Company says insurer used wrong formula to calculate work comp premiums

Kelly Holleran Apr. 19, 2010, 5:41am

An East St. Louis corporation claims its workers compensation insurance carrier overcharged it by more than $200,000 on premiums it paid because the carrier used an incorrect formula to calculate payments due.

Keely and Sons Inc. filed a lawsuit April 8 in St. Clair County Circuit Court against Zurich American Insurance Company.

Keely and Sons claims it has already attempted to recover the premium overpayments it paid to Zurich, but Zurich refuses to reimburse it.

Keely and Sons contends that Zurich began overcharging it on its 2003 policies and continued to overcharge it the following year.

To calculate Keely and Sons' required premium payments, Zurich used a formula known as the Contingent Experience Rating Modification, according to the complaint. However, the state of Illinois disapproved of the use of such a rating system and instead required insurers to use an Experience Rating Modification of 1.00, the suit states.

Because of the difference in the ratings, Zurich charged Keely and Sons $351,402 in 2003 instead of the $216,029 Keely and Sons would have been charged had Zurich used the correct and authorized calculating system, the suit states. In 2004, Zurich charged Keely and Sons $295,110 instead of the $168,634 it would have charged the company under the correct calculation formula, the complaint says.

"As a result of Zurich's incorrect use of the Experience Rating Modification for the Policies, Zurich has charged, and Keely and Sons has paid, a total of $274,270 more than the premium amount that would have been using the correct Experience Rating Modification," the suit states.

In its four-count complaint, Keely and Sons alleges breach of contract and violation of Illinois code.

It seeks damages pursuant to 215 ILCS 5/155, plus costs, disbursement, pre- and post-judgment interest, attorney's fees and other relief the court deems just.

Charles L. Philbrick of Rathje and Woodward in Wheaton will be representing it.

St. Clair County Circuit Court case number: 10-L-163.

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