United States District Court, N.D. Illinois, Eastern Division
MEMORANDUM OPINION AND ORDER
ROBERT BLAKEY, District Judge.
breach of contract case, Plaintiff Technology Insurance
Company has sued B & R Insurance Partners, LLC for failing to
pay the premiums and other sums due under the terms of the
Workers Compensation and Employers Liability Insurance Policy
issued by Plaintiff to Defendant. The case is currently
before the Court on Plaintiff's motion for summary
judgment . For the reasons explained below, the Court
denies the motion.
& Procedural History
B & R Insurance Partners, LLC. ("B&R") is a
professional employer organization ("PEO") founded
in August of 2012 for the purpose of handling workers'
compensation insurance needs for the taxicab industry. DSOF
 Â¶Â¶ 2, 6; Deposition of Patrick Joseph Ripoli taken
6/26/15 , pp. 12, 16. The three founders of B&R, William
Wahl, Pat Ripoli, and Tsefiereda Ripoli, were aware that the
calculation of Illinois workers' compensation insurance
overestimated a taxicab drivers' annual wages and knew
that, as a practical matter, the majority of workplace
injuries in the industry were covered by third party car
insurance coverage. , pp. 13-17. They also knew that the
Illinois Insurance Act remained inconsistent with
Chicago's Municipal Code regarding taxicab workers'
compensation insurance requirements. Id. The
Municipal Code of Chicago Section 9-112-600 further
complicated this market by requiring taxicab drivers to set
aside fares to obtain workers' compensation insurance.
PSOF  Â¶Â¶ 9.
August 16, 2012, despite its reservations about the Illinois
workers' compensation insurance market, B&R applied for a
workers' compensation policy through a system created
under the Illinois Insurance Act called the "Illinois
Assigned Risk Plan for Workers' Compensation"
("Assigned Risk Plan")  Â¶Â¶ 8, 11. The Assigned
Risk Plan was designed to assist companies who could not find
workers' compensation insurance in the voluntary
insurance market by assigning applications to various
insurance providers. , p. 40-41. B&R's application
was assigned to the Plaintiff, Technology Insurance Company
("Technology")  Â¶Â¶ 7. At the time of the
application, B&R had not recruited any taxicab associations
as clients and had only one employee; the application
requested coverage for just that one employee, William Wahl.
, p. 17-20. For this limited coverage, the application
estimated a premium of $707.00. Complaint  Â¶ 8; [1-1]. The
Policy provided that the actual premium would be calculated
at the end of the cover period, based on payroll records.
parties entered into a Workers Compensation and Employers
Liability Insurance Policy ("Policy") through the
Assigned Risk Plan for the period of August 17, 2012 to
August 17, 2013.  Â¶ 10. After entering into the Policy,
B&R began recruiting taxicab companies to be endorsed under
the Policy. , pp. 17-20. On September 10, 2012, B&R added
sixteen taxicab associations to the Policy, endorsing 6, 286
total taxicab medallions from 24-Seven, Ace, American United,
Blue Diamond, Checker, Chicago Carriage, Choice, City
Service, Dispatch/Avenue, Flash, Globe, Koam, Sun Taxi, Top
Cab, Yellow, and Chicagoland Limousine/AIS.  Â¶Â¶ 11. B&R
asked Technology to add these clients to the policy, and it
made the request via email, the customary method adopted by
both parties. Id.
2012 or early 2013, William Wahl, Rick Allen and Pat Ripoli,
as B&R's representatives, met with Technology Insurance
officials in Atlanta. , p. 68-72. During this meeting,
B&R discussed its concerns about the workers'
compensation insurance marketplace. Id. The parties
discussed the methodology for calculating premiums and also
discussed what would constitute "provable
remuneration" of a taxicab driver's yearly salary.
Id. The topic of provable remuneration was
important; under the Policy, the actual premium due at the
conclusion of coverage was supposed to be based upon
"provable remuneration" in the form of payroll
records.  Â¶Â¶ 15, 17.
the Policy was issued, all parties agreed that the quoted
premium was only an estimate, which would be subject to
change after a final audit based upon the "provable
remuneration."  Â¶ 11. The Policy required B&R to
maintain complete records of all payroll transactions for use
in the final audit, which would then be used to determine the
actual premium owed.  Â¶ 8. However, B&R knew it could not
maintain complete payroll records for the taxicab drivers
covered by the Policy, and it told Technology as much.  Â¶
18. The taxicab associations provide 1099's to taxicab
drivers showing annual credit card transactions. Id.
