STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
AMERISURE MUTUAL INSURANCE COMPANY,
Petitioner,
vs.
DEPARTMENT OF FINANCIAL SERVICES, DIVISION OF WORKERS‟ COMPENSATION,
Respondent.
/
Case No. 13-0865
RECOMMENDED ORDER
A final hearing was conducted in this case on June 27
and 28, 2013, in Tallahassee, Florida, before Barbara J. Staros, an administrative law judge with the Division of Administrative
Hearings.
APPEARANCES
For Petitioner: Maria Elena Abate, Esquire
Sharlee Hobbs Edwards, Esquire Colodny, Fass, Talenfeld,
Karlinsky, Abate & Webb, P.A.
100 Southeast 3rd Avenue, 23rd Floor Fort Lauderdale, Florida 33394
For Respondent: David Davis Hershel, Esquire
Michael Davidson, Esquire Department of Financial Services
200 East Gaines Street Tallahassee, Florida 32399
STATEMENT OF THE ISSUE
The issues to be decided are: 1) whether Petitioner, Amerisure Mutual Insurance Company (Amerisure), is entitled to a credit or refund due to the elimination of credits by Respondent, Department of Financial Services (Respondent or the Department), that Amerisure claims accrued in the calendar year 2009 and should apply to future assessments owed to the Special Disability Trust Fund (SDTF) and the Workers‟ Compensation Administration Trust Fund (WCATF)(collectively the Trust Funds);
2) whether the elimination of these credits was accomplished by the Department‟s application of a policy meeting the definition of a rule that has not been adopted through the chapter 120 rulemaking process; and 3) whether any refund or credit is barred by the statute of limitations in section 215.26, Florida
Statutes.
PRELIMINARY STATEMENT
On January 28, 2013, the Department issued a Notice of Intent to Deny Applications for Refund (the Notice) to Amerisure, citing section 215.26, Florida Statutes. The Notice stated that the Department was denying Amerisure‟s request for refunds of $236,663.25 in assessments paid into the SDTF, and
$25,095.70 in assessments paid into the WCATF. Amerisure timely filed a Petition for Administrative Hearing challenging the Notice.
The Petition was transmitted to the Division of Administrative Hearings on March 14, 2013. The case was scheduled for final hearing on May 21 and 22, 2013. On April 23, 2013, Respondent filed an Agreed Motion to Continue
Final Hearing, which was granted. The hearing was rescheduled for June 27 and 28, 2013.
On May 30, 2013, Petitioner filed a Motion to Amend Petition for Formal Administrative Hearing, which was granted. The case proceeded under the Amended Petition for Formal Administrative Hearing Involving Disputed Issues of Material Fact.
On June 13, 2013, the Department filed a Motion for Summary Final Order, which was denied. The parties filed unilateral
pre-hearing statements and subsequently filed a Joint Pre- Hearing Statement. The Joint Pre-Hearing Statement includes stipulated facts that, where relevant, have been incorporated into the Findings of Fact below. The case proceeded to hearing as scheduled on June 27 and 28, 2013.
At hearing, Amerisure presented the testimony of Andrea Koehler, Ray Neff,1/ Gene Smith, Maya Brown, and portions of the deposition testimony of Greg Jenkins. Amerisure‟s Exhibits numbered 1 through 3, 5, 6, 10 through 15, 18, 26 through 29,
30, 33 through 35, 39, and excerpts of 41 (which is the deposition testimony of Greg Jenkins), were admitted into
evidence. Amerisure‟s Motion to Take Judicial Notice was granted. The Department presented the testimony of Gene Smith and Maya Brown. The Department‟s Exhibits numbered 1 through 5 were admitted into evidence. A ruling on the parties‟ respective Motions for Attorney‟s Fees was deferred.
A four-volume transcript was filed on July 18, 2013. The parties timely filed Proposed Recommended Orders which have been duly considered in the preparation of this Recommended Order.
All references to the Florida Statutes are to 2010.
FINDINGS OF FACT
Amerisure is a carrier as defined in section 440.02(4), Florida Statutes, authorized to transact the workers‟ compensation line of business in the State of Florida. At all times relevant to the Department‟s Notice of Intent, Amerisure was authorized to transact the workers‟ compensation line of business in Florida, and required to pay assessments to both the SDTF and WCATF.
Pursuant to section 440.49(9)(b), Florida Statutes, the SDTF is maintained by annual assessments, paid quarterly, upon the insurance companies writing compensation insurance in Florida; the commercial self-insurers under sections 624.462 and 624.4621, Florida Statutes; the assessable mutuals as defined in section 628.6011, Florida Statutes; and the self-insurers under chapter 440, Florida Statutes. Section 440.49(9)(b) requires
the Department to determine the rate each year for the next calendar year, based on the Department‟s estimate of the amount of money necessary to administer section 440.49, and to maintain the SDTF for that next calendar year. In addition, the total amount to be assessed against all entities subject to assessment is prorated among those entities.
Similarly, pursuant to section 440.51(1), the WCATF is maintained by annual assessments, paid quarterly, upon the carriers writing compensation insurance in Florida and self- insurers. Section 440.51(1) provides that the rate is determined each year for the next calendar year based on the anticipated expenses of the administration of chapter 440 for the next calendar year. In addition, the total amount to be assessed against all entities subject to assessment is prorated among those entities.
Workers‟ compensation policies are unique insurance policies in that they provide statutorily mandated coverage that must be purchased by most employers; they provide “no fault” coverage and have no maximum dollar amount limit in the primary coverage of medical benefits.
To make such coverage affordable, the market has developed various types of policies which allow an employer, based upon its size and financial wherewithal, to limit its exposure for a possible reduction in premium. For example,
there are standard policies that provide coverage from the first dollar of loss, there are large deductible policies where the employer shares in a greater amount of risk, there are retrospective policies where final premium amount is determined on the basis of loss development during the policy, and there are dividend plans which also take into account loss experience.
Most workers‟ compensation policies are annual policies which can incept at any given day within a calendar year.
It is not unusual for a workers‟ compensation policy to run between two calendar years.
Regardless of the kind of workers‟ compensation policy issued to an employer, the initial premium at the time of policy inception is referred to as an “estimated premium.”
This is because the “estimated premium” is based on the actual number of employees in a company‟s payroll and the payroll classifications as to each employee‟s particular job -- e.g., executive supervisor, window cleaner, etc. Because the final exposure is unknown until the last day of coverage, the “estimated premium” is always subject to change.
Most workers‟ compensation policies have standard language copyrighted by the National Council on Compensation Insurance (NCCI), a statistical and rating organization which files rates and forms in Florida for use by carriers, which address this very point. Under the “Part Five Premium” section
of a standard NCCI policy, “Section E” states that the premium shown on the information page, schedules, and endorsement is an “estimate.” Section E further states that the final premium will be determined by an audit after the policy ends by using the actual and not the estimated premium base, and the proper calculations and rates that lawfully apply to the business and work covered by the policy. Finally, Section E provides that if the actual premium is more than what the policyholder paid as an estimated premium, the insured must pay the balance.
Conversely, if it is less than what was paid, the insurance company will refund premium.
When audits are performed either at the end of the policy year or later, premiums may be refunded to a policyholder.
Dividend plans are a kind of workers‟ compensation policy which allows for a dividend payment back to the policyholder if the actual loss experience observed is more favorable than anticipated. The payment of a dividend is not guaranteed, but is subject to the approval of an insurer‟s Board of Directors. Significantly, the earliest that a dividend can be paid out under a dividend plan is six months after the policy has ended. As such, dividends are never paid in the same calendar year as a policy incepts.
All workers‟ compensation carriers writing business in Florida pay an assessment on every premium dollar to fund the SDTF and WCATF. When the NCCI files for rates in Florida, it takes into account the assessments paid by carriers to the Trust Funds, and the charge for the assessments is included in the rates developed by the NCCI. The rate is the amount applied to the payroll, and the product of the payroll and rate equals the premium for a particular payroll classification.
Reporting and Collection of Assessments
The Department provides pre-printed forms entitled “Carrier and Self-Insurance Fund Quarterly Report” to workers‟ compensation carriers, such as Amerisure, to self-report “net premium” amounts on a quarterly basis.
The Department also provides a “spreadsheet” form that the carriers may utilize to indicate how they are calculating the net premium amount for each of the trust funds.
After calculating the net premium amount for each trust fund on the spreadsheet, the carrier writes in that net premium amount on the quarterly report and multiplies that amount by the assessment rate set by the Department (which is reflected on the quarterly report form).
If a carrier returns more premium and/or pays more in dividends than it has written in one quarter, it has a “negative net premium” and owes no assessment for that quarter. The
quarterly report form provides empty circles, referred to on the form as “buttons,” for the carrier to fill in indicating whether the net premium amount is negative or positive.
