees.5

The Zurich Policy was a standard assigned risk policy, procured by MVT through the
Tennessee Worker’s Compensation Insurance Plan.6 Tennessee’s assigned risk program is
administered by the National Council for Compensation Insurance (“NCCI”), a rating
organization that makes rules, classifications, and rating plans for workers’ compensation
insurance.7 See CNA (Continental Cas.) v. King, No. M2004-02911-COA-R3-CV, 2006
WL 2792159, at *1 (Tenn. Ct. App. Sept. 28, 2006); Travelers Indem. Co. v. Int’l Nutrition,
Inc., 734 N.W.2d 719, 722 (Neb. 2007).

The Zurich Policy expressly provided that MVT’s insurance premium would be calculated
by the use of “retrospective rating.” This method of insurance premium calculation bases the
premium on the total payroll of covered employees during the policy period. It is typically
used where the exact composition of the employer’s workforce is subject to substantial
variation, or where the insured’s risk is difficult to measure at the beginning of the policy
period. See Lee R. Russ & Thomas F. Segalla, 5 Couch on Ins. 3d § 69:15 (2008). Under
the retrospective rating method, the employer deposits an estimated premium with the




4
 Generally, the Tennessee Workers’ Compensation Law, Tennessee Code Annotated § 50-6-101 et seq.
(“Workers’ Compensation Law”), requires all employers with five or more employees, with certain
exceptions, to provide workers’ compensation coverage for their employees. Tenn. Code Ann. § 50-6-
106(5); see CNA (Continental Cas.) v. King, No. M2004-02911-COA-R3-CV, 2006 WL 2792159, at *4
(Tenn. Ct. App. Sept. 28, 2006); Jo Ann Forman, Inc. v. Nat’l Council on Comp. Ins., Inc., 13 S.W.3d 365,
366 (Tenn. Ct. App. 1999).
5
 The Zurich Policy was renewed, cancelled, and reinstated on various occasions. At all times relevant to this
lawsuit, however, Zurich Insurance provided workers’ compensation coverage to MVT effectively under the
same policy. The primary policy involved in this lawsuit is Policy Number 6ZZUB-7929B37-0.
6
 Employers are permitted to purchase workers’ compensation insurance in either the voluntary market or the
residual (assigned risk) market. An assigned risk plan is insurance approved by the Commissioner of
Commerce and Insurance as insurance “of last resort,” available when an employer is unable to obtain
coverage in the voluntary market. See Jo Ann Forman, 13 S.W.3d at 366 (citing Tenn. Code Ann. § 56-5-
314(c) (Supp. 1998)).
7
 The NCCI gathers data on a nationwide basis and creates tables reflecting the loss experience in each state
for each type of employment. See State ex rel. Flowers v. Tenn. Trucking Ass’n Self Ins. Group Trust, 209
S.W.3d 595, 597-98 n.6 (Tenn. Ct. App. 2006).

                                                    -3-
insurance company at the beginning of the policy period.8 Shortly after the policy period
expires, the insurance company conducts a routine retrospective premium audit, looking back
at the workers who were actually on the insured’s payroll during the policy period, utilizing
records provided by the insured employer related to employee payroll and classification. The
actual insurance premium due for the immediate past policy period is then determined based
on the results of the audit. Depending on the audit result, the insured employer may either
receive a refund on the premium paid or be required to pay additional premiums to the
insurance company.

The Zurich Policy outlines the retrospective rating methodology to be used to calculate
MVT’s insurance premium:

        C. Remuneration
        Premium for each work classification is determined by multiplying a rate times
        a premium basis. Remuneration is the most common premium basis. This
        premium basis includes payroll and all other remuneration paid or payable
        during the policy period for the services of:

                1. All your officers and employees engaged in work covered by
                this policy; and

                2. All other persons engaged in work that could make us liable
                under Part One (Workers Compensation Insurance) of this
                policy. If you do not have payroll records for these persons, the
                contract price for their services and materials may be used as the
                premium basis. This paragraph 2 will not apply if you give us
                proof that the employers of these persons lawfully secured their
                workers compensation obligations.
        ...

        E. Final Premium
        The premium shown on the Information Page, schedules, and endorsements is
        an estimate. The final premium will be determined after this policy ends by
        using the actual, not the estimated, premium basis and the proper
        classifications and rates that lawfully apply to the business and work covered
        by this policy. If the final premium is more than the premium you paid to us,



8
 The estimate is determined by the insured, and the insured submits the estimate to the insurance company
for approval based on estimated payroll amounts and classification codes.

                                                  -4-
        you must pay us the balance. If it is less, we will refund the balance to you. .
        ..

        F. Records
        You will keep records of information needed to compute premium. You will
        provide us with copies of those records when we ask for them.

        G. Audit
        You will let us examine and audit all your records that relate to this policy.
        These records include ledgers, journals, registers, vouchers, contracts, tax
        reports, payroll an disbursement records, and programs for storing and
        retrieving data. . . . Information developed by audit will be used to determine
        final premium. Insurance rate service organizations have the same rights we
        have under this provision.

(Emphasis added.) Thus, the Zurich Policy obligated MVT to produce to Zurich Insurance
payroll records and any other records for work that was completed during the policy period
for all of its employees and subcontractors for use in the insurance company’s retrospective
premium audit. Paragraph E of the Zurich Policy indicated that the results of the audit would
dictate whether MVT received a refund or was charged additional premiums. MVT was
required under the policy to pay insurance premiums for all employees and workers who may
have placed Zurich Insurance at risk of loss during the audited policy period.

                             The Texas Occupational Benefit Plan

In 2004, MVT maintained the Zurich Policy for its Tennessee employees, but created an
alternative arrangement for its Texas employees, described as an Occupational Benefit Plan
(“OB Plan”). The State of Texas has a system of workers’ compensation, but in contrast to
Tennessee, employers in Texas are not required to maintain workers’ compensation insurance
for Texas employees. MVT chose not to have workers’ compensation insurance under the
Texas workers’ compensation system for its Texas employees. Instead, MVT created the OB
Plan as a company-sponsored means for the Texas employees to recover for any on-the-job
injuries they sustained. MVT’s OB Plan was less expensive to MVT than workers’
compensation insurance.9


9
 For purposes of this appeal, it is undisputed that MVT’s OB Plan does not qualify as a substitute for bona
fide workers’ compensation insurance under Tennessee law. For example, the OB Plan does not pay medical
benefits once the employee reaches maximum medical improvement; Tennessee’s Workers’ Compensation
laws require such benefits. See Tenn. Code Ann. §§ 50-6-204, 207, and 209; see also Tenn. Code Ann. §
                                                                                             (continued...)

