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Aetna Life & Cas. v. Anfinsen Plastic Molding

OPINION FILED MARCH 29, 1977.

AETNA LIFE & CASUALTY COMPANY, PLAINTIFF-APPELLEE,

v.

ANFINSEN PLASTIC MOLDING CO., DEFENDANT-APPELLANT.



APPEAL from the Circuit Court of Kane County; the Hon. WILLIAM ELLSWORTH, Judge, presiding.

MR. PRESIDING JUSTICE RECHENMACHER DELIVERED THE OPINION OF THE COURT:

This is an appeal from a judgment entered by the circuit court of Kane County in favor of Aetna Life & Casualty Company (hereinafter referred to as Aetna) in an action to recover certain additional premiums which Aetna billed to the insured, Anfinsen Plastic Molding Co. (hereinafter referred to as Anfinsen), and which Anfinsen refused to pay

Anfinsen had previously been insured by Aetna for workmen's compensation liability under a conventional annual policy, at excess annual rates, which Anfinsen obtained through a general insurance broker by the name of Konen.

Mr. Wykstra, underwriting manager for Aetna, testified that Anfinsen was paying a premium for workmen's compensation insurance based on 1.62 of the average rate, that is, 62% above the average annual rate and that the 62% additional factor was the result of poor experience for the past three years. It appears that in April 1970, after a review by Aetna of Anfinsen's problem with workmen's compensation insurance, Aetna recommended to Konen that a retrospective premium rating plan be adopted for the Anfinsen account. Accordingly, Mr. Konen and a direct Aetna representative, Mr. Van Hart, called on Mr. LaHam, president of Anfinsen, and discussed the writing of a policy on the basis of a three-year retrospective rating plan. A three-year retrospective rating plan, as indicated by the retrospective premium endorsement attached to the policy, provides that the premium for the first policy year shall be based on the standard annual premium plus the incurred losses (if any) for the first year, the premium for the second year shall be based on the standard premium plus the incurred losses for the two-year period and the third-year premium shall be based on the total standard premium plus the losses incurred during the three-year period. The total premium paid by the insured is thus tied to the losses for the three-year period. The policy provided that it might be cancelled at any time by the insured by mailing the policy back to the company with a request for cancellation or by the company by giving 10 days' written notice to the insured. The Retrospective Premium endorsement provided that in the event of cancellation or non-renewal by the company the retrospective premiums should be computed for the period that the policy was in force in accordance with the provisions of the endorsement.

Aetna filed a motion for summary judgment. In its affirmative defense to the motion for summary judgment, Anfinsen contended that the broker, Konen, represented that the policy of insurance was a "three year Retro Plan" which would cover the defendant for a three-year period at a fixed premium; that he further represented that at the end of the three-year period the loss ration would be averaged and the additional premium, if any, would be charged to the defendant; that he further represented that the said policy would not be cancelled nor would premiums be charged on the basis of losses for one year.

After a hearing on the motion for summary judgment the motion was denied and the case proceeded to a bench trial on the merits. At trial Anfinsen's defense depended almost entirely on the following testimony which Anfinson relied on in establishing that the policy was represented as a three-year contract:

"Q [Defendant's attorney] And, was it explained to Mr. LaHam that this policy would be in force for three years?

A [Mr. Konen] Yes, sir, our — the letter to me from the company was to sell a three year retro plan. Therefore, Mr. Van Hart and I went out to sell a three year retro plan and this is the way it was explained to Mr. LaHam.

Q [Defendant's attorney] That it would be in force for three years?

A [Mr. Konen] Yes, sir. Just to explain that further, I don't think there was any particular emphasis on, you know, it's going to start May 3rd of '70 and go to May 3rd of '73, because all we continued to talk about is a three year plan.

Q [Defendant's attorney] Was it ever represented to Mr. LaHam that this was a one-year policy that you were selling him?

A [Mr. Konen] No, sir.

Q [Defendant's attorney] And, was it, in fact, represented to him that it ...


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