When a carrier has negative net premium for a quarter, a credit amount is reflected on the next quarterly report form to be applied toward future assessments.
This credit amount is pre-printed by the Department on the next quarter‟s form. This amount appears in the “debit/credit box” on the quarterly report form or in the “balance carried forward” on the spreadsheet.
The direct written premium in the insurance industry is the summation of all premiums for a given period less any returns made during that period.
Amerisure subtracts any premium returned during the calendar year from its gross number to determine direct written premium, regardless of what year the policy, for which premium is returned, incepted.
In order to calculate the net premium amount for assessment purposes, Amerisure deducts the amount of dividends paid or credited to policyholders from their direct written premium amount, regardless of the fact that the policy year for the dividend being paid is a different calendar year than the year that the dividend is paid or credited.
By statute, workers‟ compensation insurance companies, such as Amerisure, are assessed by the Department for contributions to the SDTF based on the amount of “net premiums written,” and companies are assessed for contributions to the WCATF based on the amount of “net premiums earned” or “net premiums collected.” Since at least 2004, Amerisure has been utilizing “direct written premium” to calculate the “net premium” or “net premium collected” amount listed in its quarterly reports for both the SDTF and WCATF Funds.
The Department utilizes annual reports filed with the NAIC by carriers to perform their audits and determine if an insurer has accurately reported the amount of net premium subject to assessments for the Trust Funds.
Assessments to the Trust Funds are paid by Amerisure during the quarter that premium is written. Premium is considered written when a policy first incepts or when additional premium is charged on a policy.
Because Amerisure utilizes net written premium as a “proxy” for net collected premium, it pays more in trust fund assessments up front than it would if it were able to report the company‟s actual collected premium.
Amerisure‟s 2009 Credits
In the last two quarters of 2008, Amerisure began to experience negative net premium. This continued through all of
calendar year 2009 until Amerisure once again experienced positive premium in calendar year 2010. Amerisure‟s negative premium was a result of the economic downturn, which gravely impacted a large portion of Amerisure‟s Florida customer base in the construction industry.
Due to so many employers downsizing their workforce, Amerisure returned 12 million dollars in premium in calendar year 2009.
The majority of the 12 million dollars of premium returned to policyholders was for approximately 1200 policies which had incepted prior to 2009 and for which assessments had been paid into the trust funds prior to 2009.
Amerisure‟s payment to the trust funds of the original assessment amounts on the policies that incepted prior to 2009 was based on “estimated premium,” on what Amerisure believed the premium to be at that point in time, prior to the calculation of the final premium.
According to Raymond Neff, who was accepted as an expert in the field of workers‟ compensation insurance, Amerisure‟s experience of negative net premium in late 2008 and 2009 was not unique in the workers‟ compensation construction sector as verified by NCCI data showing similar impacts to other carriers due to the recession and reductions in payroll during
this time frame. The Department did not rebut his testimony in any meaningful way.
Reporting and Payments for the SDTF
For the time periods in 2008, Amerisure paid quarterly assessments to the SDTF based upon reported net premiums written, or did not pay assessments due to reported negative net premiums written, as follows:
for the quarter ending March 31, 2008, Amerisure reported $27,651,422 in net premiums, and paid an assessment of
$1,249,844;
for the quarter ending June 30, 2008, Amerisure reported $5,282,751 in net premiums, and paid an assessment of
$238,780;
for the quarter ending September 30, 2008,
Amerisure reported negative net premiums of $923,570, and no assessment was due or paid; and
for the quarter ending December 31, 2008, Amerisure reported negative net premiums of $1,269,343, and no assessment was due or paid.
Because of premium refunds made to policyholders in the quarters ending September 30, 2008, and December 31, 2008, resulting in an overpayment, Amerisure received a credit against future SDTF assessment payments in the amount of $99,119.66.
For the time periods in 2009, Amerisure did not owe or pay assessments to the SDTF due to reported negative net premiums written, resulting from reported payment of premium refunds to policyholders, as detailed below.
For the quarter ending March 31, 2009, Amerisure reported negative net premiums of $1,422,158, and no assessment was due or paid. When the Department provided Amerisure with its Carrier and Self-Insurance Quarterly Premium Report to complete for the quarter ending March 31, 2009, it included a
$99,119.66 "Debit/Credit" carried over from 2008 for the SDTF on the report form.
For the quarter ending June 30, 2009, Amerisure reported negative net premiums of $2,382,484, and no assessment was due or paid. When the Department provided Amerisure with its Carrier and Self-Insurance Quarterly Premium Report to complete for the quarter ending June 30, 2009, it included a
$163,401.20 "Debit/Credit" for the SDTF on the report form. This amount was the sum of $99,119.66 carried over from 2008, plus a $64,281.54 credit from the quarter ending March 31, 2009, calculated by application of the 2009 assessment rate to the
$1,422,158 reported negative net premium for the quarter ending March 31, 2009.
For the quarter ending September 30, 2009, Amerisure reported negative net premiums of $2,392,606, and no
assessment was due or paid. When the Department provided Amerisure with its Carrier and Self-Insurance Quarterly Premium Report to complete for the quarter ending September 30, 2009, it included a $271,089.48 "Debit/Credit" for the SDTF on the report form. This amount was the sum of $99,119.66 carried over from 2008; plus a $64,281.54 credit from the quarter ending March 31, 2009, calculated by application of the 2009 assessment rate to the $1,422,158 reported negative net premium for the quarter ending March 31, 2009; plus a $107,688.28 credit from the quarter ending June 30, 2009, calculated by application of the 2009 assessment rate to the $2,382,484 reported negative net premium for the quarter ending June 30, 2009.
For the quarter ending December 31, 2009, Amerisure reported negative net premiums of $3,237,419, and no assessment was due or paid. When the Department provided Amerisure with its Carrier and Self-Insurance Quarterly Premium Report to complete for the quarter ending December 31, 2009, it included a $379,235.27 "Debit/Credit" for the SDTF on the report form. This amount was the sum of $99,119.66 carried over from 2008; plus a $64,281.54 credit from the quarter ending March 31, 2009, calculated by application of the 2009 assessment rate to the $1,422,158 reported negative net premium for the quarter ending March 31, 2009; plus a $107,688.28 credit from the quarter ending June 30, 2009, calculated by application of the
2009 assessment rate to the $2,382,484 reported negative net premium for the quarter ending June 30, 2009; plus a $108,145.79 credit from the quarter ending September 30, 2009, calculated by application of the 2009 assessment rate to the $2,392,606 reported negative net premium for the quarter ending
September 30, 2009.
For the time periods in 2010, Amerisure paid quarterly assessments to the SDTF based upon reported net premiums, as detailed below.
For the quarter ending March 31, 2010, Amerisure reported net premiums of $828,566, and paid an assessment of
$37,451.18. The assessment was paid by application of
$37,451.18 of the $99,119.66 credit carried over from 2008.
When the Department provided Amerisure with its Carrier and Self-Insurance Quarterly Premium Report to complete for the quarter ending March 31, 2010, it included a $99,119.66 "Debit/Credit" carried over from 2008 for the SDTF on the report form. The credits of $64,281.54, $107,688.28, and $108,145.79 recognized in the reports for the quarters ending June 30, September 30, and December 31, 2009, were deleted.
However, the Department did not otherwise notify Amerisure that it was deleting the credits or why it was deleting the credits. It also did not provide a point of entry for Amerisure to challenge the deletion of the credits.
For the quarter ending June 30, 2010, Amerisure reported net premiums of $1,282,179. It paid an assessment of
$57,954.49 by application of $57,954.49 of the $99,119.66 credit carried over from 2008.
For the quarter ending September 30, 2010, Amerisure reported net premiums of $937,504. It paid an assessment of
$13,687.56 in part by application of the remainder of the
$99,119.66 credit carried over from 2008, along with a payment of $9,974.01.
For the quarter ending December 31, 2010, Amerisure reported net premiums of $657,457, and paid an assessment of
$9,597.41.
For the time periods in 2011, Amerisure paid quarterly assessments to the SDTF based upon reported net premiums, as
follows:
for the quarter ending March 31, 2011, Amerisure
reported $2,455,230 in net premiums, and paid an assessment of
$35,846.36;
for the quarter ending June 30, 2011, Amerisure reported $1,741,790 in net premiums, and paid an assessment of
$25,430.13;
for the quarter ending September 30, 2011, Amerisure reported $2,054,805 in net premiums, and paid an assessment of $30,000.15; and
for the quarter ending December 31, 2011, Amerisure reported $1,823,063 in net premiums, and paid an assessment of $26,616.72.