                                                   -5-
After MVT established its OB Plan, it did not pay premiums to Zurich Insurance for its
Tennessee-resident over-the-road drivers, taking the position that those employees were
actually Texas employees who were covered under the Texas OB Plan.10 MVT classified the
Tennessee-resident over-the-road drivers as Texas employees because they were hired from
MVT’s Texas office, their paychecks were generated from Texas, their assignments came
from Texas, their job required them to travel in several states, and they attended MVT
orientation in MVT’s main terminal in El Paso, Texas. At orientation, the Tennessee-
resident drivers were informed that they were not covered by the Zurich Policy for their on-
the-job injuries, but instead were considered Texas employees covered by the OB Plan.
Consistent with MVT’s classification, MVT reported those Tennessee-resident drivers to the
state of Texas, not to Tennessee, for purposes of unemployment insurance filings.

When MVT made the decision to classify the Tennessee-resident over-the-road drivers as
Texas employees and cease making premium payments for the drivers, it sent a notification
letter to Zurich Insurance.11 MVT’s letter explained that MVT did not need workers’
compensation insurance coverage for the Tennessee-resident over-the-road drivers, and that
it would no longer submit insurance claims for them under the Zurich Policy. Zurich
Insurance did not respond to MVT’s notification letter.

                                  Retrospective Premium Audits

                                Events Leading to Relevant Audits

During the policy period beginning March 16, 2004, through March 16, 2005, about twenty
of MVT’s Tennessee-resident over-the-road drivers filed claims for on-the-job injuries under
the Zurich Policy. Zurich Insurance paid some of these claims.

In May 2005, after the policy period ended, Zurich Insurance conducted a retrospective
premium audit for that policy period. In the audit, Zurich Insurance discovered that MVT
had not paid workers’ compensation insurance premiums for the twenty workers who had
filed claims. The account manager underwriter responsible for the insurance policy audits


9
 (...continued)
50-6-114(a) (“No contract or agreement . . . shall in any manner operate to relieve any employer, in whole
or in part, of any obligation created by this chapter, except as provided [herein].”).
10
  It is unclear from this record whether, or to what extent, MVT ever paid insurance premiums to Zurich
Insurance for the Tennessee-resident over-the-road drivers before it established the OB Plan.
11
  This letter is not in the appellate record. We will assume for purposes of this appeal, however, that the
letter was sent as asserted by MVT.

                                                   -6-
of MVT, Ms. Latoya Pierce (“Ms. Pierce”),12 later explained: “When it came time for the
[MVT] audit, none of the individuals could be found. The payroll records could not be found
for those claimants that were submitted under our policy.” Thus, MVT had not included
those employees in the initial calculation of its insurance premium. Upon learning this, Ms.
Pierce decided that no further claims filed by MVT’s Tennessee-resident over-the-road
drivers would be covered under the Zurich Policy. On July 8, 2005, Ms. Pierce wrote an
internal memorandum informing a coworker that MVT “has stated that the reason we could
not find the payroll for the 20 claimants during last year’s policy . . . is because they were all
hired out of Texas – the over the road drivers are not Tennessee employees.” Based on this,
Ms. Pierce told the co-worker: “Going forward, we will not accept any claims for these
individuals nor should we be picking up any payroll at audit that does not originate from the
state of Tennessee.” Ms. Pierce’s memorandum was only distributed internally and was not
communicated to MVT.

Nevertheless, even after she decided that Zurich Insurance should not accept further claims
for MVT’s Tennessee-resident over-the-road drivers, Ms. Pierce remained uncertain about
Zurich Insurance’s risk exposure under the Zurich Policy for these employees. She realized
that, for Zurich Insurance to have accepted the claims, the Tennessee-resident over-the-road
drivers who had filed claims under the Zurich Policy must have told Zurich Insurance
representatives that they “were principally employed in the state of Tennessee,” because all
of the claimants’ injuries had occurred outside of Tennessee. Reviewing the records that
MVT had provided to Zurich Insurance, Ms. Pierce saw that MVT had locations in several
states, and she was unsure about where the Tennessee-resident over-the-road drivers lived
and whether they should have been classified as Tennessee employees for purposes of
coverage. As a result, “to nail down” Zurich Insurance’s exposure, Ms. Pierce arranged for
an underwriting review process in which MVT’s account would be reviewed by several
underwriters, a process done when there is a particular concern.

In 2005, three audits of MVT were conducted by outside audit firms, sometimes called “fee
companies.” The audits concluded that MVT’s payroll for the Tennessee-resident over-the-
road drivers should have been included in MVT’s premium calculation, but gave few details
about the basis for the conclusion. Dissatisfied with these audits, Ms. Pierce requested an
internal audit. Zurich Insurance’s audit department then contacted its own auditor, Harvey




12
  Ms. Pierce is actually an employee of Travelers Insurance. In the record, the relationship between
Travelers Insurance and Zurich Insurance is unclear; however, it is undisputed that Ms. Pierce, as a Travelers
Insurance employee, administered the Zurich Policy per a contract between Travelers Insurance and Zurich
Insurance.

                                                     -7-
Lehrfeld (“Mr. Lehrfeld”),13 for a thorough re-audit of MVT’s operations, with particular
emphasis on the Tennessee-resident over-the-road drivers.

As requested, Mr. Lehrfeld conducted the re-audit of MVT, focusing on the policy period of
March 29, 2005, through May 10, 2005. After his audit, in a January 2006 email to Ms.
Pierce, Mr. Lehrfeld commented that “the difference between the audit by the fee
compan[ies] [(outside audit firms)] and my audit is the gray area of over-the-road drivers.”
In his preliminary conclusions, Mr. Lehrfeld chose not to include the payroll of the
Tennessee-resident over-the-road drivers in his calculation of MVT’s premium, because the
information given to him by MVT indicated that these drivers were Texas employees. At the
same time, however, he noted specifically that no driving logs had been made available to
him. In her response to Mr. Lehrfeld, Ms. Pierce said:

           Because [MVT] did not provide the driving logs, you were unable to definitely
           determine the state of each driver’s base terminal for regular loading,
           unloading, etc. or the state in which they spend a majority of their driving time,
           therefore please process the audit to include all drivers based on their state of
           residence according to the NCCI’s extra-territorial classification guidelines .
           ...

Thus, Ms. Pierce asked Mr. Lehrfeld to process the information MVT had provided in
accordance with the guidelines promulgated by NCCI, the national rating organization that
administers Tennessee’s assigned risk program.

The NCCI guidelines referenced by Ms. Pierce were contained in the NCCI Scopes Manual
(“NCCI Scopes Manual”) guidelines on so-called “extra-territorial” drivers. Those
guidelines provide:

           The payroll of drivers, chauffeurs, and helpers for truckers shall be assigned
           to the state in which the base terminal from which they load, unload, store or
           transfer freight on a regular basis is located. . . . When the driver, chauffeur
           or helper does not operate from a base terminal, a determination shall be made
           as to where the exposure lies. In that case, payroll shall be assigned as
           follows:

                           1. If it can be established that a trucker spends a majority
                    of driving time in a specific state, the trucker’s payroll shall be
                    assigned to that state.

