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UNITED ACOUSTICAL v. FIDELITY9/19/1996
These appeals involve a premium on a workers' compensation insurance policy which United Acoustical and Drywall Systems, Inc. ("United") obtained from Fidelity and Casualty Company of New York ("Fidelity"). In Case No. A96A1481, United appeals from the judgment in Fidelity's favor; in Case No. A96A1482, Fidelity cross appeals. For the reasons set forth below, we reverse the judgment in Case No. A96A1481, and affirm the judgment in Case No. A96A1482.
On August 18, 1994, Fidelity filed its complaint against United, alleging that United was indebted to it for various premium payments totaling $40,351.00, plus prejudgment interest and court costs. It was undisputed that Continental Insurance Company issued a workers' compensation insurance policy for United through Fidelity for the period October 1, 1989 through October 1, 1990. The policy was an assigned risk pursuant to the Georgia Workers Compensation Plan. The estimated annual premium for the policy was $6,943. Nevertheless, the policy contained a provision by which the actual premium due would be calculated based on a final audit of United, which was to be undertaken by Fidelity.
The policy stated that the premium shown on the information page was an estimate and that the "final premium will be determined after this policy ends by using the actual, not the estimated, premium basis and the proper classifications and rates that lawfully apply to the business and work covered by this policy. . . ." The policy further stated: "You [the insured] will keep records of information needed to compute premium. You will provide us with copies of those records when we ask for them." Regarding audits, the policy stated: "You will let us examine and audit all your records that relate to this
policy. These records include ledgers, journals, registers, vouchers, contracts, tax reports, payroll and disbursement records, and programs for storing and retrieving data. We may conduct the audits during regular business hours during the policy period and within three years after the policy period ends. Information developed by audit will be used to determine final premium." The policy stated that "premium for this policy will be determined by our manuals of rules, rates, rating plans and classifications. We may change our manuals and apply the changes to this policy if authorized by law or a governmental agency regulating this insurance."
Fidelity performed an interim audit on United on April 27, 1990. As a result of that audit, Fidelity issued an endorsement charging United an additional annual premium of $35,008. On August 1, 1990, Fidelity charged a further premium of $991. The policy was extended for the term of October 1, 1990 through October 1, 1991, and was cancelled on February 5, 1991. United does not contest the outstanding balance owed on the $3,851 premium charged for this period and thus, we will not address it here. It is undisputed that Fidelity never performed a final audit at the conclusion of the October 1989-1990 policy period.
After Fidelity filed its complaint, United answered and filed a motion for protective order, arguing that Fidelity was barred from performing an audit since its request was more than three years after the end of the policy term, as provided for in the policy. Fidelity opposed United's motion and filed the affidavit of its attorney, in which he swore that the premiums claim had been the subject of a May 1993 lawsuit, which suit was dismissed without prejudice based on an agreement in which United agreed to make its payroll records available. From the letters attached to his affidavit, it appears that United did not allow the audit to occur. In a second affidavit opposing the protective
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