For the time periods in 2012, Amerisure paid quarterly assessments to the SDTF based upon reported net premiums, as
follows:
for the quarter ending March 31, 2012, Amerisure
reported $4,816,098 in net premiums, and paid an assessment of
$69,351.81; and
for the quarter ending June 30, 2012, Amerisure reported $2,072,685 in net premiums, and paid an assessment of
$29,846.66.
Reporting and Payments for the WCATF
For the time periods in 2008, Amerisure paid quarterly assessments to the WCATF based upon reported net premiums, or did not pay assessments due to reported negative net premiums, as follows:
for the quarter ending March 31, 2008, Amerisure reported $30,353,820 in net premiums, and paid an assessment of
$75,885;
for the quarter ending June 30, 2008, Amerisure
reported $6,696,958 in net premiums, and paid an assessment of
$16,742;
for the quarter ending September 30, 2008, Amerisure reported $874,225 in net premiums, and paid an assessment of $2,186; and
for the quarter ending December 31, 2008, Amerisure reported $1,271,387 in negative net premiums, and no assessment was due or paid.
Because of premium refunds made to policyholders in the quarters ending September 30, 2008, and December 31, 2008, resulting in an overpayment, Amerisure received a credit against future WCATF assessment payments in the amount of $3,178.47.
For the time periods in 2009, Amerisure did not owe or pay assessments to the WCATF due to reported negative net premiums resulting from reported payment of premium refunds to policyholders, as detailed below.
For the quarter ending March 31, 2009, Amerisure reported $1,321,194 in negative net premiums. When the Department provided Amerisure with its Carrier and Self- Insurance Quarterly Premium Report to complete for the quarter ending March 31, 2009, it included a $3,178.47 "Debit/Credit" carried over from 2008 for the WCATF on the report.
For the quarter ending June 30, 2009, Amerisure reported $2,990,876 of negative net premiums. When the Department provided Amerisure with its Carrier and Self- Insurance Quarterly Premium Report to complete for the quarter
ending June 30, 2009, it included a $6,481.46 "Debit/Credit" for the WCATF on the report, which is the sum of $3,178.47 carried over from 2008, plus a $3,302.99 credit from the quarter ending March 31, 2009, calculated by application of the 2009 assessment rate to the $1,321,194 reported negative net premium for the quarter ending March 31, 2009.
For the quarter ending September 30, 2009, Amerisure reported $2,176,521 in negative net premiums.2/ When the Department provided Amerisure with its Carrier and Self- Insurance Quarterly Premium Report to complete for the quarter ending September 30, 2009, it included a $13,958.65 "Debit/Credit" for the WCATF on the report. This amount was the sum of $3,178.47 carried over from 2008; plus a $3,302.99 credit from the quarter ending March 31, 2009, calculated by application of the 2009 assessment rate to the $1,321,194 reported negative net premium for the quarter ending March 31, 2009; plus a $7,477.19 credit from the quarter ending June 30, 2009, calculated by application of the 2009 assessment rate to the $2,990,876 reported negative net premium for the quarter ending June 30, 2009.
For the quarter ending December 31, 2009, Amerisure reported $3,549,615 in negative net premiums. When the Department provided Amerisure with its Carrier and Self- Insurance Quarterly Premium Report to complete for the quarter
ending December 31, 2009, it included a $19,399.95 "Debit/Credit" for the WCATF on the report. This amount was the sum of $3,178.47 carried over from 2008; plus a $3,302.99 credit from the quarter ending March 31, 2009, calculated by application of the 2009 assessment rate to the $1,321,194 reported negative net premium for the quarter ending March 31, 2009; plus a $7,477.19 credit from the quarter ending June 30, 2009, calculated by application of the 2009 assessment rate to the $2,990,876 reported negative net premium for the quarter ending June 30, 2009; plus a $5,441.30 credit from the quarter ending September 30, 2009, calculated by application of the 2009 assessment rate to the $2,176,521 reported negative net premium for the quarter ending September 30, 2009.
For the quarters in 2010, Amerisure paid quarterly assessments to the WCATF based upon reported net premiums, as detailed below.
For the quarter ending March 31, 2010, Amerisure reported $225,027 in net premiums, and paid an assessment of
$1,800.22 by applying $1,800.22 of the $3,178.47 credit carried over from 2008.
When the Department provided Amerisure with its Carrier and Self-Insurance Quarterly Premium Report for the quarter ending March 31, 2010, it included a $3,178.47 "Debit/Credit" carried over from 2008 for the WCATF on the
report. The credits of $3,302.99, $7,477.19, and $5,441.30 recognized in the reports for the quarters ending June 30, September 30, and December 31, 2009, were deleted.
The Department did not otherwise notify Amerisure that it was deleting the credits or why it was deleting the credits. The Department also did not provide an opportunity for Amerisure to challenge the deletion of the credits.
For the quarter ending June 30, 2010, Amerisure reported $2,011,533 in net premiums, and paid an assessment of
$16,092.26, which was paid in part by application of the remainder of the $3,178.47 credit carried over from 2008.
For the quarter ending September 30, 2010, Amerisure reported $1,094,027 in net premiums, and paid an assessment of
$23,466.23. This payment included $14,714.01 due for an assessment owed for the quarter ending June 30, 2010.
For the quarter ending December 31, 2010, Amerisure reported $656,608 in net premiums, and paid an assessment of
$5,252.86.
For the time periods in 2011, Amerisure paid quarterly assessments to the WCATF based upon reported net premiums, as follows:
for the quarter ending March 31, 2011, Amerisure reported $2,456,006 in net premiums, and paid an assessment of
$24,068.86;
for the quarter ending June 30, 2011, Amerisure reported $1,864,571 in net premiums, and paid an assessment of
$18,272.80;
for the quarter ending September 30, 2011, Amerisure reported $2,539,405 in net premiums, and paid an assessment of $24,866.17; and
for the quarter ending December 31, 2011, Amerisure reported $1,782,608 in net premiums, and paid an assessment of $17,469.56.
For the time periods in 2012, Amerisure paid quarterly assessments to the WCATF based upon reported net premiums, as follows:
for the quarter ending March 31, 2012, Amerisure reported $4,837,632 in net premiums, and paid an assessment of
$84,658.56; and
for the quarter ending June 30, 2012, Amerisure reported $2,348,810 in net premiums, and paid an assessment of
$41,104.18.
For its Carrier and Self-Insurance Fund Quarterly Premium Reports submitted to Respondent for the quarters ending March 31, 2008; June 30, 2008; September 30, 2008; and December 31, 2008, premium refunds made to policyholders included in the calculation of "net premiums" and "net premiums
written" reflect premium refunds made to policyholders by Amerisure in the calendar year 2008.
For its Carrier and Self-Insurance Fund Quarterly Premium Reports submitted to the Department for the quarters ending March 31, 2009; June 30, 2009; September 30, 2009; and December 31, 2009, premium refunds made to policyholders included in the calculation of "net premiums" and "net premiums written" reflect premium refunds made to policyholders by Amerisure in the calendar year 2009.
For its Carrier and Self-Insurance Fund Quarterly Premium Reports submitted to the Department for the quarters ending March 31, 2010; June 30, 2010; September 30, 2010; and December 31, 2010, premium refunds made to policyholders included in the calculation of "net premiums" and "net premiums written" reflect premium refunds made to policyholders by Amerisure in the calendar year 2010.
For its Carrier and Self-Insurance Fund Quarterly Premium Reports submitted to the Department for the quarters ending March 31, 2011; June 30, 2011; September 30, 2011; and December 31, 2011, premium refunds made to policyholders included in the calculation of "net premiums" and "net premiums written" reflect premium refunds made to policyholders by Amerisure in the calendar year 2011.
For its Carrier and Self-Insurance Fund Quarterly Premium Reports submitted to the Department for the quarters ending March 31, 2012, and June 30, 2012, premium refunds made to policyholders included in the calculation of "net premiums" and "net premiums written" reflect premium refunds made to policyholders by Amerisure in the calendar year 2012.
For its Carrier and Self-Insurance Fund Quarterly Premium Reports submitted to the Department for the quarters ending March 31, 2008; June 30, 2008; September 30, 2008; and December 31, 2008, premium refunds made to policyholders included in the calculation of "net premiums" and "net premiums written" reflect refunds made to policyholders by Amerisure for policies where assessments for premium for those policies were paid in calendar years prior to 2008.
Likewise, for its Carrier and Self-Insurance Fund Quarterly Premium Reports submitted to the Department for the quarters ending March 31, 2009; June 30, 2009; September 30, 2009; and December 31, 2009, premium refunds made to policyholders included in the calculation of "net premiums" and "net premiums written" reflect refunds made to policyholders by Amerisure for policies where assessments for premium for those policies were paid in calendar years prior to 2009.
