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Traincroft, Inc. v. Insurance Coo of State of Pennsylvania

United States District Court, D. Massachusetts

June 23, 2014

TRAINCROFT, INC., Plaintiff and Counterclaim-Defendant,
v.
THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA, Defendants and Counterclaim-Plaintiff, NORMAN SPENCER McKERNAN, INC., and JENNIFER PORTER, Defendants.

MEMORANDUM AND ORDER ON DEFENDANT'S MOTION TO DISMISS AND MOTION TO STRIKE

F. DENNIS SAYLOR, IV, District Judge.

This is a dispute as to the payment of premiums for workers' compensation insurance policies. Jurisdiction is based on diversity of citizenship.

Plaintiff Traincroft, Inc., purchased workers' compensation insurance policies underwritten by defendant The Insurance Company of the State[1] of Pennsylvania ("ICSP") and brokered by defendants Norman Spencer McKernan, Inc. ("NSM") and Jennifer Porter. Traincroft alleges that defendants provided insurance quotes based on outdated classification codes, thereby artificially lowering the estimated insurance premiums and inducing Traincroft to purchase from them rather than their competitors. ICSP later audited Traincroft and sought payment of additional premiums, based on the appropriate classification codes. Traincroft filed a complaint in state court requesting a declaratory judgment that it does not owe additional premiums, that ICSP violated Mass. Gen. Laws ch. 93A, and that NSM and Porter were negligent and committed professional malpractice.

Defendant ICSP removed the action to this Court and moved to dismiss the complaint for lack of subject-matter jurisdiction and failure to state a claim upon which relief can be granted. ICSP also filed a counterclaim, alleging breach of contract and unjust enrichment and seeking payment of the additional assessed premiums, and moved to strike plaintiff's answer to the counterclaim.

For the reasons set forth below, the motion to strike will be denied and the motion to dismiss will be denied.

I. Background

Except where otherwise noted, the facts are presented as stated in the complaint.

The Insurance Company of the State of Pennsylvania is a Pennsylvania corporation with its principal place of business in New York. Norman Spencer McKernan, Inc., is an insurance broker; it is a Pennsylvania corporation with its principal place of business in Pennsylvania. Jennifer Porter, a citizen of Pennsylvania, is an insurance broker who works for NSM.

Traincroft, Inc., is a Massachusetts corporation that provides outsourcing, engineering, and technical services. Traincroft sought the assistance of NSM and Porter in purchasing four workers' compensation insurance policies to cover its workers in Pennsylvania. Each year, NSM and Porter obtained from the ICSP a quote to insure Traincroft for the next policy year. The quotes were based, in part, on classification codes set by the Pennsylvania Compensation Rating Bureau ("PCRB"). Traincroft accepted the policy each year by agreeing to the quote and paying the policy premium.

On October 25, 2010, the PCRB sent a letter to ICSP regarding a change in classification codes that affected temporary staffing businesses, such as Traincroft. ( See Pl. Mem., Ex. A). The change was effective for new and renewal policies as of December 1, 2010. Traincroft renewed its policy on November 20, 2011, and again on November 20, 2012.

According to the complaint, ICSP did not change the classification codes for Traincroft's 2011 and 2012 renewal policies. It did not adjust the quoted premiums to reflect an increased price due to the classification change, and NSM and Porter likewise did not advise Traincroft of the effect of the change. Traincroft alleges that it relied on the quotes in deciding whether to continue purchasing insurance from ICSP or to seek insurance from another company.

In April 2013, ICSP conducted an audit of Traincroft's 2011 policy. In the summer of 2013, it informed Traincroft that it owed additional premiums totaling $182, 499 based on the new classification codes.

According to Traincroft, on June 12 and June 28, 2013, it wrote to the Pennsylvania State Workers Insurance Fund and the PCRB requesting review of its classification in light of the audit. (Pl. Mem., Ex. B, C). The PCRB responded on July 26, 2013, stating in part that ICSP and Traincroft had provided timely notice of the new classification codes. (Pl. Mem., Ex. D). Traincroft then filed a complaint with the Pennsylvania Insurance Department on September 13, 2013, alleging that ICSP did not notify it of the classification change and attendant premium increase and later sought unpaid premiums, in violation of the Pennsylvania Workers' Compensation Manual. (Pl. Mem., Ex. E). On October 2, 2013, ICSP responded, contending that it changed the classification codes and conducted the audits properly. (Pl. Mem., Ex. G). On October 24, 2013, the Pennsylvania Insurance Department informed Traincroft that it had not identified a violation of Pennsylvania insurance law. (Pl. Mem., Ex. H).

On February 6, 2014, Traincroft filed a complaint in Massachusetts state court against ICSP, NSM, and Porter. On March 6, 2014, ICSP removed the action to this Court, and on March 13, filed a motion to dismiss and a counterclaim. ICSP ...


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