13
     Mr. Lehrfeld is also employed by Travelers Insurance, and at that time he had been an auditor for 38 years.

                                                        -8-
                       2. If a base terminal or state of majority of driving time
                cannot be established and a trucker is traveling from his state
                of residence, payroll shall be assigned to the trucker’s state of
                residence.

(Emphasis added). Therefore, under these NCCI guidelines, in the absence of information
from MVT about the drivers’ base terminal or the location where the drivers spent the
majority of their driving time, Ms. Pierce determined that those employees should be
assigned to their state of residence – Tennessee.

In a follow-up email, Mr. Lehrfeld asked Ms. Pierce to make the decision about whether to
include MVT’s Tennessee-resident over-the-road drivers in the final premium calculations.
 Ms. Pierce responded that, “absent the driving logs, these individuals are being included
based on the [NCCI] extra-territorial classification guidelines for class code 7219.” 14
(Emphasis in original).

                                           Policy Period 1

The next month, Ms. Pierce asked Mr. Lehrfeld to conduct another audit of MVT for a
different policy period. This audit was to be a complete retrospective premium audit for the
first policy period in question in this lawsuit, namely, the period of June 30, 2005, through
March 16, 2006 (“Policy Period 1”). To conduct this audit, Mr. Lehrfeld met with MVT’s
vice president of administration and human resources, Luis Garcia, at MVT’s headquarters
in Las Cruces, New Mexico. The purpose of Mr. Lehrfeld’s meeting was to obtain
information about the MVT Tennessee-resident drivers. Mr. Lehrfeld asked Mr. Garcia for
employment records and driving logs for the Tennessee-resident over-the-road drivers in
order to determine where they spent the majority of their time and where the majority of their
loads originated. Mr. Garcia told him that the driving logs were not available because they
were maintained at an off-site location. Mr. Garcia explained that MVT treated all of those
drivers, as a group, as Texas employees and covered them under the MVT’s OB Plan, not the
Zurich Policy.

Without the driving logs or other documentation to show the base terminal for MVT’s
Tennessee-resident over-the-road drivers or where they spent the majority of their driving
time, Mr. Lehrfeld again turned for guidance to the NCCI Scopes Manual. Based on the
NCCI guidelines, Mr. Lehrfeld assigned the payrolls for those drivers to the state of the
drivers’ residence, Tennessee. Pursuant to the NCCI guidelines, Mr. Lehrfeld calculated that


14
  It is not clear whether MVT was charged with retrospective premiums on the Tennessee-resident over-the-
road drivers for that policy period as a result of this audit.

                                                  -9-
MVT owed Zurich Insurance a retrospective premium balance of $231,534 for Policy Period
1.

MVT refused to pay the retrospective premium balance assessed against it for Policy Period
1. As a result, Zurich Insurance canceled MVT’s insurance policy on June 3, 2006.

                                          Policy Period 2

After canceling MVT’s workers’ compensation insurance coverage, Zurich Insurance
directed Mr. Lehrfeld to conduct a cancellation audit for the time period immediately
preceding cancellation. This time period is the second policy period involved in this lawsuit,
March 17, 2006, through the cancellation date, June 3, 2006 (“Policy Period 2”).15 To
accomplish this, on July 13, 2006, Mr. Lehrfeld again met with Mr. Garcia at MVT
headquarters in Las Cruces, New Mexico, to discuss the Tennessee-resident over-the-road
drivers, with the same result. Not surprisingly, Mr. Lehrfeld reached the same conclusion
that, absent the driving logs, the payrolls of all of MVT’s Tennessee-resident over-the-road
drivers must be included for purposes of calculating MVT’s workers’ compensation
insurance premium. As a result, Mr. Lehrfeld determined that MVT owed Zurich Insurance
another $96,807 in retrospective premiums for Policy Period 2. MVT again declined to pay
the assessed premium. This left unpaid a total of $328,341 in retrospective premiums for
both policy periods.

                                              Lawsuit

On March 13, 2008, Zurich Insurance filed this lawsuit against MVT in the Chancery Court
for Davidson County, Tennessee. Under the terms of the Zurich Policy, Zurich Insurance
sought $328,341 in retrospective premiums due from MVT for Policy Periods 1 and 2, plus
prejudgment interest.

In its answer, MVT denied liability for the retrospective premiums. As an affirmative
defense, MVT claimed that Zurich Insurance should be estopped from asserting that an
agreement existed to cover the Tennessee-resident over-the-road drivers, because it knew or
should have known that it was providing coverage only for MVT’s Tennessee administrative
and clerical staff, not its drivers. In addition, MVT asserted a counterclaim against Zurich
Insurance. The counterclaim alleged that, during the two policy periods at issue, twelve of
MVT’s Tennessee-resident over-the-road drivers submitted claims to MVT for their on-the-
job injuries through MVT’s OB Plan. MVT argued that, if it were held liable for extra


15
 Policy Period 2 would have expired on March 16, 2007, but it ended prematurely when the Zurich Policy
was canceled due to non-payment of the retrospective insurance premium for Policy Period 1.

                                                -10-
retrospective premiums on the Zurich Policy, then the twelve claims filed by those drivers
under MVT’s OB Plan should have been covered by Zurich Insurance under the Zurich
Policy.

After discovery, Zurich Insurance filed a motion for partial summary judgment with regard
to MVT’s counterclaim. Because it was undisputed that MVT did not report to Zurich
Insurance any on-the-job injuries for the twelve subject Tennessee-resident drivers or
otherwise present the claims for payment, Zurich Insurance argued, it was impossible for
Zurich Insurance to perform under the insurance contract. Therefore, Zurich Insurance
contended, it was undisputed that it did not breach the Zurich Policy. In support of this
motion, Zurich Insurance attached a statement of undisputed facts, MVT’s responses to
interrogatories, MVT’s answers to requests for admissions, and a copy of the Zurich Policy.
MVT’s response argued that genuine issues of material fact remained on its counterclaim.

Zurich Insurance then filed a second motion for summary judgment, this one on the
allegations in its complaint in chief. The second summary judgment motion claimed that the
undisputed facts established that MVT was responsible under the Zurich Policy for paying
workers’ compensation insurance premiums for its Tennessee-resident over-the-road drivers,
because those employees presented a risk of loss to Zurich Insurance under the insurance
policy. In support of its motion, Zurich Insurance attached another statement of undisputed
facts, the Zurich Policy, the NCCI Scopes Manual Extra-Territorial Provision, and four
depositions.16

MVT’s response to Zurich Insurance’s second motion for summary judgment argued that this
motion should be denied also because there were genuine issues of material fact for trial.
MVT asserted that it had legitimately classified its Tennessee-resident over-the-road drivers
as Texas employees during the relevant policy periods. MVT also said that the depositions
of Mr. Lehrfeld and Ms. Pierce showed that several factors are considered in determining the
state of payroll for a given driver, including the state in which the driver is hired, the state
of origin of the driver’s paycheck, the state in which the driver spends the majority of his
time, and the state in which the driver begins his runs. MVT also argued that it was unclear
whether the NCCI guidelines applied in this situation. Even if the NCCI guidelines were
applicable, MVT argued, there was a genuine issue of material fact as to the state of payroll
for each Tennessee-resident over-the-road driver employed by MVT during the policy period
when considered individually, because each employee’s circumstances were unique.



