Richard B. McNamara
ORDER
This action is brought by Surge Resources, Inc. ("Surge") against Liberty Mutual Group, Inc. and Liberty Mutual Insurance Company ("Liberty") alleging that it overpaid Liberty for workers compensation premiums and it is entitled to a repayment of approximately $418,000.00. Liberty has filed a counterclaim, alleging that Surge underpaid premiums during the period of 2001 through 2010 and that Surge owes Liberty $2,163,773.00. Surge has moved for a summary judgment against Liberty on its counterclaim on statute of limitations grounds. For the reasons stated in this Order, Surge's Motion for Summary Judgment is DENIED, and an evidentiary hearing will be held on whether the statute of limitations has been equitably tolled.
I
Surge is an employee leasing company which supplies employees to businesses. Liberty provided workers compensation to it from 2001 through 2010. Premiums for workers compensation coverage were based primarily on the remuneration of employees in their various job classifications. At the inception of the policy, the insured provided estimated remuneration for each job and paid an estimated premium. At the conclusion of the policy period, the premium would be adjusted based upon an audit of the insured's books and records. The policies at issue specifically allowed Liberty to audit Surge's records any time up to three years after the policy period ended.
Effective January 1, 2010, Liberty lost the contract to provide assigned risk worker's compensation coverage in New Hampshire. Surge alleges that it began the process of reconciliation and learned that it had overpaid Liberty for policies incepted on October 1, 2006, October 1, 2007, and October 1, 2008. It claims that between October 1, 2006 and October 1, 2009, Surge overpaid Liberty a$418,220.00. Surge brought suit on November 4, 2010.
On February 1, 2011 Liberty filed an answer and counterclaim. It alleged that Surge had disputed the result of an audit done in 2002, and that in accordance with applicable law, the dispute was referred to the National Council on Compensation Insurance (NCCI) for resolution. It claims that the dispute "largely concerned the appropriate expense modification to be applied to the policies" and that the dispute "affected all subsequent policies." Def.'s Answer, Countercl., Setoff & Recoup. ¶ 9. Liberty also claims:
10. While this dispute was pending, Surge made estimated premium payments based upon its own calculations of what it believed it was due. Even putting aside the dispute regarding the experience modification, Surge's calculations were often inconsistent with Liberty Mutual's calculations.
11. As a result of the foregoing, the parties agreed that Surge would continue to make estimated payments until the dispute was resolved and a full reconciliation of all policy years could be completed.
12. On January 14, 2010, Liberty Mutual received notice that NCCI had ruled upon the parties' dispute regarding experience modifications. Apparently, NCCI had resolved this dispute years ago but Liberty Mutual never received notice of that decision.
Def.'s Answer, Countercl., Setoff & Recoup. ¶¶ 10-12. It does not appear to be disputed that NCCI actually ruled on February 25, 2003. Liberty claims, however, that did not become aware that NCCI had ruled in its favor until January 2010.
On July 25, 2011, Surge filed a motion to dismiss, alleging that Liberty's counterclaim, setoff, and recoupment for premiums related to policy years 2003, 2004 and 2005 is barred by New Hampshire RSA 508:4 because it established a three-year statue of limitations for this claim. Surge attached affidavits in support of its motion to dismiss, setting forth the dates upon whieh audits were completed and asserting its view that the statute of limitation ran on the last policies on July 16, 2010 or more than 15 weeks prior to Surge commencing this action.
Defendants filed an objection supported by the affidavit of David Reeder. Reeder asserts that under applicable NCCI rules, Liberty could not seek to collect the disputed portions of the premium at issue until the NCCI had resolved the parties' dispute as to the appropriate experience modification. Based on its affidavit, Liberty argued:
There is also no dispute that neither party received notification of the NCCI decision until at least January of 2010, with Surge alleging that it did not receive notification of that decision until it received Liberty Mutual's counterclaim in February 2011. The facts establish that Liberty Mutual did not
know of any right to seek additional premiums from Surge until at least January 2010.
Def.'s Mem. in Supp. Def.'s Obj. to Pl.'s Mot. to Dismiss Countercl. 6 (emphasis included).
After a conference with the Court, the parties agreed that because of the factual nature of the claim, the Surge's Motion to Dismiss should be treated as a Motion for Summary Judgment. Surge filed a Memorandum in Support of its Motion to Dismiss on October 12, 2011 and asserts that as a matter of law, Liberty was not barred from bringing suit merely because matters were pending before the NCCI, and that in any event a seven year delay is so unreasonable that the discovery rule of RSA 508:4 is inapplicable.
In its Sur-Reply, Liberty argued that the dispute at issue here was in fact required by the legal relationship between Surge and Liberty, providing the supporting affidavit of Neil Johnson. Johnson is identified as an Assistant Vice President at Liberty, who has had significant experience with the dispute resolution process involving worker's compensation insurance issues. Surge filed a further response to Liberty' Sur-Reply on November 18, 2011 in which Surge continued to dispute whether NCCI rules barred Liberty's ability to seek collection, as a matter of law. Surge also asserted:
Even assuming without admitting that Liberty could not sue under the newly disclosed NCCI rules while a
bona fide premium dispute was pending before the Plan Administrator, Liberty has still failed to put forth any facts that show that its delay in bringing suit constituted "reasonable diligence" under the discovery rule.