The documentation from the taxicab association, however,
failed to contain complete wage information, and thus, the
cash transactions conducted by the taxicab drivers was
unavailable. Id.;  p. 75-81.
Policy issued to B&R provided that, where the policy holder
cannot maintain proper payroll records, the Policy followed
the rules, rates and procedures of the National Council on
Compensation Insurance ("NCCI").  Â¶ 8. The NCCI
is the administrator of all Assigned Risk Plans in Illinois
and it assigned certain Class Codes for use in determining
workers' compensation rates. Id. NCCI Manual
Class Code 7370 provides a rate to calculate the premium for
use with taxicab drivers where there is an "absence of
verifiable payroll records."  Â¶ 22. Under this class
code, premiums were to be calculated using a rate of $48, 400
per leased or rented vehicle.  Â¶ 24.
believed this rate far exceeded what a taxicab driver earned
per year, and it shared its view with Technology, sparking
detailed discussions between the parties about what could
constitute "provable remuneration" in the absence
of complete payroll records.  Â¶ 19. B&R provided some
information to Technology, but Technology was not satisfied.
At the end of the Atlanta meeting in late 2012 or early 2013,
Technology informed B&R that if they could not come up with
an acceptable method to show provable remuneration, then the
premium would be calculated using the above Class Code 7370
rate, which would result in a final premium of roughly $25,
000, 000. , p. 70.
meeting with Technology was not the only attempt by B&R to
bring workers' compensation premiums for taxicab drivers
in line with the reality of driver pay.  at Exhibit D, p.
6-8. In early 2013, B&R filed a dispute with the Illinois
Department of Insurance ("DOI") concerning the
calculation of the $48, 400 figure in Class Code 7370.
Id. The DOI sent the dispute to the NCCI.
Id. The NCCI indicated that B&R's proposed
options for determining payroll for the taxi industry were
"informative and will be thoroughly reviewed by
NCCI's staff." Id., p. 6. Subsequently, the
NCCI indicated that B&R's request to adopt a new
ratemaking methodology for Code 7370 was "not within the
jurisdiction of the Illinois WC Appeals Board."
Id. On May 21, 2013, Tim Higgins, Regulatory
Services Manager at NCCI, resolved the dispute stating in an
email that the "current treatment and ratings values for
Code 7370 remain applicable to your Technology policy
effective 8/17/12 through 8/17/13." Id.
18, 2013, Gina Forstman, Assigned Risk Manager at Technology
Insurance Company, sent an email to B&R confirming that
Technology required a physical audit to determine the final
premium owed on the Policy.  Â¶12; [1-7]. Specifically,
Technology requested the income tax statements of each
driver, the exact number of taxi cabs endorsed by the Policy,
and the listing of each taxi association client of B&R during
the Policy period. Id. Even after this demand, on
July 25, 2013, B&R continued to solicit additional clients to
be covered under its Policy. [54-7].
January 6. 2014, Technology conducted a physical audit. 
Â¶ 17;  Â¶ 12 (attached as Exhibit 7). Due to the lack of
payroll records for taxicab drivers, the "Taxicab
Co" section of the audit could not be calculated and was
deemed to be unworkable.  Â¶ 14. The audit worksheet shows
that Technology's auditor indicated that the value of the
"unworkable" audit was $10, 850, 044. It is not
clear how the auditor arrived at this figure, however, as no
methodology or calculation is shown. Id.;  Â¶ 13
(attached as Exhibit 4). Based upon the audit, Technology
adjusted the premium to $11, 447, 907, which included all B&R
clients endorsed by the Policy. Id. Because B&R had
already paid $1, 597, 460.22 on the Policy, that amount was
subtracted from this adjustment, leaving an outstanding
premium amount due of $9, 966, 080.78.  Â¶ 21. B&R refused
to pay this amount. Id.
response to B&R's refusal to pay the outstanding premium,
Technology sued. On March 28, 2014, Technology filed its
complaint alleging breach of contract and seeking damages in
the amount of $9, 966, 080.78, ...