16
  Zurich Insurance also attached to the motion a copy of an order of the Tennessee Department of Labor and
Workforce Development approving a settlement between the Uninsured Employers Fund and MVT related
to time periods other than those involved in the lawsuit.

                                                  -11-
                                  Trial Court’s Decision

On February 25, 2011, the trial court conducted a hearing on both of Zurich Insurance’s
motions for summary judgment. At the conclusion of the hearing, the trial court held in favor
of Zurich Insurance on both motions.

The trial court first discussed the summary judgment motion on Zurich Insurance’s
complaint. Initially, the trial court held that the payrolls of MVT’s Tennessee-resident over-
the-road drivers should have been included in calculating MVT’s insurance premium under
the Zurich Policy. Applying the guidelines set out in the NCCI Scopes Manual to the
undisputed facts, the trial court concluded that the payrolls of all of the Tennessee-resident
over-the-road drivers would be included in MVT’s premium basis:

       [T]he Tennessee resident over-the-road drivers engaged in work for [which]
       MVT could make Zurich liable under the policy pursuant to the NCCI manual
       rules.
              [MVT] does not dispute that the Tennessee resident over-the-road
       drivers loaded, unloaded at the Tennessee terminal during the policy period
       and drove out from the Tennessee terminal. The payroll for these resident –
       Tennessee resident over-the-road drivers are specifically to be included in the
       calculation in the premium basis under the NCCI manual rules.

Thus, the trial court granted summary judgment to Zurich Insurance on the claims in its
complaint.

The trial court also granted summary judgment in favor of Zurich Insurance on MVT’s
counterclaim, because it was undisputed that MVT did not report any claims to Zurich
Insurance as required under the policy. Therefore, it held, Zurich Insurance had no
obligation to cover the claims.

On March 17, 2011, the trial court entered a written order on the motions for summary
judgment filed by Zurich Insurance. The order incorporated by reference the trial court’s oral
ruling, and it expanded on the ruling as well. The order explained that, “as the Zurich Policy
is an assigned risk policy, the NCCI manual governs the premium determination at issue,”
and it quoted pertinent excerpts from the NCCI guidelines. The trial court recited several
undisputed facts supporting its conclusion that MVT’s Tennessee-resident over-the-road
drivers should have been included in the calculation of its retrospective premium:

       [A]t all times relevant to this dispute, MVT maintained a terminal [in]
       Nashville, Tennessee (“Tennessee Terminal”). MVT[’s] . . . Tennessee

                                             -12-
      resident over-the-road drivers loaded and unloaded at the Tennessee Terminal
      . . . . [T]hese drivers began and ended their trips on a regular basis at the
      Tennessee Terminal.
                                          ***
      [T]he over the road drivers were managed by dispatchers who were located in
      Tennessee. . . . Dispatchers were responsible for making sure trip plans are
      implemented and drivers return to Tennessee, as scheduled. With the
      exception of information uploaded to the driver’s on board computer, all
      communications between MVT and these drivers were accomplished through
      the Tennessee dispatchers. Such communications included the reporting of
      any on the job injuries. . . . The Tennessee Terminal was the only MVT
      facility with which the Tennessee drivers visited and communicated on a
      regular basis.

      . . . All applications, interviews, background checks, and driving tests for
      MVT’s Tennessee over the road drivers took place in Tennessee.

Considering these undisputed facts, the order concluded that Zurich Insurance was exposed
to risk during the policy periods at issue by MVT’s employment of the Tennessee-resident
over-the-road drivers, and that Zurich Insurance correctly calculated MVT’s retrospective
premiums under the Zurich Policy by including the payrolls of these drivers. Finally, the
order granted Zurich Insurance summary judgment on MVT’s counterclaim.

On April 27, 2011, the trial court entered an agreed final order awarding Zurich Insurance
prejudgment interest in the amount of $99,260.50 and assessing costs against MVT. MVT
now appeals.

                    ISSUES ON A PPEAL AND S TANDARD OF R EVIEW

MVT states the issue on appeal as follows:

              Whether the trial court erred in granting a summary judgment declaring
      that retrospective premiums were owed on a workers’ compensation policy for
      Tennessee resident employees when (1) the guidelines that the court deemed
      governing are optional and by their own terms do not apply under the facts of
      this case, (2) there is no material evidence as to where any individual employee
      was hired or principally worked, (3) evidence regarding general company
      policies with respect to the location of hiring and supervision is conflicting,
      and (4) the insured had notified the insurance company of its request to decline



                                             -13-
        coverage for the class of workers at issue and utilize an occupational injury
        benefit plan? 17

The resolution of a motion for summary judgment is a matter of law, which we review de
novo, with no presumption of correctness in the trial court’s decision. Martin v. Norfolk
S. Ry. Co., 271 S.W.3d 76, 84 (Tenn. 2008). In addressing this issue, “we are required to
review the evidence in the light most favorable to the nonmoving party and to draw all
reasonable inferences favoring the nonmoving party.” Id. (citing Staples v. CBL Assocs.,
Inc., 15 S.W.3d 83, 89 (Tenn. 2000)).

A motion for summary judgment should be granted only “if the pleadings, depositions,
answers to interrogatories, and admissions on file, together with the affidavits, if any, show
that there is no genuine issue as to any material fact and that the moving party is entitled to
a judgment as a matter of law.” Tenn. R. Civ. P. 56.04. In filing a motion for summary
judgment, the initial task of the party bearing the ultimate burden at trial is to “produce
evidence for all unadmitted elements of the claim or defense, and the evidence must be such
that, if uncontradicted, no reasonable jury could find against the movant and the movant
would be entitled to a directed verdict at trial.” Robert Banks Jr. & June F. Entman,
Tennessee Civil Procedure § 9-4(m) (3d ed. 2009) (emphasis added); see Milan Box Corp.
v. Hardy, No. W2006-02478-COA-R3-CV, 2007 WL 2790680, at *8-9 (Tenn. Ct. App. Sept.
26, 2007). Thus, a plaintiff-movant cannot be granted summary judgment unless it
“establishes both the elements of his claim and the invalidity of all asserted defenses.” Milan
Box Corp., 2007 WL 2790680, at *9 (citing Tennessee Civil Procedure, supra, § 9-4(m));
see Heatherly v. Campbell Co. Sch. Bd., No. 03A01-9505-CH-00155, 1995 WL 491002, at
*2 (Tenn. Ct. App. Aug. 18, 1995).