Events Following the Deletion of 2009 Credits
Gene Smith, Assessments Coordinator for the Division of Workers‟ Compensation of the Department, has the responsibility to calculate the assessment rate for the Trust Funds. Evelyn Vlasak was Mr. Smith‟s predecessor as Assessments Coordinator. On September 13, 2010, Gene Smith sent an e-mail requesting that Amerisure provide for each quarter in 2008 and 2009 “[a]n original computer generated run showing the written premium for all Line of Business 160 (workers‟ compensation) in Florida by policy number with totals at the end.” Amerisure provided the requested information via Excel spreadsheet on October 1, 2010.
By letter dated December 9, 2010 (received on December 14, 2010), Mr. Smith stated, in pertinent part:
We received the excel spreadsheet of Amerisure Mutual Insurance Company‟s 2008- 2009 Policy Level Details. To complete our audit we also need the detailed documentation for dividends and large deductibles. Please review the list below, and provide the requested documentation by December 20, 2010.
The same Policy Level Detail spreadsheets for each quarter from
January 1, 1999, through the current quarter 2010. There is no need to provide 2008 and 2009 as you have already provided these.
Detail of annual dividends declared and paid from January 1, 1999, through the current quarter 2010.
Detail of quarterly large deductible “add backs” from January 1, 1999, through the current quarter 2010.
In response, Amerisure‟s counsel contacted Mr. Smith via e-mail on December 14, 2010, to ask why the Department needed this information. Mr. Smith responded by e-mail on January 2, 2011, stating that the Department would respond very soon.
On January 4, 2011, David Hershel, an attorney for the Department, contacted Amerisure‟s counsel and advised that the additional data requested in the December 9, 2010, letter was needed to review the credit amounts claimed by Amerisure.
Mr. Hershel stated that the Department would send a revised letter, paring down its information request.
On January 10, 2011, Mr. Smith sent a letter, which
stated:
We received the excel spreadsheet of Amerisure Mutual Insurance Company‟s 2008- 2009 Policy Level Details. To complete our audit we also need the detailed documentation for dividends and large deductibles, as well as the payments for the second and third quarters of 2010. Please review the list below.
Detail of annual dividends declared and paid from January 1, 2008, through the 4th quarter 2010.
Detail of quarterly large deductible “add backs” from January 1, 2008, through the 4th quarter 2010.
Payments for the second and third quarters of 2010 for the WCATF as required by Florida law.
Please provide the requested documentation by January 21st, 2011. Thank you in advance for your time and assistance. If you have any questions, please feel free to contact me.
On January 17, 2011, Amerisure agreed to send in the requested payments as a sign of good faith. In this transmittal, Amerisure reserved its rights to withhold against further assessments.
On January 27, 2011, Amerisure provided Gene Smith with Excel spreadsheets containing the information sought in items 1 and 2 of the January 10, 2011, letter.
On July 1, 2012, some 17 months later, Gene Smith responded by letter, directing that the appropriate procedure and remedy to request a refund of monies paid into the State Treasury is set forth in section 215.26, Florida Statutes, and providing the forms developed for this request.
On September 26, 2012, Amerisure submitted its applications for credit or refund pursuant to section 215.26. Amerisure requested a credit or refund of $25,095.70 paid into WCATF and $236,663.25 paid into SDTF from October 26, 2010, through July 26, 2012, which Amerisure alleges it should not have been required to pay in light of the amount of credit it
had accrued in 2008 and 2009. For example, the request for refund with respect to the SDTF states:
Through the reporting period of June 30, 2012, Amerisure has paid $236,663.25 in assessments to the SDTF that the company should not have been required to pay since it had credits that should have been applied against its assessment liability. As such, Amerisure requests a refund of the total amount of $236,663.25 paid into the SDTF between September 30, 2010, and June 30, 2012. Furthermore, Amerisure asserts its right to apply, and requests the SDTF to facilitate, the application of the remaining credit balance of $189,783.75 against future assessment liability.
The Department denied Amerisure‟s request for refund of the overpayment of assessments paid into the SDTF and WCATF from January 2011 onward in its NOI dated January 28, 2013.
The Department states in its NOI that Amerisure is “seeking to be paid in cash for supposed credits which it never accrued.” The denial letter also informed Amerisure of its right to an administrative hearing. Amerisure timely filed a Request for Administrative Hearing, which gave rise to this proceeding.
The statement that the credits never accrued is inconsistent with the Department‟s prior calculation of the credits on the reporting forms that the Department sent to Amerisure each quarter to complete. The forms for 2009 clearly
indicated accrued credits and Department staff acknowledged eliminating those credits.
The Department‟s Treatment of “Excess Credits”
Maya Brown is a government analyst with the Department‟s Division of Workers‟ Compensation. Her duties include creating manuals, performing audits on insurance carriers, and processing refunds for carriers.
According to Ms. Brown, she was instructed in 2009 by Ms. Vlasak that at the end of a year, if a company has negative premiums and does not owe any assessments or has not paid any assessments, that balance, which she described as “excess credits,” is then removed.
Based upon this understanding, Ms. Brown removed
$451,532 (which Amerisure refers to as the 2009 credits) from Amerisure‟s rolling calculations when the 2010 quarterly report forms were sent to Amerisure. She did not call Amerisure and notify them that she was deleting the credits or of the reason for doing so, and does not know of anyone else providing that information to Amerisure.
The quarterly report form for the first quarter of 2010, however, carried forward the 2008 credits that Amerisure had accumulated in 2008.
Ms. Brown first learned about the concept of “excess credits” in 2004 when she was trained to perform audits by Ms. Vlasak.
Since 2004, the only other Assessment Unit employee performing audits besides Ms. Brown was Ms. Vicki Griffin.
Ms. Griffin was also trained by Ms. Vlasak and utilized the same procedures with regard to “excess credits.”
Sometime before May 2009, Ms. Vlasak drafted proposed rules for the Assessment Unit that addressed “excess credits” based on negative “net premium”. An early version of the draft rules was prepared as early as March 29, 2006. The July 26, 2008, draft of proposed rule 69L-4.003, entitled “Completion of Quarterly Reports and Payment of Assessment by Carriers,” included the following in subsection (e)(5):
If as a result of premium offsets for dividends paid or credited and premium refunds, a Carrier will owe no assessments for any of the four calendar year quarters, the Carrier will be able to apply the unused premium offset to reduce assessments owed in any of the other three quarters of the same calendar year. However, after the Quarterly Report is filed for the period ending December 31, the Division will adjust the Carrier‟s records to remove any credits due to these premium offsets that were not used in that year. Therefore the (credit) debit pre-printed on the upcoming March 31st Quarterly Premium and Assessment Report will reflect only overpayment of assessment(s) owed for the previous calendar year. If this adjustment is necessary, the Carrier will be [sic] receive written notification.
Section (h) of the draft proposed rule addressed the Department‟s procedure for “overpayments”:
When a Carrier has computed its net assessable premiums and assessments according to this rule and later determines that either the WCATF or SDTF assessment has been overpaid, the company may elect to apply the overpayment against future assessments owed to the same fund or may submit an [sic] refund request under Section 215.26, Florida Statutes.
Written notification of an overpayment must be accompanied by detailed documentation of the computation of the alleged overpayment, a copy of the State Page of the Annual Report for the referenced year, and as needed, revised Quarterly Reports.
Written notification that a refund has been requested must meet the requirements of Section 215.26, Florida Statutes, including the submission of the approved form. The refund request must be received within three years of the date the alleged overpaid amount was initially deposited into the state treasury.
Written notification of the election to apply the overpayment against future assessment payments must be received within three years of the date the overpaid amount was initially deposited into the state treasury. Upon verification of an overpayment, future assessments may be offset until the verified overpayment is fully utilized, with no time limitations.
Each Carrier shall bear the responsibility to notify the Division in written format, that an overpayment may have occurred and to provide documentation that will allow the Department to verify the amount of the alleged overpayment.
If an overpayment has occurred, and revised Quarterly Reports are submitted, the Carrier does not submit an Application for Refund on an approved form, the Carrier will be allowed to offset future assessments to the extent of the overpayment. However, after the end of the three-year window, in the absence of a written refund application, the unused portion of the overpayment, if any, will no longer be available as an offset against future assessments, or for the issuance of a refund pursuant to Section 215.26(2).
The Division shall bear the responsibility to acknowledge receipt of this notification and to verify the amount of overpayment, if any, as well as respond to the request for credit or refund.
The Department acknowledges that these draft proposed rules were never promulgated or published in a notice of proposed rule development.
