Heavican, C.J.
The district court, acting as an intermediate court of appeals under the Administrative Procedure Act, affirmed the decision of the director of the Department of
In 2007, Gridiron purchased the assets of the Omaha Beef indoor football team, owned by Omaha Beef, LLC. The purchase agreement indicated that Gridiron was purchasing
Gridiron also agreed to assume a limited number of liabilities as set forth in an appendix attached to the agreement.
Gridiron is a Nebraska limited liability company formed for the primary purpose of purchasing and operating the Omaha Beef indoor football team. Following the purchase, Omaha Beef, LLC, remained an active corporation according to the Nebraska Secretary of State's office, but there is no evidence in the record as to whether Omaha Beef, LLC, continued to engage in business activity following the sale of the Omaha Beef football team.
During the first 3 to 4 months of ownership, Gridiron made several improvements to the operation of the team. First, it changed the location where practices were held, moving to a better-lit, safer facility. Unlike Omaha Beef, LLC, Gridiron required at least one, if not two, trainers to be at each practice. Gridiron also hired a full-time team chiropractor, mandated the use of knee braces at practice, and instituted weight training and nutrition programs for players. Gridiron hired a new head coach and increased the size of the coaching staff from two to five. Only a few of the players from the previous years' roster made the team for the 2008 season. Note that in addition to operating the Omaha Beef football team, Gridiron was involved in other business activities, notably the marketing of boxing matches.
In February 2008, Gridiron applied for workers' compensation insurance under the Nebraska Workers' Compensation Plan (NWCP). The NWCP provides a mechanism for purchasing workers' compensation insurance for employers who cannot obtain such insurance on the open market. The State of Nebraska has contracted with Travelers Indemnity Company (Travelers) to act as carrier for the NWCP, and in such capacity, Travelers is required to provide insurance to every eligible employer who complies with the requirements of the plan and pays the premium. That premium is determined by the National Council on Compensation Insurance, Inc. (NCCI), in accordance with its "Manuals of Rules, Classifications, Rates and Rating Plans." The NCCI uses the "Experience Rating Plan Manual" to assign each applicant with an XMod to be used in calculating the premium. The XMod is based upon an applicant's workers' compensation claims experience—the higher the XMod, the higher the premium. A new business is assigned an XMod of
Gridiron argued that it was entitled to an XMod of "1.00," because it was a new entity with no claims experience. But the NCCI disagreed and determined that under rule 3-C-1(a), Gridiron was "combinable" with Omaha Beef, LLC, and that thus, the various XMod's assigned to Omaha Beef, LLC, for the relevant time periods must be transferred to Gridiron. An NCCI panel upheld the NCCI's decision, though it instead reasoned that Gridiron was a successor entity to Omaha Beef, LLC, under rule 3-C-1(a)(4).
Gridiron appealed to the Nebraska Department of Insurance. The department affirmed, concluding that (1) Gridiron had the burden of proof; (2) Gridiron was a successor entity to Omaha Beef, LLC; (3) the NCCI panel's decision finding "combinability in accordance with Rule 3-C" was correct; (4) the evidence failed to show that Gridiron and Omaha Beef, LLC, were separate and independent companies; and (5) the NCCI panel's determination of the XMod was correct. The department also found that the issue of unpaid premiums, raised by Travelers for the first time before the department, should be determined in a separate civil action.
Gridiron appealed to the district court, which affirmed. The district court concluded that Gridiron had the burden of proof, but had failed to meet that burden to show that it was not a successor to Omaha Beef, LLC, under rule 3-C-1(a)(2) and (4). The district court reasoned that Gridiron was a successor to Omaha Beef, LLC, and that change in ownership resulted in the transfer of the workers' compensation rating for Omaha Beef, LLC, to Gridiron. Gridiron appeals.
Note that the district court found error in the department's determination that Gridiron had failed to show it was a separate and independent company from Omaha Beef, LLC, and further found that "this is not about combinability" and that Omaha Beef, LLC, and Gridiron are not combinable entities. Neither of these findings has been appealed.
On appeal, Gridiron assigns, restated and renumbered, that the district court erred in finding that (1) Gridiron had the burden of proof to show there was no "`change in ownership'" and (2) a "`change in ownership'" existed such that the XMod of Omaha Beef, LLC, should be transferred to Gridiron.
A judgment or final order rendered by a district court in a judicial review pursuant to the Administrative Procedure Act, Neb.Rev.Stat. §§ 84-901 to 84-920 (Reissue 2008, Cum.Supp.2012 & Supp. 2013), may be reversed, vacated, or modified by an appellate court for errors appearing on the record.
Gridiron first assigns that the district court erred in finding that it had the burden of proof to show that the NCCI's XMod determination was incorrect and that there was no "change in ownership" under rule 3-C-1(a).
When challenging the decision of an administrative agency, the presumption under Nebraska law is that the agency's decision was correct, with the burden of proof upon the party challenging the agency's actions.
Gridiron's first assignment of error is without merit.
Gridiron next assigns that the district court erred in affirming the determination below that there was a "change in ownership" under rule 3-C-1(a) supporting the transfer of the XMod for Omaha Beef, LLC, to Gridiron. Gridiron instead contends that it is entitled to an XMod of "1.00," the XMod assigned to new entities without any claims experience. Travelers argues that the decision of NCCI transferring the XMod of Omaha Beef, LLC, to Gridiron was correct because the sale of the Omaha Beef football team from Omaha Beef, LLC, to Gridiron was a change in ownership as contemplated by rule 3-C-1(a).
The insurance policy between Travelers and Gridiron provides that "[a]ll premium[s] for this policy will be determined by our manuals of rules, rates, rating plans and classifications." And the agreement between Travelers and the State of Nebraska provides that the "rating systems and policy forms used by the Contract Carrier shall be those filed by the [NCCI] for use by all member insurers in Nebraska."