The interpretation of a contract is a question of law, subject to de novo review, with no
presumption of correctness in the trial court’s conclusion. Allstate Ins. Co. v. Tarrant, 363
S.W.3d 508, 527 (Tenn. Ct. App. 2012). Likewise, the interpretation of a statute is an issue
of law subject to de novo review. Nye v. Bayer Cropscience, Inc., 347 S.W.3d 686, 694
(Tenn. 2011).

                                               A NALYSIS

On appeal, MVT’s primary argument is that the employment status of the disputed
Tennessee-resident over-the-road drivers must be determined on a case-by-case basis for


17
 In the argument section of MVT’s appellate brief, the issues are framed somewhat differently from the
Statement of the Issue in the brief. Ultimately the difference is not material to our analysis. MVT does not
appeal the trial court’s grant of summary judgment on MVT’s counterclaim.

                                                   -14-
each driver, because the circumstances for each are different. Only after that is done, MVT
argues, may the court determine if Zurich Insurance correctly calculated the retrospective
workers’ compensation insurance premium owed by MVT, if any. Because Zurich Insurance
has not presented undisputed evidence as to individual drivers, MVT contends, issues of
material fact remain, and Zurich is not entitled to summary judgment. MVT also insists that
the trial court erred in relying on the NCCI guidelines, because they are only guidelines and
are not applicable here because Zurich Insurance had its own guidelines.

In response, Zurich Insurance insists that MVT never argued to the trial court that the
employment status of the disputed drivers must be ascertained on a case-by-case basis for
each individual driver, and so MVT is precluded from making this argument on appeal. It
contends that, for insurance policies that provide for retrospective premiums, the burden is
on the insured to establish that an employee should be excluded from the premium
calculation. Zurich Insurance emphasizes that the Zurich Policy covered employees who
presented an arguable workers’ compensation risk, so Zurich Insurance correctly calculated
MVT’s retrospective premium on that basis. It maintains that reference to the NCCI
guidelines was appropriate under the Zurich Policy.

At heart, this is a contractual dispute in which we are called upon to interpret each party’s
obligation under the Zurich Policy. Insurance policies are contracts subject to the traditional
rules of contractual interpretation. See King, 2006 WL 2792159, at *5. The “cardinal rule”
of contract interpretation is to ascertain the intent of the parties and to effectuate that intent
consistent with applicable legal principles. Frizzell Constr. Co. v. Gatlinburg, L.L.C., 9
S.W.3d 79, 85 (Tenn. 1999). When interpreting a contract, our role is to ascertain the
intention of the parties “based on the ordinary meaning of the language contained within the
four corners of the contract.” 84 Lumber Co. v. Smith, 356 S.W.3d 380, 383 (Tenn. 2011).
If the language is unambiguous, the contract must be interpreted as written, and the words
expressing the parties’ intentions should be given the usual, natural, and ordinary meaning.
Pitt v. Tyree Org., 90 S.W.3d 244, 252 (Tenn. Ct. App. 2002).

Because the Zurich Policy is a contract for workers’ compensation insurance, we must
interpret the policy in a manner that is consonant with Tennessee’s workers’ compensation
laws. Consequently, a brief overview of Tennessee’s workers’ compensation statutes and
caselaw is in order.

Generally, the Tennessee Workers’ Compensation Law requires all employers with five or
more employees, with certain exceptions, to provide workers’ compensation coverage for
their employees. Tenn. Code Ann. § 50-6-106(5); see King, 2006 WL 2792159, at *4; Jo
Ann Forman, Inc. v. Nat’l Council on Comp. Ins., Inc., 13 S.W. 365, 366 (Tenn. Ct. App.
1999). “Workers’ compensation insurance policies are contracts between the insurer and the

                                              -15-
employer, by which the insurer, in return for a premium, agrees to indemnify the employer
against all liabilities arising under the workers’ compensation law.” Jo Ann Forman, 13
S.W.3d at 366. “[T]he provisions of the Workers Compensation Law must be read into every
policy of workers compensation insurance.” King, 2006 WL 2792159, at *5; see Hartford
Underwriters Ins. Co. v. Penney, No. E2009-01330-COA-R3-CV, 2010 WL 2432058, at *4
(Tenn. Ct. App. June 17, 2010) (“In Tennessee, any inquiry into an individual’s employment
status for workers’ compensation insurance coverage necessarily is guided by overlapping
state workers’ compensation law.”).

Workers’ compensation insurance policies must be construed in light of the purpose of the
workers’ compensation statutes. “The purpose of the Workers Compensation Law . . . is to
provide a reliable and equitable remedy to workers who are injured on the job, while limiting
the liability to which the employer is exposed.” King, 2006 WL 2792159, at *4. To further
that purpose, an employer whose operations fall within the scope of the law must either
maintain a policy of insurance to secure any possible workers’ compensation liability or,
alternatively, meet the stringent financial requirements necessary to maintain the status of a
self-insured employer. See id.; see also Penney, 2010 WL 2432058, at *4.

On appeal, MVT does not dispute that it is covered by Tennessee’s Workers’ Compensation
Law, nor does MVT dispute that it is required to maintain an insurance policy “to secure any
possible workers’ compensation liability.”18 MVT in fact procured the Zurich Policy in order
to comply with this statutory obligation. The question on appeal centers on whether MVT
owes retrospective insurance premiums on the policy based on the payrolls of the Tennessee-
resident over-the-road drivers.

We note that the retrospective rating provision in the Zurich Policy is a standard provision
in workers’ compensation insurance policies. These provisions are based on the reality that
“any number of employees may be hired or terminated while the policy is in effect, thus
increasing or decreasing the amount of risk to which the insurer is exposed.” King, 2006 WL
2792159, at *6. As demonstrated in this case, however, the retrospective rating method of
premium computation requires cooperation between the insurance company and the insured
employer. Both the insurance company and the insured employer have responsibilities in the
required retrospective premium audit. When disputes arise, given that the purpose of the
Workers’ Compensation Law is to provide a reliable remedy for injured workers, the burden
is on the insured employer to establish that its workers should be excluded from premium
consideration. One commentator has explained:




18
     MVT does not claim that it met the financial requirements to be a self-insured employer.

                                                     -16-
       In most retrospective rate situations, the insured is required to provide the
       insurer with various documentation. If the information is incorrect, the insured
       runs the risk of having the insurance cancelled.

               Disputes may arise between the parties over the particular factors
       employed in calculating the retrospective rate. For example, the parties may
       disagree about the actual number of employees of the insured, whether
       particular goods were excluded from coverage, and whether the insurer lost the
       right to claim a particular loss item. Should one or more of these factors be
       called into question, the burden ordinarily falls on the insured, who usually has
       custody of the relevant information, to establish that it should be excluded
       from premium consideration.