In 2011, Mr. Jenkins, the new Bureau Chief, revived attempts to promulgate rules for the Assessment Unit. That is, he circulated Ms. Vlasak‟s draft proposed rules to members of his staff for their consideration. However, other office priorities took precedence, and as of 2013, no further attempts at rule development have been undertaken by the Department in this regard. Ms. Brown understood that the language in
Ms. Vlasak‟s draft rules is consistent with what occurred in 2009 regarding Amerisure‟s reporting of negative premium.
Despite the failure of the Department to adopt the draft rules, or some other version of them, the policy reflected in these
proposed rules has been applied by the Department to eliminate Amerisure‟s 2009 credits.
Ms. Vlasak based her procedures on section 624.5094, Florida Statutes. However, the Department has since acknowledged that the statute does not speak to or define “excess credits.”
The elimination of “excess credits” at the end of the year is currently the policy of the Division of Workers‟ Compensation and is how its employees process quarterly reports and assessment payments.
This procedure is also reflected in a draft policy and procedures manual put together by Gene Smith at the direction of Greg Jenkins to capture the policies and procedures of the Assessment Unit. Under the caption “Prior Balance Carried Forward,” the manual provides:
. . . a company may report (in very rare circumstances) negative net premium on Line 1 of the Quarterly Premium Report for either the WCATF or SDTF which would otherwise result in a negative assessment amount. This will carry over the following quarter. Should the company continue to reflect a negative amount by calendar year
end, these negative amounts are removed per Section 624.5094, F.S.
Mr. Jenkins wrote and compiled these policies and procedures when he was the Assessment Unit coordinator, a position he held until about a year and a half ago.
If, on the other hand, a carrier only experiences negative net premium during some quarters but not all, these credits may be deemed an “official overpayment” and be allowed to carry forward. The process to determine if an overpayment is “official” has not been written into any policy or procedure, proposed rule, rule, or statute.
Determining whether credits for a given calendar year are “excess” or “official overpayments” is a process that occurs only after a company has filed its annual report with the NAIC. This never occurs before March of the year following the year in question. Pursuant to current Department policy, a company cannot request a refund for an overpayment until after it is deemed an “official overpayment.”
Mr. Smith testified that he agreed with the Department‟s position that section 624.5094 required credits accumulated to be eliminated if the company continued to reflect a negative amount of net premium by the end of the calendar year, despite the fact that the statute does not include or define the term “excess credits.”
Mr. Smith acknowledged that his interpretation of section 624.5094 stems from his belief that a carrier can experience negative net written premium for all four quarters of a year, which he believes is a violation of section 624.5094.
This, in turn, is based on Mr. Smith‟s definition of net written premium.
To determine the net premium amount for assessment purposes, Mr. Smith took the position that carriers can only deduct return premium for a policy that incepts in the same calendar year that the premium is returned.
Mr. Smith believed that additional premiums collected in a calendar year subsequent to the policy year for which the premium is collected would likewise not be included in the direct written premium or net premium number.
Mr. Smith could point to no statute, rule, or bulletin which defines net premium in this fashion.
Mr. Jenkins, the Bureau Chief, agreed with Mr. Smith‟s interpretation, deferring to his judgment.
Mr. Jenkins acknowledged that the determination made with regard to Amerisure‟s 2009 credits was based on Mr. Smith‟s definition of net premium, because Amerisure could not offset refunds or dividends from prior policy years in determining the amount of net premium.
Mr. Jenkins also agreed with Mr. Smith that section 624.5094 “tied the Department‟s hands” with regard to Amerisure.
The Department‟s determination that its “excess credits” policy prevents Amerisure from utilizing the 2009
credits against future assessments is further outlined in a June 9, 2011, email from Victoria Griffin to Gene Smith which states:
Gene,
You had asked me about my recall of the unit‟s procedure for dealing with negative premium and section 624.5094 FS in the past.
Since I have been here it has been common practice to accept all reporting at face value to include negative premiums till such time that we received the report from NAIC which reflected the written, earned and dividends the carriers reported, which may include negative amounts.
In regards to your question regarding 624.5094, we have not ever reviewed individual policy holder information for any insurance company.
My understanding of what happened with the Amerisure Mutual file is that they reported negative premiums for all four (4) quarters of 2009, (stating verbally that they took a loss for that year and wanted to recoup) and they believed that they were entitled to the credit amount reflected for 2009.
Regardless of the fact that no assessment amounts had been paid in to the funds for that time frame. When we completed the audit for 2009, those negative amounts were removed; leaving a credit balance reflected from actual overpayments of 2008 to both funds. These overpayments were used towards future assessments and as of 4th quarter 2010 were exhausted.
Let me know if you need any more information.
Thanks, Vicki
If Amerisure and other carriers were to use the Department‟s definition of “net premium” and not include additional premium written for policies that incepted in prior calendar years, the Department would most likely experience a substantial drop in the amount of assessments collected for either Trust Fund.
This represents the most probable scenario because it is more likely for an insurer to charge additional premium after a year-end or subsequent audit than to return premium. In fact, for the last 12 years that Andrea Koehler has worked at Amerisure, other than the period at issue in 2008-2009, the company consistently wrote more premium than it returned.
Most importantly, this interpretation of the definition of net premium is inconsistent with using the amounts listed in a company‟s NAIC reports as an audit method to insure proper reporting by the insurance companies. In order for the numbers to be comparable, the amount reported must be consistent with industry practice in reporting to the NAIC.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the parties and the subject matter of this case pursuant to sections 120.569 and 120.57(1), Florida Statutes (2013).
This proceeding, as all other proceedings conducted under section 120.57(1), is de novo in nature. See
§ 120.57(1)(k), Fla. Stat.
Generally, unless there is a statute which provides otherwise, the party asserting the affirmative of an issue has the burden of proof. See Dep‟t of Transp. v. J.W.C. Co., 396 So. 2d 778 (Fla. 1st DCA 1981); Balino v. Dep‟t of HRS, 348 So. 2d 349 (Fla. 1st DCA 1977). Amerisure petitioned the Department for affirmative relief and agency action, i.e., a determination that the Department improperly disallowed credits for 2009 and that Amerisure is entitled to a refund for
assessments paid as a result of that disallowance. Accordingly, Amerisure, as the carrier who is asserting entitlement to credit or refund, has the burden of proof.
With regard to Amerisure‟s challenge to agency statements, Amerisure has the burden to prove that these statements meet the definition of a rule and that the agency has not adopted them as rules. The Department then has the burden to establish the factors described in section 120.57(1)(e)2. S.W. Fla. Water Mgmt. Dist. v. Charlotte Cnty., 774 So. 2d 903, 908 (Fla. 2d DCA 2001).
The standard of proof is a preponderance of the evidence. See § 120.57(1)(j), Fla. Stat.
This case requires the resolution of three issues:
1) whether Amerisure is entitled to a credit or refund due to the elimination of credits by the Department that accrued in the calendar year 2009; 2) whether any refund or credit is barred by the statute of limitations in section 215.26; and 3) whether the elimination of these credits was accomplished by the Department‟s application of a policy meeting the definition of a rule that has not been adopted through the chapter 120 rulemaking process.
Elimination of the 2009 Credits
At the heart of this case is the Department‟s decision to eliminate the credits accrued during 2009, despite having shown those credits on each of Amerisure‟s quarterly reports from March 2009 through December 2009.
The Department contends in its Proposed Recommended Order that:
Although there was much speculative testimony about what it does or does not require or prohibit, section 624.5094, Florida Statutes, really has no material application to this case other than to specify the two types of deductions it allows carriers to take when reporting their net premium figures to the Department, to wit: returned premiums and paid dividends.
Amerisure contends that it is entitled to those deductions regardless of whether the refunds or dividends occur during the year the policy incepts, while Department personnel testified that those
deductibles should be taken only if the refunds or dividends occur during the policy inception year.
The reason that this debate is immaterial, however, is because there is no evidence that the Department has ever applied it to Amerisure, or, for that matter, any other carrier, as Amerisure incorrectly contends, to force the carriers to so limit those deductions. The testimony clearly establishes that the Department accepts the reported net premium figures, checking them only for arithmetical error. It has never required a carrier to adjust its figures to comport with its employee‟s inception-year-only understanding of the statute.
The Department‟s argument is rejected for two reasons: 1) the evidence clearly indicates that the Department‟s action in eliminating the 2009 credits was based, at least in part, on its staff‟s erroneous interpretation of section 624.5094; and 2) its assumption that forcing the carriers to submit new reports is the only application of the policy that could be relevant is incorrect.
