THE TRAVELER'S INDEMNITY COMPANY, Plaintiff-Appellant, vs. D.J. FRANZEN, INC., Defendant-Appellee.
Annotate this Case
Download PDF
IN THE COURT OF APPEALS OF IOWA
No. 9-847 / 09-0040
Filed December 17, 2009
THE TRAVELER’S INDEMNITY COMPANY,
Plaintiff-Appellant,
vs.
D.J. FRANZEN, INC.,
Defendant-Appellee.
________________________________________________________________
Appeal from the Iowa District Court for Polk County, Douglas F. Staskal,
Judge.
Traveler’s Indemnity Company appeals from the district court’s order
granting D.J. Franzen, Inc.’s motion for summary judgment. AFFIRMED.
CeCelia C. Ibson and Laurie J. Wiedenhoff of Smith, Schneider, Stiles &
Serangeli, P.C., Des Moines, for appellant.
Stanley J. Thompson, of Davis Brown Law Firm, Des Moines, for appellee.
Considered by Eisenhauer, P.J., and Potterfield, J., and Zimmer, S.J.*
*Senior judge assigned by order pursuant to Iowa Code section 602.9206 (2009).
2
POTTERFIELD, J.
I. Background Facts and Proceedings
In 2003, D.J. Franzen, Inc. (Franzen), an over-the-road trucking company,
applied for insurance coverage through the assigned risk plan.1 The National
Council on Compensation Insurance (NCCI), as administrator of Iowa’s assigned
risk plan, selected Traveler’s Indemnity Company (Traveler’s) to be Franzen’s
workers’ compensation insurance carrier.
On its application, Franzen was
required to identify the class code of each employee to be covered under the
insurance policy as well as a total number of employees and their total estimated
annual payroll. The rate of insurance varies based on the class code of the
insured employees and their total payroll.
Franzen’s application listed seven
code 8810 clerical office employees with a total estimated payroll of $230,000
and zero code 7229 hauling employees (drivers) with a total estimated payroll of
zero dollars. Based on this information, Traveler’s calculated Franzen’s deposit
premium to be $1775.
NCCI prepares reports each year that include data for the insured for the
three years prior to the date of the report. NCCI’s report dated September 15,
2003, revealed that in the previous three years, Franzen carried workers’
compensation insurance for its code 7229 hauling employees in addition to its
clerical employees. Franzen informed Traveler’s that it had sold all of its trucks,
and former 7229 employees were now owner-operators, for whom they were not
1
The assigned risk plan is a statutory mechanism that serves to make insurance
available for employers who are unable to obtain workers’ compensation insurance in
the traditional insurance market.
3
required to provide workers’ compensation insurance.2 A Traveler’s underwriter
became concerned about the status of Franzen’s 7229 employees, especially
after discovering Franzen owned a truck leasing company, Heartland Lease Inc.
Traveler’s unsuccessfully attempted to obtain Franzen’s cooperation in
conducting a preliminary audit. On December 13, 2003, Traveler’s sent a letter
stating that Franzen’s policy would be placed in cancellation status effective
January 14, 2004. The letter further stated coverage would not be reinstated
until Franzen fully cooperated with the preliminary audit. Franzen then provided
the requested information.
After reviewing the sample contract between Franzen and its drivers,
Joseph Pinto, a Traveler’s fraud examiner, noted that “it is apparent that anyone
who signs this contract is an owner-operator and not an employee.” Traveler’s
informed Franzen that drivers who had signed a contract would be considered
owner-operators, but all other drivers would be considered 7229 employees and
included in the workers’ compensation policy. Traveler’s conducted a second
audit in July of 2004 and decided that eight of Franzen’s drivers were owneroperators, but the rest of the drivers, some of whom leased trucks from Heartland
Lease, were to be included in the insurance policy.
On September 23, 2004, Traveler’s issued a premium adjustment notice
to Franzen showing that Franzen’s total premium due had increased to
$552,436. No workers’ compensation claims had been filed during the coverage
2
“With some exceptions . . . Iowa employers are required by law to obtain insurance
covering their liability for workers’ compensation benefits.” Traveler’s Indem. Co. v.