5 Couch on Ins. 3d, supra, § 69:15 (footnotes omitted). In a retrospective premium audit,
the issue is not whether the worker would have certainly been covered had he filed a claim
on the insurance policy; rather, the audit is an after-the-fact analysis designed “to examine
the actual risk which [the insurance company] undertook during the policy period.” Royal
Ins. Co. v. R&R Drywall, Inc., No. M2002-00791-COA-R3-CV, 2003 WL 21302983, at *4
(Tenn. Ct. App. June 6, 2003) (quoting the trial court decision).

The parties have cited no Tennessee case in which an insurance carrier sought retrospective
premiums for an insured’s extraterritorial employee residing in Tennessee, and we have
found none. On several occasions, however, this Court has addressed an insurance carrier’s
demand for retrospective premiums from an insured employer based on their employment
of subcontractors, where the insured employer claimed that the subcontractors were
independent contractors, not included in the calculation of the insured’s workers’
compensation insurance premium. A review of those cases is helpful to our analysis.

In CNA (Continental Casualty) v. King, the insured, Mr. King, owned and operated a
roofing business. King, 2006 WL 2792159, at * 1. Mr. King had no employees, but instead
used subcontractors almost exclusively to perform the roofing work on his jobs. For the
roofing job in question, Mr. King was required to furnish proof of workers’ compensation
insurance. To fulfill this requirement, Mr. King purchased a workers’ compensation policy
from the plaintiff insurance company. Like the policy in the instant case, the policy in King
provided for a retrospective rating method of determining premiums at the expiration of the
policy period. Id. at *2. The policy required Mr. King to pay an insurance premium for all
employees and uninsured subcontractors, with the proviso that he could avoid that obligation
if he provided proof to the plaintiff insurance company “that the employers of these persons
lawfully secured their workers compensation obligation.” Id. at *1.



                                             -17-
To obtain the insurance coverage, Mr. King filled out a questionnaire for the plaintiff
insurance company. The questionnaire asked, among other things, whether he would be
using subcontractors for the roofing job at issue. Mr. King did not answer in the affirmative.
Despite this, Mr. King in fact used six subcontractors on the job. He did not pay insurance
premiums for the six uninsured subcontractors he used, and did not identify them as
employees or uninsured subcontractors in the questionnaire.

When the plaintiff insurance company performed an audit, it learned that Mr. King had
employed the subcontractors but did not identify them in the questionnaire. The insurance
company promptly cancelled the policy. After a retrospective premium audit, the insurance
company assessed Mr. King an additional premium of $14,790, based on his employment of
the uninsured subcontractors. Mr. King refused to pay, and the insurance company filed a
lawsuit to collect the premium. Id. at *2.

At trial, Mr. King testified that he did not pay additional premiums for the six subcontractors
because he believed that they were independent contractors for whom he was not required
to maintain workers’ compensation coverage. Id. at *3. After a trial, the trial court made a
finding of fact that Mr. King’s workers were, in fact, independent contractors. However, it
also observed that the issue was not clear cut and that “it would have taken a lawsuit to
establish the true status of the workers.” Id. at *4. The trial court concluded that the
insurance company “would have been required by its contract to defend such a suit in any
case, and that the suit could have gone either way with regard to the status of these
employees.” Id. Moreover, the insurance contract provided a means by which Mr. King
could have legitimately excluded those workers from coverage under Mr. King’s policy —
by providing proof that the workers’ employers had secured their workers’ compensation
obligation — but he did not do so. Therefore, because the insurance company had been
exposed to liability on account of Mr. King’s workers, the trial court granted the insurance
company’s claim for retrospective premiums. Id. Mr. King appealed.

On appeal, Mr. King’s main argument was that the evidence established that the six workers
were independent contractors, not employees. In response, the insurance company argued
that, had one of the workers filed an on-the-job injury claim against Mr. King, the insurance
company would have been required “to defend against the claim, to bear the risk that the
worker would be found to be a statutory employee under Tenn. Code Ann. § 50-6-113, and
to pay whatever benefits the worker was entitled to.” Id. at *7. Thus, the insurance company
argued, it bore “the risk to defend any claim brought by a worker on the job site even if that
defense was to prove the injured worker was an independent contractor.” Therefore, the
insurance company contended, it had had a risk of loss for these workers during the policy
period. Id. The appellate court agreed, concluding that the insurance company was justified
in including in the premium base the payroll of the subcontractors, particularly in light of the

                                              -18-
fact that Mr. King could have avoided the assessment by providing the necessary information
to the insurance company. Id.

Retrospective insurance premiums were also considered in Hartford Underwriters Ins. Co.
v. Penney, in which Mr. Penney, a home builder, purchased a workers’ compensation policy
from the plaintiff insurance company. Penney, 2010 WL 2432058, at *1. Mr. Penney paid
a premium only for himself for the one-year period of the policy, and he filed no claims
during that time. During the policy period, Mr. Penney had used three subcontractors in the
construction of a home.19 Those workers had signed I-18 forms, swearing that they did not
want to be covered under Mr. Penney’ workers’ compensation policy.20 Based on these I-18
forms, Mr. Penney did not pay a workers’ compensation insurance premium for those
workers. Id. at *1 & n.2. In its subsequent retrospective premium audit, the insurance
company determined that premiums were due for these workers and assessed Mr. Penney
accordingly. Mr. Penney refused to pay, relying on the I-18 forms and his characterization
of the workers as independent contractors. The insurance company sued Mr. Penney for the
retrospective premiums. Id. at *3.

At trial, Mr. Penney testified in support of his assertion that the three workers were
independent contractors, not employees, insisting that he did not control any aspect of their
work. Describing the issue as a “close case” on the facts, the trial court concluded that the
workers were employees, not independent contractors. Accordingly, it granted the insurance
company’s claim for retrospective premiums. Id. at *4. Mr. Penney appealed.

On appeal, the appellate court noted the established rule that any doubt as to a worker’s status
must be resolved in favor of finding that the worker is an employee who is entitled to
workers’ compensation insurance coverage. Id. at *4-5; see Armstrong v. Spears, 393
S.W.2d 729, 731 (Tenn. 1965). It reasoned: “The workers’ compensation law is to be
‘rationally but liberally construed to promote and adhere to the Act’s purposes of securing


19
 A fourth subcontractor was also used, but he did not file an I-18 form, and it was undisputed that he was
an employee and that Mr. Penney owed an additional premium payment for the subcontractor. Penney, 2010
WL 2432058, at *1.
20
  According to the King court, I-18 forms are actually titled “Election of Non-Coverage by Sub-Contractor”
and must be signed by both the subcontractor and the general contractor. Although they provide a
mechanism whereby a subcontractor can waive his own right to be covered by the Workers’ Compensation
Law, the form itself states that he cannot waive the rights of his employees. King, 2006 WL 2792159, at *2
& n.3. The insurance policy in Penney contained a provision stating that an I-18 form was “simply a
statement of your intention not to cover these individuals. It is not a form recognized in the Tennessee
Workers’ Compensation Law and it does not resolve the fundamental issue of whether these individuals are
working for you as sole proprietors/partners or as employees.” Id. at *2.