Section 624.5094 reads in pertinent part:
Casualty insurance premiums. - Notwithstanding any statutory provision to the contrary, for the purposes of calculating the annual assessments for the Special Disability Trust Fund under
s. 440.49 and expenses of administration under s. 440.51, any amount paid or credited as dividends or premium refunds in the same calendar year by the insurer to its policyholders must be deducted from „net premium,‟ „net premiums written,‟ „direct premium,‟ and „net premium collected‟ for
the calendar year. Such offset for dividends or premium refunds paid or credited for the current year must be applied against the current year‟s net premium for that year‟s assessment regardless of the policy year for which the dividends or premium refunds are being reimbursed. (emphasis added).
This section provides instruction for the calculation of net premium, net premiums written, and net premium collected. It does not address credits in any way, and certainly does not mandate that credits be eliminated should a carrier have four quarters in a year where negative premiums were reported. Finally, it does not mandate, contrary to Department staff‟s interpretation, that only premiums or dividends paid in the same calendar year that a policy incepts can be deducted.
To the contrary, section 624.5094 requires that the offset for dividends or refunds must be applied in the year that they are paid, “regardless of the policy year for which the dividends or premium refunds are being reimbursed.” In other words, if refunds are issued in 2009 for a policy which incepted in 2006, those refunds must be applied against the 2009 net premium, regardless of the fact that the policy incepted in 2006.
The Department erred in relying on section 624.5097 to eliminate Amerisure‟s 2009 credits. There is nothing in
section 624.5094 that mandates that credits be eliminated under any circumstances.
The Department insists that to allow the 2009 credits when Amerisure did not pay an assessment in 2009 would allow Amerisure to “double-dip.” However, the credit is created by Amerisure paying more out in refunds and dividends than it wrote or collected in premium. The amount refunded or paid in dividends was part of the basis for a prior assessment, in that it is returned money from a higher estimated premium. The Department implicitly acknowledged that reality when it calculated a credit for each quarter in 2009 and included that credit on the forms it forwarded to Amerisure for its quarterly reports.
The Department‟s assertion that there is no evidence to indicate that it ever applied its interpretation against Amerisure is also contrary to the evidence. Its position appears to be premised on the belief that the only application of the policy would be to require a carrier to submit a new quarterly report. However, the testimony of Maya Brown and the manual prepared by Gene Smith, along with the e-mail by
Vicki Griffin, make it abundantly clear that when a carrier had any credits and reported negative premium for a calendar year, the practice and policy of the Department was to remove any credits that would have accrued during the year. The evidence
was also clear that the basis of this policy and practice was, at least in part, the staff‟s interpretation of
section 624.5094.
When the Department eliminated the 2009 credits, it provided no explanation to Amerisure and afforded it no point of entry to challenge the elimination of credits. As stated by the First District, “an agency must grant affected parties a clear point of entry, within a specified time after some recognizable event in investigatory or other free-form proceedings, to formal or informal proceedings under section 120.57.” Capeletti Bros.
v. Dep‟t of Transp., 362 So 2d 346, 348 (Fla. 1st DCA 1978).
In General Development Utilities, Inc. v. Department
of Environmental Regulation, 417 So. 2d 1068, 1070 (Fla. 1st DCA 1982), the Department of Environmental Regulation notified the appellant by letter that it was imposing a zero allocation for oxygen-demanding materials at one of its sewage plants at the expiration of its current permit, and advised that it should review its options for meeting the new limits prior to the expiration of its permits. The Department did not provide a point of entry and refused to grant a section 120.57 hearing, stating that its letter was informational only, and had no legal or practical effect apart from prospective licensing. In rejecting that position, the First District stated:
The Department has taken a position, reduced it to writing, and disseminated it to the affected party who must now submit a proposed schedule for compliance, or hazard nonrenewal of its permits. Clearly this is a final agency decision affecting the substantial interests of GDU. The fact that the petitioners can submit additional or contrary information on the disputed issues of material fact in hopes that DER will reconsider its position is not a substitute for a 120.57 hearing upon request. . . .
The essential ingredients of a 120.57 hearing are present, i.e., final agency action affecting the petitioner‟s substantial interests coupled with a disputed issue of material fact. If section 120.57 is to be “the Act‟s wider point of entry for those with varied or general complaints concerning agency action: those against whom the agency has instituted adjudicatory proceedings, those whose impending injury is not wholly and precisely traceable to a rule invalidly exercising delegated legislative authority, those whose substantial interests are threatened by several agency causes or simply by agency action which is proceeding arbitrarily, imperiously, or obliviously,” then GDU has a case. State ex rel. Department of General Services v. Willis, 344 So. 2d 580, 591 (Fla. 1st DCA 1977).
The same can be said here. The Department made the decision to eliminate Amerisure‟s credits accrued during 2009 and reduced it to writing by eliminating the credit attributable to that year on Amerisure‟s quarterly reporting form. It provided the form to Amerisure, without further explanation or notice of any right to hearing. Rather than notify Amerisure of its right to challenge the elimination of the credit, it asked
for additional documents and for payment before, after nearly two years, it notified Amerisure that the sole remedy to recoup payment would be to file a request for refund pursuant to section 215.26, and upon Amerisure‟s seeking a refund, indicated it was untimely.
Had the Department notified Amerisure of its right to a hearing on the decision to eliminate the credits when it took place, there would be no reason to pay additional funds into the treasury and hence, no reason for Amerisure to have to seek a refund.
[S]imply providing a point of entry is not enough if the point of entry is so remote from the agency action as to be ineffectual as a vehicle for affording a party whose substantial interests are or will be affected by agency action a prompt opportunity to challenge disputed issues of material fact in a 120.57 hearing.
Id. at 1070. See also Gardner v. School Bd. of Glades Cnty., 73 So. 3d 314, 316 (Fla. 2d DCA 2011)(notice of agency action that fails to inform a party of its right to seek administrative review and the relevant time limits is inadequate to trigger commencement of the administrative process); Bryant v. Dep‟t of
HRS, 680 So. 2d 1144 (Fla. 3d DCA 1996)(where agency failed to provide point of entry to challenge report of claim determination of overpayment to Appellant, it failed to establish a waiver of the right to hearing).
Application of Section 215.26, Florida Statutes
Having been placed in the position of paying assessments it did not owe, Amerisure is seeking the credit or refund of $25,095.70 paid into WCATF and $236,663.25 paid into SDTF from October 26, 2010, through July 26, 2012.
Section 215.26 provides:
Repayment of funds paid into State Treasury through error. –
The Chief Financial Officer may refund to the person who paid same, or his or her heirs, personal representatives, or assigns, any moneys paid into the State Treasury which constitute:
An overpayment of any tax, license, or account due;
A payment where no tax, license, or account is due; and
Any payment made into the State Treasury in error;
and if any such payment has been credited to an appropriation, such appropriation shall at the time of making any such refund, be charged therewith. There are appropriated from the proper respective funds from time to time such sums as may be necessary for such refunds.
Application for refunds as provided by this section must be filed with the Chief Financial Officer, except as otherwise provided in this subsection, within 3 years after the right to the refund has accrued or else the right is barred. . . . The Chief Financial Officer may delegate the authority to accept an application for refund to any state agency, or the judicial branch, vested by law with the responsibility for the collection of any tax, license, or account due. The application for refund must be on
a form approved by the Chief Financial Officer and must be supplemented with additional proof the Chief Financial Officer deems necessary to establish the claim; provided, the claim is not otherwise barred under the laws of this state. Upon receipt of an application for refund, the judicial branch or the state agency to which the funds were paid shall make a determination of the amount due. If an application for refund is denied, in whole or in part, the judicial branch or such state agency shall notify the applicant stating the reasons therefor. Upon approval of an application for refund, the judicial branch or such state agency shall furnish the Chief Financial Officer with a properly executed voucher authorizing payment.
No refund of moneys referred to in this section shall be made of an amount which is less than $1, except upon application.
This section is the exclusive procedure and remedy for refund claims between individual funds and accounts in the State Treasury.
* * *
(6) A taxpayer may contest a denial of refund of tax, interest, or penalty paid under a section or chapter specified in
s. 72.011(1) pursuant to the provisions of s. 72.011.
The NOI states in part:
To allow Amerisure to obtain the cash refunds it requests would be inconsistent with the provisions of Sections 440.49(9)(b) and 440.51(1), Florida Statutes. SDTF and WCATF assessments for years after 2009 were calculated by the Department taking into consideration both Amerisure‟s not being owed refund or credit based on overpayment to either fund in year 2009, and its lack of
contribution to either fund in year 2009. Four years after 2009, granting the relief sought by Amerisure would render inaccurate the fiscal calculations upon which SDTF and WCATF assessments have been based by the Department, resulting in the incorrect proration of amounts assessed against all entities paying assessments to the WCATF and SDTF. Further, granting the relief would result in inequities to other entities having paid assessments into those funds, and possible avoidance of tax due to deductions taken under Section 440.51(5), Florida Statutes.