Comm’r of Ins., 767 N.W.2d 646, 647 (Iowa 2009). One such exception is in the case of
an independent contractor, who is not considered an employee and may be excluded
from the employer’s workers’ compensation policy. Iowa Code § 85.61(13)(c) (2007).
4
year.
Franzen refused to pay the additional premium, asserting it had no
employee drivers, only owner-operators. On November 23, 2004, Traveler’s sent
a letter declining to revise the audit and advising that an appeal could be directed
to NCCI.
Franzen did not appeal or pay the premium due. Therefore, on June 28,
2007, Traveler’s filed a petition seeking judgment against Franzen for the amount
of the additional premium. On July 29, 2008, Franzen filed a motion for summary
judgment asserting all of its drivers were independent contractors and should not
have been included in Franzen’s workers’ compensation premium. Traveler’s
filed a resistance to Franzen’s motion for summary judgment and also filed a
cross motion for summary judgment on October 15, 2008. The district court
granted Franzen’s motion for summary judgment. Traveler’s appeals, arguing:
(1) it had sole authority to determine Franzen’s premium obligation; (2) Franzen’s
failure to exhaust administrative remedies bars its defense; and (3) the record
supports a finding that all but eight of Franzen’s drivers were employees.
II. Standard of Review
We review the granting of a summary judgment motion for correction of
errors at law.
In re Estate of Renwanz, 561 N.W.2d 43, 44 (Iowa 1997).
Summary judgment is appropriate when the record demonstrates that there is no
genuine issue of material fact and the moving party is entitled to judgment as a
matter of law. Id. We review the evidence in the light most favorable to the
nonmoving party. Id.
5
III. Administrative Remedies
Traveler’s asserts that according to the NCCI manual, Franzen was
required to raise any dispute “before the appropriate administrative or regulatory
body having jurisdiction over appeals on Plan matters.”3 Traveler’s contends that
because Franzen failed to exhaust available administrative remedies, the district
court was barred from hearing Franzen’s defenses and should have granted
Traveler’s motion for summary judgment.
Generally, a prerequisite to an appeal to the district court is that the
appealing party must first exhaust all administrative remedies available. Kloster
v. Hormel Foods Corp., 612 N.W.2d 772, 775 (Iowa 2000). However, in this
case, Traveler’s, the plaintiff, brought a suit for money damages against Franzen,
the defendant.
Thus, Traveler’s is essentially arguing that Franzen cannot
defend itself in this suit for damages because it failed to dispute the premium
amount before the proper administrative agency. The doctrine of exhaustion of
administrative remedies is an affirmative defense that cannot be raised by a
plaintiff to bar a defendant from presenting a defense in a suit for money
damages. See Jones v. Bock, 549 U.S. 199, 212-17, 127 S. Ct. 910, 918-22,
166 L. Ed. 2d 798, 810-14 (2007) (holding that failure to exhaust administrative
remedies is an affirmative defense). Thus, as the plaintiff in this case, Traveler’s
cannot prevail on its contention that Franzen failed to exhaust administrative
remedies.
3
The NCCI manual states, “Any person affected by the operation of the Plan . . . who
may have a dispute . . . may seek a review of the matter by the Plan Administrator.”
6
IV. Determination of Employee Status
Traveler’s asserts that, as a matter of contract and of law, it had sole
authority to determine which individuals were employees and which individuals
were owner-operators. While Traveler’s refers to contract terms that indicate it
may have authority to determine how an employee’s job is classified, Traveler’s
does not have authority to determine the separate issue of whether certain
individuals are employees. Iowa Code section 85.61(13)(c) establishes criteria
for determining when an owner-operator is an independent contractor and
therefore not an employee. Thus, this issue is properly governed by statute and
is not within Traveler’s sole authority.
Further, the district court properly determined that Traveler’s did not
generate a fact question as to whether the drivers at issue were employees or
independent contractors. The drivers satisfied the statutory criteria presented in
section 85.61(13)(c) and should therefore have been considered independent
contractors and excluded from Franzen’s workers’ compensation insurance
policy. Thus, Traveler’s was not entitled to a money judgment, and the district
court properly granted Franzen’s motion for summary judgment.
AFFIRMED.
Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You should read the full case before relying on it for legal research purposes.
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