                                                  -19-
benefits to those workers who fall within its coverage.’” Penney, 2010 WL 2432058, at *6
(quoting Hodge v. Diamond Container Gen., Inc., 759 S.W.2d 659, 664 (Tenn. 1988)).
Given this liberal construction, the appellate court affirmed the trial court’s factual finding
that the three workers involved were employees, not independent contractors.

The appellate court in Penney then discussed the effect of the I-18 forms executed by the
workers. It noted the language in Tennessee Code Annotated § 50-6-114(a), stating: “No
contract or agreement . . . shall in any manner operate to relieve any employer in whole or
in part of any obligation created by this chapter . . . .” Id. at *7. It stated that the contractors’
liability for premiums was not determined by the workers’ employment relationship or the
execution of an I-18 Form, but rather, it was determined by the insurance contract itself. Id.
at 8. Applying the reasoning in King, the Penney court held that the insurance carrier’s
potential liability under the policy was “a sufficient basis for enforcing [the insurance
carrier’s] additional premium assessments.” Id. at *9. The appellate court observed: “If any
of these workers had been injured on the job, they could have submitted a claim for workers’
compensation that Mr. Penney would have had to answer as the arguable employer,
irrespective of the executed I-18 Forms.” Id. The insurance company “undertook the risk
during the policy period, including the risk that it would have to defend Mr. Penney as the
insured in a suit to establish a definitive determination as to the employment relationship
between Mr. Penney with the injured worker.” Id. On this basis, the appellate court affirmed
the trial court’s decision, holding Mr. Penney liable for the retrospective premiums.

King and Penney are instructive in our review of Zurich Insurance’s claim for retrospective
insurance premiums. Both cases emphasize that, where the insurance company was exposed
to the risk of defending a workers’ compensation lawsuit filed by a worker, even if only to
litigate the worker’s status, the assessment of retroactive premiums was warranted under the
insurance contract. Penney, 2010 WL 2432058, at *5; King, 2006 WL 2792159, at *7-8; see
also Hodge, 759 S.W.2d at 664.

Against this backdrop, we turn to the facts in the case at hand. As this is a contractual
dispute, we focus on the terms of the contract – the Zurich Policy. It provides that the
“premium includes payroll . . . during the policy period for the services of” MVT’s
employees and “[a]ll other persons engaged in work that could make us liable” for workers’
compensation benefits. Therefore, consistent with King and Penney, the evidence need not
show definitively that the disputed employees were in fact Tennessee drivers who were
entitled to workers’ compensation benefits under Tennessee law. Under the Zurich Policy,
the issue is whether Zurich Insurance “could” have been liable for workers’ compensation
benefits for the Tennessee-resident over-the-road drivers.




                                                -20-
Next we look at the parties’ duties and responsibilities under the Zurich Policy. Paragraph
E states explicitly that MVT’s initial insurance premium is “an estimate,” and that “[t]he final
premium will be determined after this policy ends by using the actual, not the estimated,
premium basis and the proper classifications and rates that lawfully apply to the business and
work covered by this policy.” Paragraph G of the Zurich Policy authorizes Zurich Insurance
to “examine and audit” MVT’s records and use the “[i]nformation developed by audit . . . to
determine final premium.”

MVT has duties under the contract as well. The Zurich Policy states that MVT must “keep
records of information needed to compute premium.” MVT must “provide [Zurich
Insurance] with copies of those records when [it] ask[s] for them” and “let [Zurich Insurance]
examine and audit all [of MVT’s] records that relate to this policy.” Numerous types of
records are specified in the policy.

In sum, under the Zurich Policy, MVT is required to keep pertinent records and provide them
to Zurich Insurance for audit. Zurich Insurance, in turn, determines the final premium based
on the records provided to it by MVT. If Zurich Insurance uses methodology to determine
the premium that is congruent with the policy and consistent with the records and information
furnished by MVT, it has complied with its contractual obligation. If so, MVT owes the
premium assessed.

We consider first MVT’s arguments on Zurich Insurance’s use of the NCCI guidelines in
determining whether the payroll of the disputed drivers should be included in the premium
calculation. MVT appears to argue that (1) the trial court erred in holding that the NCCI
guidelines govern the issue, (2) the Zurich Policy says that the premium will be determined
by Zurich Insurance’s rules, so use of the NCCI guidelines was not permissible, and (3) there
is a question of fact for trial as to whether the NCCI guidelines apply.

We respectfully disagree as to all of these arguments. The issue is not whether the NCCI
guidelines “govern” the issues in the case. The issue is whether Zurich Insurance was
permitted under the Zurich Policy to use the NCCI guidelines in its premium calculation.
The Zurich Policy states: “All premiums for this policy will be determined by our manuals
of rules, rates, rating plan and classifications.” We do not read this as prohibiting Zurich
Insurance from consulting the guidelines of NCCI, a national rating organization, to
determine whether Zurich Insurance “could” be held liable for workers’ compensation
benefits for the disputed workers. We note that the same section of the Zurich Policy states
specifically that “[i]nsurance rate service organizations” also have the right to examine and
audit MVT’s records for premium purposes. In its appellate brief, MVT itself refers to the
NCCI guidelines as “optional.” Zurich Insurance’s use of the NCCI guidelines in this case
is not contrary to the insurance contract.

                                              -21-
MVT argues that the trial court erred in granting summary judgment to Zurich Insurance
where MVT had notified Zurich Insurance that it intended to decline coverage for the
disputed workers and utilize its OB Plan for those workers. It is undisputed that MVT’s OB
Plan is not a substitute for workers’ compensation under Tennessee law, and the Texas OB
Plan does not absolve MVT of its obligation to provide workers’ compensation insurance for
its Tennessee employees. See Tenn. Code Ann. § 50-6-114(a). Under those circumstances,
MVT’s notification to Zurich Insurance that it intended to decline coverage for the disputed
employees is irrelevant, because it does not affect Zurich Insurance’s exposure to risk as to
those employees.

MVT takes umbrage at Zurich Insurance’s insinuation that MVT “refused” to provide
requested information, specifically, the drivers’ logs for the employees at issue. Whether
MVT did or did not “refuse” to prove such records is, at most, tangential to our analysis. At
the end of the day, Zurich Insurance was tasked with using whatever information MVT
provided to ascertain whether Zurich Insurance was at risk for the employees in question.
The less information MVT provides, the less basis there is for Zurich Insurance to conclude
that it is not at risk. As noted above, where the insurance company determines its premium
through retrospective rating, “the burden ordinarily falls on the insured, who usually has
custody of the relevant information, to establish that it should be excluded from premium
consideration.” 5 Couch on Ins. 3d, supra, § 69:15.