Rule 3-C-1(a) of the NCCI's experience rating plan manual states:
At issue on appeal are the definitions of change in ownership as set forth in rule 3-C-1(a)(2) and (4).
On appeal, Gridiron argues that it is not a successor to Omaha Beef, LLC, under the principles of corporate law and that for this reason, there was no change in ownership under rule 3-C-1(a)(4). For its part, Travelers concedes that Gridiron is not a successor under the principles of corporate law, but suggests that Gridiron is framing the issue incorrectly and that the focus should not be on the corporate entity, but instead should be on "the risk to be insured."
Familiar principles guide this court in its interpretation of the language of the manual, namely that where the terms of a contract are clear, they are to be accorded their plain and ordinary meaning.
Under the terms of the NWCP, the contract carrier, Travelers, must utilize the ratings plans of the NCCI. And the policy between Travelers and Gridiron provides that the NCCI manuals will be used by Travelers. This court has held that the NCCI manuals are appropriately incorporated by reference into policies issued under the NWCP.
To properly interpret rule 3-C-1(a), we must consider all of the relevant provisions of the NCCI's rating manual. Rule 3-E-1 provides that the "experience for any entity undergoing a change in ownership will be retained or transferred to the experience ratings of the acquiring, surviving or new entity unless specifically excluded by this Plan." Change in ownership is defined in rule 3-C as reprinted above. Rule 3-F-1 is entitled "Evasion of Experience Rating Modification" and provides:
Rule 3-D deals with the combination of entities.
The general rule, then, provides that an experience rating is retained when an entity undergoes a change in ownership. As the language of rule 3-E-1 demonstrates, this rule is written broadly in that the rating transfers to the "acquiring, surviving or new entity." A change in ownership is also defined broadly in rule 3-C-1 to
And the language of rule 3-C-1(a)(4) itself lends further support to this conclusion. That rule provides that there is a "change in ownership" with the "[f]ormation of a new entity that acts as, or in effect is, a successor...." (Emphasis supplied.) Plainly, this language does not limit situations involving a "change in ownership" to those in which one entity is actually a successor under corporate law. Instead, it also includes entities that are "in effect" a successor—clearly a broader definition.
We conclude that the sale of the Omaha Beef football team to Gridiron by Omaha Beef, LLC, is a "change in ownership" under rule 3-C-1(a)(4). Omaha Beef, LLC, was still an active corporation, but there was no evidence that it was conducting business—and it certainly was not operating the Omaha Beef football team. And Gridiron was a new entity that was "in effect ... a successor" to Omaha Beef, LLC, because, like Omaha Beef, LLC, before it, Gridiron's business was operating the Omaha Beef football team. And because Gridiron was a successor under rule 3-C-1(a)(4), there was a "change in ownership" sufficient to permit the transfer of the XMod for Omaha Beef, LLC, to Gridiron.
In addition, we conclude that the district court was correct in finding there was a change in ownership under rule 3-C-1(a)(2). In its appeal of this finding, Gridiron argues that the district court erred in finding a change in ownership under rule 3-C-1(a)(2). Gridiron argues that because the NCCI did not rely on rule 3-C-1(a)(2), the district court erred in doing so. Gridiron further argues that even if the district court properly relied upon rule 3-C-1(a)(2), that definition was not met, because Gridiron did not take on the operations of Omaha Beef, LLC.
We disagree with Gridiron that there was no change in ownership as defined under rule 3-C-1(a)(2). Rather, we find it clear that under rule 3-C-1(a)(2), there was a change in ownership. It is undisputed that Gridiron was formed for the purpose of purchasing and operating the Omaha Beef football team. The purchase agreement clearly states that Gridiron is purchasing the assets of Omaha Beef, LLC, and includes a laundry list of assets, most notably including the United Indoor Football League franchise, the trade name "Omaha Beef," and the goodwill of the Omaha Beef football team. While the purchase agreement does not specifically indicate that Gridiron is purchasing all assets, it also does not exclude any assets from the sale and the parties do not contend that some assets were excluded from the sale. Finally, Gridiron, as a new entity, has taken over the operations of Omaha Beef, LLC: what Omaha Beef, LLC, did— running the Omaha Beef football team—is instead now done by Gridiron. We reject Gridiron's assertions to the contrary.
Nor are we persuaded by Gridiron's assertion that the district court, and now this court, cannot rely on rule 3-C-1(a)(2) to find a change of ownership in this case because the NCCI failed to do so. Gridiron cites no authority to support this contention, and accordingly, we reject it. But even if we construe Gridiron's argument
We addressed this issue in Farmland Foods v. State.
But we explained that the plaintiffs were misconstruing this "`cardinal principle.'"
In Farmland Foods, we ultimately declined to reach the issue of whether we could affirm on grounds different from those cited by an administrative agency. However, we decided the case on similar grounds: "No rule of law precludes this court from affirming an agency decision stating a correct reason and correct facts simply because a portion of those facts was not explicitly connected with the agency's correct reason."
We find Farmland Foods helpful to our disposition here. The department's order, while somewhat unclear, made the correct findings of fact to support a change in ownership under rule 3-C-1(a)(2), discussed that section, and essentially concluded that it had been met. The order simply failed to note that finding in its conclusions of law section of the order.
We therefore conclude that in addition to the change in ownership under rule 3-C-1(a)(4), there was a change in ownership under rule 3-C-1(a)(2) due to the asset sale and taking over of the business operations of Omaha Beef, LLC, by Gridiron. While this was not a basis for the department's decision, it is supported by the findings made by the department.
Gridiron's second assignment of error is without merit.
The decision of the district court is affirmed.
AFFIRMED.