* * *
Amerisure had no assessment base in calendar year 2009, paid no assessments into the WCATF or SDTF for calendar year 2009, and as a result is not entitled to any moneys from the State Treasury. Section 215.26(2), Florida Statutes, requires that refund requests must be filed with the Chief Financial Officer within 3 years after the right to the refund has accrued or else the right is barred. That time period is generally interpreted as meaning 3 years from the date of payment of the tax. State ex rel. Victor Chemical Works v. Gay, 74 So. 2d 560 (Fla. 1954). Because the refunds sought by Amerisure do not represent monies it actually paid into the WCATF or SDTF, there can be no basis to determine whether the refund requests are timely. Amerisure is seeking to be paid in cash for supposed credits which it never accrued.
The Department‟s statement that a refund would be inequitable for other entities is merely a recognition that no decision regarding the Trust Funds occurs in a vacuum. This rationale, taken at face value, would support the notion that the Department may never acknowledge an error because to do so
would require adjustment in its calculations. In other words, it is better for Amerisure to bear the brunt of the Department‟s error, rather than to make a correction that may affect others. Cf. Dep‟t of Rev. v. Kemper Investors Life Ins. Co., 660 So. 2d 1124, 1127 n.2 (Fla. 2d DCA 1995)(“A logical extension of DOR‟s reasoning is that once insurance premium taxes are paid based upon an undercalculation of corporate income and emergency excise taxes, the premium tax remains forever paid, and is not subject to refund”). This response does not address whether the refund is appropriate, but only the Department‟s reluctance to admit error.
As discussed previously, Amerisure refunded premiums in 2009, upon which it had previously paid assessments. The Department initially recognized these payments when originally calculating credits for the quarters in which Amerisure reported negative premium. To eliminate the credits and to require payment in lieu of recognizing the credits was error. Entitlement to a refund may be based upon an error of the applicant or of the agency. Sarnoff v. Fla. Dep‟t of High. Saf.
& Motor Veh., 825 So. 2d 351, 356 (Fla. 2002).
The Department‟s conclusion that no determination as to timeliness could be made is also in error. The Department is correct that in order to obtain a refund, it must be determined when the right to a refund “accrued.” The right to a refund
under section 215.26 accrues at the time the taxes were paid. Fla. Dep‟t of Rev. v. Leon, 824 So. 2d 197, 201 (Fla 2d DCA 2002). The record is clear that Amerisure paid $25,095.70 into WCATF and $236,663.25 into SDTF from October 26, 2010, through July 26, 2012, after the Department eliminated its credits accrued in 2009. These amounts were, contrary to the conclusion in the NOI, monies paid well within the three-year period prior to the September 16, 2012, request for refund. Amerisure‟s request for refund is not for the original sums that were paid into the State Treasury prior to 2009, but for the amounts paid in 2011 and 2012 for the 2010 assessments, which were paid because of the Department‟s erroneous elimination of the credits in early 2010.
Not only was Amerisure‟s request timely, but any delay in its submission is due in large part to the Department‟s failure to provide an earlier point of entry, which would have obviated these proceedings. Further, the Department‟s actions can be interpreted as delaying resolution of the issue so that a request for refund would indeed be untimely.
It was only because of the Department‟s failure to provide a point of entry that Amerisure was unable to challenge the elimination of credits and resolve the issue when it occurred. Instead, the Department initiated an “audit” which
has never been completed and required payment of the funds that are the subject of the request for refund.
In Gene Smith‟s January 10, 2012, letter requesting additional data for the review of the credit amounts claimed by Amerisure, Mr. Smith stated that the Department would not complete the audit unless payment was made for the second and third quarters of 2010 -- quarters for which no payments would be due but for the elimination of credits for 2009.
Amerisure had yet to receive the results of the audit when it was finally notified that in order to have this payment returned, a request for refund pursuant to section 215.26 was required. Indeed, the audit was never completed. It is notable that the Department usually limits its review of quarterly reports to comparison with NAIC reports. Here, the Department initiated an audit, requiring significant documentation, instead of directly responding to Amerisure‟s inquiries regarding the credits. Not only did the Department not complete the audit, but it used the audit as a way to coerce Amerisure into submitting the payment of the amounts represented by the credit. Under these circumstances Amerisure has demonstrated its entitlement to a refund.
Whether the Department‟s Policies Constitute an Unadopted
Rule
In order to challenge the agency statement, Amerisure
must prove that the agency statement of policy will result in a real or immediate injury in fact and that the policy is being applied by the agency in taking final agency action against Amerisure. Cf. Jacoby v. Fla. Bd. of Med., 917 So. 2d 358 (Fla. 1st DCA 2005). Amerisure has standing to challenge the applicability of the agency statement pursuant to section 120.57(1)(e), as it is asserting that the Department has relied on the statement in its determination to eliminate the 2009 credits and to require payment of additional assessment in lieu of applying the credits.
The Legislature has determined that agencies must adopt those policies meeting the definition of a rule as rules. As section 120.54(1) provides,
(1)(a) Rulemaking is not a matter of agency discretion. Each agency statement defined as a rule by s. 120.52 shall be adopted by the rulemaking procedure provided by this section as soon as feasible and practicable.
Rulemaking shall be presumed feasible unless the agency proves that:
The agency has not had sufficient time to acquire the knowledge and experience reasonably necessary to address a statement by rulemaking; or
Related matters are not sufficiently resolved to enable the agency to address a statement by rulemaking.
Rulemaking shall be presumed practicable to the extent necessary to provide fair notice to affected persons of relevant agency procedures and applicable principles, criteria, or standards for agency decisions unless the agency proves that:
Detail or precision in the establishment of principles, criteria, or standards for agency decisions is not reasonable under the circumstances; or
The particular questions addressed are of such a narrow scope that more specific resolution of the matter is impractical outside of an adjudication to determine the substantial interests of a party based on individual circumstances.
(b) Whenever an act of the Legislature is enacted which requires implementation of the act by rules of any agency within the executive branch of state government, such rules shall be drafted and formally proposed as provided in this section within 180 days after the effective date of the act, unless the act provides otherwise. . . .
Section 120.57(1)(e), Florida Statutes, reads as follows:
An agency or an administrative law judge may not base agency action that determines the substantial interests of a party on an unadopted rule. The administrative law judge shall determine whether an agency statement constitutes an unadopted rule. This subparagraph does not preclude application of adopted rules and applicable provisions of law to the facts.
Notwithstanding subparagraph 1., if an agency demonstrates that the statute being
implemented directs it to adopt rules, that the agency has not had time to adopt those rules because the requirement was so recently enacted, and that the agency has initiated rulemaking and is proceeding expeditiously and in good faith to adopt the required rules, then the agency‟s action may be based upon those unadopted rules, subject to de novo review by the administrative law judge. The agency action shall not be presumed valid or invalid. The agency must demonstrate that the unadopted rule:
Is within the powers, functions, and duties delegated by the Legislature or, if the agency is operating pursuant to authority derived from the State Constitution, is within that authority;
Does not enlarge, modify, or contravene the specific provisions of law implemented;
Is not vague, establishes adequate standards for agency decisions, or does not vest unbridled discretion in the agency;
Is not arbitrary or capricious. A rule is arbitrary if it is not supported by logic or the necessary facts; a rule is capricious if it is adopted without thought or reason or is irrational;
Is not being applied to the substantially affected party without due notice; and
Does not impose excessive regulatory costs on the regulated person, county, or city.
The recommended and final orders in any proceeding shall be governed by the provisions of paragraphs (k) and (l), except that the administrative law judge‟s determination regarding an unadopted rule under subparagraph 1. or subparagraph 2. shall not be rejected by the agency unless
the agency first determines from a review of the complete record, and states with particularity in the order, that such determination is clearly erroneous or does not comply with essential requirements of law. In any proceeding for review under
s. 120.68, if the court finds that the agency‟s rejection of the determination regarding the unadopted rule does not comport with the provisions of this subparagraph, the agency action shall be set aside and the court shall award to the prevailing party the reasonable costs and a reasonable attorney‟s fee for the initial proceeding and the proceeding for review.
Section 120.52(16) defines a rule as:
[E]ach agency statement of general applicability that implements, interprets, or prescribes law or policy or describes the procedure or practice requirements of any agency and includes any form which imposes any requirement or solicits any information not specifically required by statute or by an existing rule.
An "unadopted rule" is defined as an agency statement that meets the definition of the term rule, but that has not been adopted pursuant to the requirements of section 120.54. § 120.52(20), Fla. Stat.