MVT insists on appeal that the employment status of each of the disputed over-the-road
drivers must be established individually, examining the particular facts for each driver. We
would be more receptive to this argument if the record indicated that, in the course of Zurich
Insurance’s retrospective audit, MVT attempted to demonstrate that individual drivers within
the group presented no risk to Zurich Insurance. The record reflects the opposite, that
representatives of both MVT and Zurich Insurance dealt with MVT’s Tennessee-resident
over-the-road drivers collectively. For the audit Mr. Lehrfeld conducted, Mr. Garcia testified
that he was asked for various specified employment records for Tennessee employees,
including the Tennessee-resident over-the-road drivers. Mr. Garcia questioned the request
because Mr. Garcia believed that the over-the-road drivers were “not covered under workers’
comp.” Nevertheless, Mr. Garcia gave Mr. Lehrfeld the employees’ records and answered
some unspecified questions; Mr. Lehrfeld then “did his audit.” After the audit came back
unfavorably, Mr. Garcia said, MVT wrote Zurich Insurance a “dispute letter” taking the
position that all of the Tennessee-resident over-the-road drivers should have been excluded.
The reasons given for this position were common to all of the drivers; for example, that they
all signed a form acknowledging that they are Texas employees, and they all understood that
they had agreed to be covered under the Texas OB Plan rather than the Tennessee Workers’
Compensation Act.



                                             -22-
Our focus remains whether the undisputed facts establish that Zurich Insurance performed
its contractual duty under the Zurich Policy to audit the information and records furnished
by MVT and determine the retrospective premium.21 In the course of such a retrospective
audit, the burden is on MVT to establish exclusion from premium consideration. If MVT
gave Zurich Insurance no indication in the audit that it felt that certain of the over-the-road
drivers presented less risk to the insurance carrier than others, it cannot, in the ensuing
litigation, ask the trial court to conduct a mini-trial on the circumstances of each individual
driver.

Finally, MVT argues that summary judgment is inappropriate at this juncture because
genuine issues of material fact exist as to whether the Tennessee-resident over-the-road
drivers are actually Texas employees or Tennessee employees. It points out the many factors
that are considered when making this determination, such as (1) the employees’ state of hire,
(2) the state from which their pay originates, (3) the state in which they spend the majority
of their time, (4) the state in which they normally begin and end their runs, (5) the state in
which they are reported for unemployment purposes, (6) the state where they were trained
(orientation), and (7) the state in which their employment is principally located. With so
many disputed issues of fact, MVT argues, summary judgment in favor of Zurich Insurance
was not appropriate.

Respectfully, the presence of disputed facts as to these factors does not persuade us that the
trial court erred in granting summary judgment to Zurich Insurance. We are mindful that the
bar for Zurich Insurance is not high; under the terms of the Zurich Policy, it need only show
that it “could” be liable for workers’ compensation benefits for the disputed employees.
Moreover, as we have emphasized, “the burden ordinarily falls on the insured, who has
custody of the relevant information to establish” that the disputed employees “should be
excluded from premium consideration.” 5 Couch on Ins. 3d, supra, § 69:15.

Given the records and information produced by MVT in the retrospective premium audit,
Zurich Insurance had little choice but to conclude that it “could” be liable to MVT’s
Tennessee-resident over-the-road drivers. It is undisputed that all of the Tennessee-resident
over-the-road drivers lived in Tennessee, and that their employment was necessitated by
MVT’s establishment of a terminal in Tennessee to service its growing Tennessee client
base. It is also undisputed that, for all of these employees, at least some of their work was
performed in Tennessee. The lack of driving logs left Zurich Insurance with almost no




21
 For this reason, the cases cited in MVT’s brief involving whether a particular trucker is entitled to workers’
compensation benefits are inapposite.

                                                     -23-
information regarding the state in which these drivers spent the majority of their time.22 The
fact that the employees are hired and paid out of Texas, are trained in Texas, and are reported
for unemployment purposes in Texas, does not remove the risk of exposure to Zurich
Insurance under the Zurich Policy. Moreover, it is not insignificant that twenty similarly-
situated MVT employees filed claims for their on-the-job injuries under the Zurich Policy
during the first year of the policy’s existence, and many of those were paid by Zurich
Insurance without objection. See King, 2006 WL 2792159, at *10 (noting that, after the
expiration of the policy period, Mr. King actually notified the insurance company of an on-
the-job injury of one of his workers, “apparently expecting coverage”).

Both King and Penney establish that the propriety of retrospective premiums must be
determined by referring to the language in the insurance contract and the overlapping
Workers’ Compensation Law. The Zurich Policy in this case requires MVT to pay premiums
based on the “payroll and all other remuneration paid . . . for the services of . . . [a]ll your
officers and employees [and] [a]ll other persons engaged in work that could make us liable
under Part One (Workers Compensation Insurance) of this policy.” In return, Zurich
Insurance is to provide workers’ compensation insurance for “any possible workers’
compensation liability.” Id. at *4. Zurich Insurance is required to pay all covered claims and
“to defend . . . any claim, proceeding or suit against you for benefits payable by this
insurance.” Given the undisputed facts of this case, Zurich Insurance was at risk of being
required to defend MVT against a claim filed by one of MVT’s Tennessee-resident over-the-
road drivers, even if only to litigate the matter of coverage. Therefore, Zurich Insurance was
entitled to include the payrolls of MVT’s Tennessee-resident over-the-road drivers in its
premium basis for the relevant policy periods. We find no error in the trial court’s grant of
summary judgment in favor of Zurich Insurance on its claim for the retrospective insurance
premiums.

Accordingly, we affirm the grant of summary judgment in favor of Zurich Insurance. All
other issues raised and not addressed herein are pretermitted by our decision.




22
  Even if MVT had produced driving logs in the trial court that supported its position, we would be loathe
to say that they could be considered in the litigation. We are, after all, construing the parties’ obligations
under the insurance policy. Under the terms of the policy, MVT was obliged to produce such records in the
audit, for calculation of the retrospective premium. If Zurich Insurance made a reasonable premium
calculation based on the records produced, we are hard-pressed to see why MVT would be permitted to bring
forth more records in the ensuing litigation. But we need not reach this issue.

                                                    -24-
                                       C ONCLUSION

The decision of the trial court is affirmed. Costs on appeal are to be taxed to Appellant
MVT Services, Inc., d/b/a Mesilla Valley Transportation, and its surety, for which execution
may issue, if necessary.




                                                   _________________________________
                                                   HOLLY M. KIRBY, JUDGE




                                            -25-