Mem. in Resp. to Liberty Mutual's Sur-Reply Mem. 5.
Procedurally, the parties have cross moved for summary judgment under RSA 491:8-a. However, the issue to be decided by the Court is not one of summary judgment on the merits, but whether Liberty's counterclaim is barred by the statute of limitations. Both parties recognize that the statute of limitations bounds Liberty's right to bring this claim. Both parties agree that the claim is facially time barred and agree that the discovery rule is applicable but disagree whether the discovery rule tolls the statute of limitations in this case.
II
The discovery rule is an exception to the three year statute of limitations for personal actions. RSA 508:4 provides in relevant part:
[W]hen the injury and its causal relationship to the act or omission were not discovered and could not reasonably have been discovered at the time of the act or omission, the action shall be commenced within 3 years of the time the plaintiff discovers, or in the exercise of reasonable diligence should have discovered, the injury and its causal relationship to the act or omission complained of.
The discovery rule exception does not apply unless the plaintiff did not discover, and could not have discovered with reasonable diligence, "either the alleged injury or its causal connection to the alleged negligent act."
Perez v. Pike Indus., Inc., 153 N.H. 158, 160 (2005). Whether or not the plaintiff was reasonably diligent in determining the causal connection between his injury and an act or omission of the defendant is a question of fact, which must be decided by the Court in advance of trial, since the tolling is equitable in nature.
Black Bear Lodge v. Trillium Corp.,
136 N.H. 635, 638 (1993);
Keshishian v. CMC Radiologists,
142 N.H. 168,179 (1997). The burden is on the plaintiff to show that the equitable tolling of the discovery rule applies to an action that the statute of limitations would otherwise bar.
Glines v. Bruk,
140 N.H. 180,181 (1995). The discovery rule is essentially an equitable defense to the statute of limitations. The Court treats the summary judgment motions filed by the parties as essentially motions for summary judgment on the equitable issue here.
Liberty argues that once an insurer invokes the NCCI procedure, as Surge did here, it is not able to assert a claim. But its argument is not based entirely upon legal analysis of the documents before the Court, but upon the affidavit of Neil Johnson. Johnson asserts that in his experience once an insured has filed with NCCI, the filing concerns a bona fide dispute, the insured pays the undisputed premium, and the insured is deemed to be in compliance and cannot be sued. Johnson Aff. ¶¶ 7, 8. Thus, the NCCI virtually always suspends collection activity. Johnson Aff. ¶¶ 7, 8. While it is not necessary to decide the issue, it appears to the Court that the NCCI rules may well act as a bar to Liberty making a claim while a claim is pending before the NCCI.
However, the applicability of the NCCI bar is not the real issue before the Court. The fact is that NCCI did decide this claim in 2003 but Liberty claims it did not learn of this until 2010 and thus could not make its claim. Surge argues that even if it is appropriate to interpret the NCCI bar in this manner, Liberty cannot prevail because "Liberty has still failed to put forth any facts to show that its delay in bringing suit constituted 'reasonable diligence' under the discovery rule." Mem. in Resp. to Liberty Mutual's Sur-Reply Mem. 5. Surge essentially argues that because Defendant took no action to pursue resolution of the NCCI disputes or check the status of the NCCI decision from 2002 when the first disputes were filed until January of 2010, it did not act reasonably. Surge argues that Liberty "has the burden of supplying a full and complete explanation of its seven-year failure to learn about the February 25, 2003 letter" which would have allowed it to proceed, and that it has failed to do so. Pl.'s Mem. in Supp. of Mot. to Dismiss 10.
Summary judgment can only be granted if no genuine issue as to any material fact exists and the moving party is entitled to summary judgment as a matter of law. RSA 491:8-a; see also. Green Mtn. Ins. Co. v. Bonney, 131 N.H. 762, 766 (1989).
When considering a motion for summary judgment, the trial court cannot weigh the contents of the parties' affidavits and resolve factual issues, but must determine whether a reasonable basis exists to dispute the facts claimed in the moving party's affidavits at trial; if so, the trial court must deny the motion for summary judgment.
Sabinson v. Tr. of Dartmouth Coll., 160 N.H. 452, 460 (201o):
Iannelli v. Burger King Corp., 145 N.H. 190,192-193 (2000). The New Hampshire Supreme Court has emphasized that while summary judgment affords savings in time, effort and expense, the value of judicial economy may not be gained at the expense of denying a litigant the right of trial where there is a genuine issue of material fact to be litigated.
Concord Group Ins. Co. v. Sleeper,
135 N.H. 67, 69 (1991). While it has been said that summary judgment's most effective use is in breach of written contract or debt cases, a court cannot resolve issues of credibility or weigh evidence on summary judgment.
Iannelli, 145 N.H. at 192.
Based on the pleadings and affidavits on file, it appears that whether Liberty is entitled to the equitable tolling of the discovery rale requires an evidentiary hearing. Accordingly, an evidentiary hearing shall be scheduled at the Court's early convenience.
SO ORDERED.
_________________________
Richard B. McNamara,
Presiding Justice