Amerisure‟s Amended Petition identifies four statements that it contends are agency policies meeting the definition of a rule:
In any given year, the definition of net premium written or net premiums collected does not include premiums returned or collected for policies that incepted in prior calendar years. This definition is
key to computing the SDTF and WCATF assessments due each year.
Any credits accrued during four (4) negative quarters in a calendar year are excess credits that are eliminated and cannot be carried over to the next calendar year.
Credit balances can be carried forward for a three (3) year period from one calendar year to the next as long as the insurer had at least one quarter per calendar year at positive net premium. After three (3) years the credits are eliminated unless the insurer requests a refund.
Based on the Department‟s definition of net written premium or net premiums collected, it is a violation of
section 624.5094, Florida Statutes, for an insurer to report four consecutive quarters of negative premiums.
With respect to the first statement, the evidence did not demonstrate that this statement meets the definition of a rule. A statement is considered to be "generally applicable" if it is intended by its own effect to create rights, to require compliance, or to otherwise have the direct and consistent effect of law. State Bd. of Admin. v. Huberty, 46 So. 3d 1144, 1147 (Fla. 1st DCA 2010) (use of telephone hotline to allow employees to make a switch in their pension plan did not meet definition of a rule; simply provided a means of exercising an election consistent with the statute); Coventry First, LLC v.
Off. of Ins. Reg., 38 So. 3d 200, 204-205 (Fla. 1st DCA 2010)
(statements not unadopted rules because discretionary in their application); Ag. for Health Care Admin v. Custom Mobility, Inc., 995 So. 2d 984, 986 (Fla. 1st DCA 2008)(sampling formula just one of several permitted under statute, and therefore does not have the direct and consistent effect of law); and Dep‟t of
Rev. v. Vanjaria Enter., Inc., 675 So. 2d 252, 255 (Fla. 5th DCA 1996)(tax assessment procedures in DOR training manuals not simply a direct application of statute; procedures afford no discretion to auditors and creates DOR‟s entitlement to taxes while adversely affecting property owners).
While Gene Smith and Greg Jenkins were clearly of the view identified in the statement, it does not by its own effect create rights, require compliance, or otherwise have the direct and consistent effect of law. The evidence indicates that the Department‟s “application” of the definition of net premium written and net premium collected is mixed; while it influenced the actions taken with respect to Amerisure, the Department also generally accepted the quarterly reports submitted by carriers and compared those reports to the annual reports submitted to NAIC, and that the reports filed with the NAIC are consistent with the industry‟s understanding of the terms. Under these circumstances, while there may be confusion as to the proper definition of the terms which could be clarified by rulemaking, no generally applicable policy has been demonstrated.
The same cannot be said for the statements identified in paragraph 139.(b) and (c). The undisputed testimony at hearing is that the Department has taken the position that any credits accrued during four negative consecutive quarters in a calendar year are excess credits that are eliminated and cannot be carried over to the next calendar year, and that credit balances are eliminated after three years unless the insurer requests a refund. With respect to the statement in paragraph (b), the Department has held this position at least since 2004. The evidence indicates that agency personnel had no discretion to vary from this view. Further, the Department‟s position is not a simple application of the law to the information provided, because no statute referenced by the Department makes any mention of excess credits and how they are to be treated.
The Department may avoid the consequences of section 120.57(1)(e) if it can demonstrate that the conditions described in section 120.57(1)(e)2. apply: that it has been directed to implement rules; that it has not been able to do so because of the recent passage of legislation; and that the
agency has initiated rulemaking and is proceeding in good faith. Here, there is no recent legislation. The Department clearly had sufficient time to acquire the knowledge and experience reasonably necessary to address the statement by rulemaking. It has been applying the policies consistently since at least 2004.
The policies have been drafted in rulemaking form at least as early as 2006, but never noticed for rulemaking.
With respect to the fourth agency statement, it represents the Department‟s interpretation of section 624.5094, as opposed to a rule. Cf. Envtl. Trust v. Dep‟t of Envtl.
Prot., 714 So. 2d 493, 498 (Fla. 1st DCA 1998). Further, while Gene Smith clearly believed that these definitions were appropriate, and acted accordingly, the evidence was unclear as to ramifications of this belief, other than the removal of the credits discussed above. This statement, standing alone, does not create rights, require compliance, or otherwise have the direct and consistent of law. State Bd. of Admin. v. Huberty, supra.
In sum, Amerisure demonstrated that it was entitled to the credits for 2009, and the Department erred both in eliminating the credits and not providing an appropriate point of entry to challenge the elimination of the credits. Amerisure‟s application for refund was filed within three years of the payments for which it seeks a refund, and the Department erred in denying its request. The policies of eliminating credits after four quarters of reporting negative premium in the same year and of eliminating any credits after a four-year period are policies meeting the definition of a rule that have not been adopted through the rulemaking process.
Both parties have requested attorney‟s fees and costs in this proceeding. The Department‟s Motion for Attorney‟s Fees pursuant to section 57.105, Florida Statutes, is denied, as the Department is not a prevailing party in this proceeding. In its Amended Petition, Amerisure sought attorney‟s fees and costs pursuant to section 120.595(4), Florida Statutes, and has filed a separate motion for fees pursuant to section 57.105.
Section 120.595(4)(a) provides that if an appellate court or an administrative law judge determines that all or part of any agency statement violates section 120.54(1)(a), a judgment or order shall be entered against the agency for reasonable costs and reasonable attorney‟s fees, unless the agency demonstrates that the statement is required by the Federal Government to implement or retain a delegated or approved program or to meet a condition to receipt of federal funds. The Department has made no assertion regarding federal programs.
Because statements (b) and (c) are unadopted rules, Amerisure is entitled to recover fees and costs in this action pursuant to section 120.595(4)(a). Jurisdiction is retained to determine the amount of fees pursuant to section 120.595(4), upon entry of a final order.
Based on the foregoing Findings of Fact and Conclusions of Law, it is
RECOMMENDED that the Department enter a final order incorporating the findings of this Recommended Order and reinstating Amerisure‟s 2009 credits as credits toward future assessments due to the Trust Funds.
DONE AND ENTERED this 15th day of November, 2013, in Tallahassee, Leon County, Florida.
S
BARBARA J. STAROS
Administrative Law Judge
Division of Administrative Hearings The DeSoto Building
1230 Apalachee Parkway
Tallahassee, Florida 32399-3060
(850) 488-9675
Fax Filing (850) 921-6847 www.doah.state.fl.us
Filed with the Clerk of the Division of Administrative Hearings this 15th day of November, 2013.
ENDNOTES
1/ A portion of Mr. Neff‟s testimony was not admitted and was proffered.
2/ The Joint Pre-Hearing Statement states that Amerisure reported $2,176,521 in net premiums, as opposed to negative net premiums. However, the quarterly report for September 2009 included at Bates number AME2090 in Petitioner‟s Exhibit 1 indicates that Amerisure reported a negative net premium, which is consistent with the remainder of paragraph 12.c. in the Joint
Pre-Hearing Stipulation. It is concluded that the omission of the word “negative” in this paragraph was a clerical error.
COPIES FURNISHED:
Maria Elena Abate, Esquire Colodny, Fass, Talenfeld,
Karlinsky, Abate and Webb, P.A.
100 Southeast 3rd Avenue, 23rd Floor Fort Lauderdale, Florida 33394
David Davis Hershel, Esquire Department of Financial Services
200 East Gaines Street Tallahassee, Florida 32399
Michael Davidson, Esquire Department of Financial Services Larson Building
200 East Gaines Street Tallahassee, Florida 32399
Julie Jones, CP, FRP, Agency Clerk Division of Legal Services Department of Financial Services
200 East Gaines Street Tallahassee, Florida 32399-0390
NOTICE OF RIGHT TO SUBMIT EXCEPTIONS
All parties have the right to submit written exceptions within
15 days from the date of this Recommended Order. Any exceptions to this Recommended Order should be filed with the agency that will issue the Final Order in this case.
| Issue Date | Document | Summary |
|---|---|---|
| Feb. 13, 2014 | Agency Final Order | |
| Nov. 15, 2013 | Recommended Order | Petitioner entitled to reinstatement of credits toward future assessments due to workers' compensation trust funds. Two agency statements meet the definition of rule pursuant to section 120.52(16), Florida Statutes. |
DEPARTMENT OF INSURANCE AND TREASURER vs. KENNETH EVERETT WHITE, 13-000865 (2013)
DEPARTMENT OF INSURANCE AND TREASURER vs. JOHN WAYNE PENNINGTON, 13-000865 (2013)
DEPARTMENT OF INSURANCE AND TREASURER vs. TERRY VERNON SMITH, 13-000865 (2013)
DEPARTMENT OF INSURANCE AND TREASURER vs ROBERT PHILLIP WOLF, 13-000865 (2013)
